Last checked at 25 Feb 2010 07:00
Q4 2009 RESULTS RELEASE FEBRUARY 25, 2010
AEGON increases profitability during fourth quarter
- Strong increase in underlying earnings and net income
- Underlying earnings before tax of EUR 427 million
- Net income of EUR 393 million, due to improved earnings, realized gains on investments and lower impairments
- Impairments of EUR 209 million, the lowest level in six quarters
- Cost reduction measures of EUR 250 million realized in 2009, exceeding target of EUR 150 million
- Robust sales demonstrating solid franchise
- New life sales of EUR 549 million, driven by strong sales in most businesses
- Net deposits, excluding institutional guaranteed products, of EUR 1.5 billion, due to strong sales of pensions and retail mutual funds
- Profitable sales with value of new business of EUR 216 million and an internal rate of return of 17.6%
- Continued strong capital position
- EUR 0.8 billion in capital freed-up in Q4, totaling EUR 3.3 billion in 2009
- Excess capital of EUR 3.7 billion by end December
- Insurance Group Directivea) capital surplus of EUR 6.7 billion, equivalent to solvency ratio of 204%
- No dividend on common shares
Statement of Alex Wynaendts, CEO
"Clearly, the steps we have taken over the past year have delivered solidresults - a return to profit, reduced expenses, and continued customerconfidence, resulting in increased sales in all country units. AEGON today isin a stronger financial position, which enabled us to repay one-third of thecapital we obtained from the Dutch government. Given the uncertainenvironment, we believe that it continues to be prudent to maintain asubstantial capital buffer, as reflected in our strong capital position.Although impairments improved during the quarter, they remained at elevatedlevels for the year, which led to lower cash flows from our operating units.Consequently, AEGON will not declare a dividend to common shareholders.Looking ahead, we are confident that our strategy will continue to reinforceAEGON's strong position in the gradually improving economic environment."KEY PERFORMANCE INDICATORSamounts in EUR millions Notes Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings before tax 1 427 351 22 (181) - 1,160 1,573 (26) Net income 2 393 145 171 (1,182) - 204 (1,082) - New life sales 3 549 484 13 598 (8) 2,045 2,631 (22) Gross deposits excluding 4 5,932 5,978 (1) 5,970 (1) 23,628 22,371 6Institutional GuaranteedProducts
Value of new business (VNB) 216 169 28 233 (7)
767 837 (8) Return on equity 5 8.9% 8.4% 6 (8.7%) - 5.9% 6.6% (11)
For footnotes see page 23.
Supplements: AEGON's Q4 2009 Financial Supplement and Condensed Consolidated Interim Financial Statements are available on www.aegon.com
STRATEGIC HIGHLIGHTS
AEGON continued to deliver on its strategic priorities:
- To reallocate capital toward business with higher growth and return prospects
- To improve growth and returns from existing businesses
- To reduce financial markets risk
- To manage AEGON as an international company.
Portfolio reviewAEGON continues to assess its businesses to ensure they meet requirements interms of earnings growth, cash flow and return on capital. As part of thisreview, AEGON sold its funeral insurance business in the Netherlands inJanuary 2010 for EUR 212 million. The sale will have a positive effect onAEGON's excess capital position and is expected to result in a modest bookgain in the first half of 2010.
Cost measures During 2009, AEGON realized cost reduction measures of EUR 250 million, significantly above the company's target for the year of EUR 150 million. Excluding the impact of restructuring charges, increased employee benefit expenses in the United States and currency movements, operating costs decreased in 2009 by 5% on a comparable basis.
AEGON's total workforce, excluding agent employees, declined by 7% during theyear to just over 25,000 employees. The decline was due mainly torestructuring in the United States and the United Kingdom, as well as the saleof real estate brokerage activities in the Netherlands and the sale of thecompany's life insurance operations in Taiwan.
Capital & risk management
Capital preservation During the fourth quarter of 2009, a further EUR 0.8 billion of capital was released from AEGON's businesses, bringing the total for 2009 as a whole to EUR 3.3 billion.
Excess capital
- Excess capital above S&P AA capital adequacy requirements amounted to EUR3.7 billion at the end of the fourth quarter 2009, down from EUR 4.8 billionat the end of third quarter of 2009. The decline was due primarily torepayment of one-third of the EUR 3 billion in core capital provided by theDutch State at the end of 2008. The repayment, including interest and premiumfor repayment, totaled EUR 1.15 billion.- De-risking and capital efficiency measures added EUR 0.8 billion to excesscapital but were offset by other items, mainly related to higher regulatoryand rating agency capital requirements for longevity and default provisioning.Statutory earnings of EUR 0.3 billion were partly offset by impairments of EUR0.2 billion.
- Under current uncertain circumstances, AEGON aims to maintain a substantial capital buffer.
Core capital
- At year-end 2009, core capital, excluding the revaluation reserves, amounted to EUR 15.9 billion or 75% of the total capital base, well above AEGON's self-imposed minimum target of 70%6,7.
- Core capital, including the revaluation reserves, totaled EUR 14.2 billion, comprising EUR 12.2 billion in shareholders' equity and a further EUR 2 billion in convertible core capital securities.
- Shareholders' equity per common share of EUR 5.88.
- The revaluation reserves amounted to a negative EUR 1.7 billion, a marginalimprovement from the third quarter of 2009 as the positive effects oftightening credit spreads were almost entirely offset by the impact of risingrisk-free interest rates and realized gains.
- At the end of December 31, 2009, the Insurance Group Directive (IGD) capital surplus totaled EUR 6.7 billion, equivalent to a solvency ratio of 204%.
Improved risk profileAs announced in February last year, AEGON is running off its institutionalspread-based business in the United States. The run-off will significantlyreduce AEGON's exposure to credit risk and help lessen overall sensitivity tofluctuations in financial markets. During the course of 2009, as planned,account balances of this business were reduced by USD 11.5 billion to USD 21.3billion. During 2010, these balances are expected to be reduced by a furtherUSD 8.5 billion. In order to fund these outflows, assets from theinstitutional spread-based business have been transferred internally to otherbusinesses in the United States in exchange for cash. As a result, theinstitutional spread-based business realized a negative spread on these assetswhich adversely impacted underlying earnings.
Dividend
AEGON's dividend policy remains unchanged and is based on its capital positionand cash flows. Although the capital position is strong, cash flows wereimpacted by higher than average impairments in 2009. Therefore, AEGON will notdeclare a dividend to common shareholders over the fiscal year 2009.Manage AEGON as an international companyAt the end of the fourth quarter, AEGON launched a variable annuity product inthe Netherlands, part of a broader effort to use existing knowledge andexpertise in the United States to expand the company's variable annuitiesbusiness in Europe and Japan. Currently, variable annuity products are beingsold in the United Kingdom, the Netherlands and France. In addition, towardthe end of 2009, AEGON's joint venture with Sony Life launched its firstvariable annuity product in the Japanese market.The product is being distributed through Sony Life's Lifeplanner channel andseveral banks, including megabank Sumitomo Mitsui Banking Corp. Sales will bereported starting in the first quarter of 2010.New reporting structureFrom the first quarter of 2010, AEGON will adjust its segment reportingstructure to reflect recent structural changes in its organization. Comparablefull year 2008 and quarterly 2009 numbers will be published on April 12, 2010.The day after, on April 13, AEGON will host a meeting in London to provide afurther explanation to analysts and investors.FINANCIAL HIGHLIGHTSFINANCIAL OVERVIEW EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings before tax by line of businessLife and protection 267 280 (5) 121 121 1,052 911 15Individual savings and retirement products 78 79 (1) (433) - (94) (146) 36Pensions and asset management 105 29 -
179 (41) 259 508 (49)Institutional products (5) 5 - 100 - 118 405 (71)Life reinsurance 16 15 7 (114) - 21 (63) -Distribution (9) (1) - (19) 53 (3) 1 -General insurance 18 7 157 (3) - 36 45 (20)Interest charges and other (48) (69) 30 (17) (182) (252) (112) (125)
Share in net results of associates 5 6 (17) 5 - 23 24 (4)Underlying earnings before tax 427 351 22 (181) - 1,160 1,573 (26)Over/(under) performance of fair value items (174) (58) (200) (770) 77 (460) (1,619) 72Operating earnings before tax 253 293 (14)
(951) - 700 (46) -
Operating earnings before tax by line of businessLife and protection 250 289 (13) 104 140 988 795 24Individual savings and retirement products (36) (61) 41 (902) 96 (315) (922) 66Pensions and asset management 79 69 14
224 (65) 48 251 (81)Institutional products (20) 37 - (54) 63 161 8 -Life reinsurance 40 43 (7) (319) - 203 (361) -Distribution (9) (1) - (19) 53 (3) 1 -General insurance 18 7 157 (3) - 36 45 (20)Interest charges and other (74) (96) 23 13 - (441) 113 -
Share in net results of associates 5 6 (17) 5 - 23 24 (4)Operating earnings before tax 253 293 (14)
(951) - 700 (46) -
Gains/(losses) on investments 324 (100) -
136 138 432 35 -Impairment charges (209) (285) 27 (501) 58 (1,273) (1,038) (23)Other income/(charges) 5 48 (90) 38 (87) (323) (12) -Income before tax 373 (44) - (1,278) - (464) (1,061) 56Income tax 20 189 (89) 96 (79) 668 (21) -Net income 393 145 171 (1,182) - 204 (1,082) - Net underlying earnings 373 309 21 (69) - 1,025 1,234 (17)Net operating earnings 278 272 2 (623) - 718 69 - Underlying earnings geographicallyAmericas 304 289 5 (234) - 805 1,073 (25)The Netherlands 95 102 (7) 75 27 398 378 5United Kingdom 34 (13) - 13 162 48 141 (66)Other countries 42 42 - (17) - 161 93 73Holding and other (48) (69) 30 (18) (167) (252) (112) (125)
Underlying earnings before tax 427 351 22 (181) - 1,160 1,573 (26)Operating earnings geographicallyAmericas 201 213 (6) (1,167) - 775 (587) -The Netherlands 52 141 (63) 227 (77) 151 213 (29)United Kingdom 34 (6) - (6) - 54 122 (56)Other countries 40 41 (2) (17) - 161 93 73Holding and other (74) (96) 23 12 - (441) 113 -
Operating earnings before tax 253 293 (14)
(951) - 700 (46) -
Commissions and expenses 1,388 1,473 (6) 1,863 (25) 5,983 6,109 (2)of which operating expenses 830 776 7
928 (11) 3,262 3,272 -OPERATIONAL HIGHLIGHTSUnderlying earnings before taxAEGON's underlying earnings before tax amounted to EUR 427 million for thefourth quarter. Financial markets had a positive effect particularly comparedwith the same quarter last year, when the company's earnings were severelyimpacted by the turmoil in world financial markets.In the Americas, underlying earnings totaled USD 446 million compared with a loss ofUSD 412 million a year earlier. The improvement was due mainly to the recoveryin financial markets, which had a positive effect on both technical resultsand fee income. These more than offset lower investment income as a result ofincreased cash balances in relation to the run-off of AEGON's institutionalspread-based business in the United States.
Underlying earnings in the Netherlands increased to EUR 95 million, up from EUR 75 million in the fourth quarter last year. This increase was mainly the result of improved technical results including several provision releases. Investment income was lower, primarily because the fourth quarter of 2008 included substantial non-recurring dividend income.
In the United Kingdom, underlying earnings amounted to GBP 30 million, a sharpincrease from the fourth quarter of 2008, as significantly higher fee incomefrom improved equity and bond markets offset lower earnings from life andprotection and losses from distribution companies.Underlying earnings from Other Countries totaled EUR 42 million in the fourthquarter, driven mainly by further growth in Central & Eastern Europe andSpain. Earnings for the same quarter last year included a sizeable one-timecharge in Taiwan. AEGON's Taiwanese life insurance operations were sold during2009 and its results are no longer included in the company's incomestatements. Excluding Taiwan, underlying earnings before tax increased 24%.
Expenses for the holding company amounted to EUR 48 million in the fourth quarter of 2009, compared with EUR 17 million last year, primarily a result of higher funding costs.
Fair value itemsFair value items include the over- or underperformance on certain assets heldat fair value through profit or loss. In the fourth quarter, these showed anunderperformance of EUR 174 million, a significant improvement compared withan underperformance of EUR 770 million in the fourth quarter of 2008. In theAmericas, the underperformance of EUR 103 million was primarily attributableto losses on a macro equity hedge and negative revaluation ofreal estate related assets. Underperformance of fair value items in theNetherlands of EUR 43 million was due mainly to the impact of movements in thefair value of guarantees and related hedges. In addition, the furthernarrowing of AEGON's own credit spread resulted in a loss of EUR 26 millionfor the holding company.Gains on investmentsGains on investments amounted to EUR 324 million in the fourth quarter, aresult primarily of trading in AEGON's bond portfolios. In the Netherlands,investment gains were mainly the result of adjustments in the bond portfolio,in part driven by asset and liability management.Impairment chargesImpairment charges decreased sharply compared with the fourth quarter of 2008to EUR 209 million, the lowest level in six quarters, though they remainedabove AEGON's long-term average expectations. Impairments on US housingrelated assets totaled EUR 92 million, while the remainder was related mostlyto hybrid securities issued by Irish and UK banks.Income taxIncome tax in the fourth quarter amounted toEUR 20 million and included a tax benefit ofEUR 20 million related to cross border intercompany reinsurance transactionsbetween Ireland and the United States. Tax gains related to these internaltransactions totaled EUR 419 million in 2009, and are a partial reversal ofthe EUR 490 million in tax charges incurred during 2008.Net incomeAEGON's net income increased to EUR 393 million compared with a loss in thefourth quarter of 2008. The improvement was the result of higher underlyingearnings, as well as a significant improvement in the performance of fairvalue items, gains on investments, a sharp decline in the level of impairmentsand taxes.Commissions & expensesTotal commissions and expenses declined by 25% compared with Q4 2008 to EUR1.4 billion, a result primarily of accelerated amortization of deferred policyacquisition costs in the Americas in the fourth quarter of 2008 related tolast year's lower equity markets. Operating expenses decreased by 11% to EUR830 million as a result of significant cost savings and weakening of the US
dollar.SALES EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % New life salesLife single premiums 2,161 1,732 25 2,327 (7) 7,422 10,532 (30)Life recurring premiums annualized 333 311 7 366 (9) 1,303 1,578 (17)Total recurring plus 1/10 single 549 484 13
598 (8) 2,045 2,631 (22)
New premium production accidentand health insurance 126 125 1 161 (22) 561 614 (9)New premium production general insurance 21 12 75
17 24 56 68 (18)
Gross deposits (on and off balance)by line of businessFixed annuities 387 434 (11) 1,676 (77) 3,377 4,057 (17)Variable annuities 699 693 1 590 18 3,055 2,636 16Saving deposits 1,017 978 4 590 72 3,032 2,473 23Retail mutual funds 855 949 (10) 501 71 3,117 2,698 16Pensions and asset management 2,973 2,924 2 2,613 14 11,045 10,505 5Institutional guaranteed products 598 764 (22) 5,963 (90) 4,325 18,380 (76)Life reinsurance 1 - - - - 2 2 -Total gross deposits 6,530 6,742 (3) 11,933 (45) 27,953 40,751 (31)Total gross deposits excl.institutional guaranteed products 5,932 5,978 (1)
5,970 (1) 23,628 22,371 6
Net deposits (on and off balance)by line of businessFixed annuities (226) (225) - 593 - 382 71 -Variable annuities 12 149 (92) (114) - 651 (441) -Saving deposits 454 440 3 (535) - 870 (699) -Retail mutual funds 304 255 19 (182) - 484 590 (18)Pensions and asset management 997 1,373 (27) 257 - 3,122 1,769 76Institutional guaranteed products (7,153) (3,473) (106) 1,679 - (14,412) 2,185 -Life reinsurance (11) (12) 8 (19) 42 (51) (61) 16Total net deposits (5,623) (1,493) - 1,679 - (8,954) 3,414 -Total net deposits excl.
institutional guaranteed products 1,530 1,980 (23)
- - 5,458 1,229 -
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30, 2009 2009 %
Revenue generating investments (total) 361,018 354,033 2 Investments general account
134,205 132,617 1
Investments for account of policyholders 125,845 119,647 5 Off balance sheet investments third parties 100,968 101,769 (1)
New life salesNew life sales totaled EUR 549 million, up 13% compared with the thirdquarter. Most businesses reported increased sales for the quarter. In theNetherlands and the United Kingdom, sales increased primarily as a result of arise in demand for AEGON's pension products. In Spain and Asia, salesincreased as AEGON's businesses continued to expand, while in Central &Eastern Europe sales were unchanged from the third quarter.
Deposits
Gross deposits, excluding institutional guaranteed products, totaled EUR 5.9billion in the fourth quarter. Pension deposits, saving deposits and variableannuities were all strong. However, as anticipated, fixed annuity depositswere lower, and will continue to be managed toward a lower level. Netdeposits, excluding institutional guaranteed products, remained strong at EUR1.5 billion.Value of new businessValue of new business showed a substantial improvement across almost allcountries compared with the third quarter and amounted to EUR 216 million. Inthe Americas, the increase was due mainly to higher margins for variableannuities and life reinsurance, while in the Netherlands higher spreads onmortgages was the main driver. Higher sales volumes were the main reason foran increase in value of new business in Spain.Revenue-generating investmentsRevenue-generating investments rose to EUR 361 billion at the end of December2009, up 2% from the third quarter. The increase was mainly the result of afurther rise in equity markets and a stronger US dollar at the end of thefourth quarter of 2009.APPENDIX I -- Americas --The Netherlands --United Kingdom --Other Countries
FINANCIAL OVERVIEW, Q4 2009 GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated) Holding, United otherAmericas Kingdom The
United Other activities & Total
USD GBP Americas Netherlands
Kingdom countries eliminations EUR
Underlying earnings before tax by line of business 269 10 Life and protection 178 62 12 15 - 267 Individual savings and 136 - retirement products 101 (27) - 4 - 78 22 28 Pensions and asset management 15 53 32 5 - 105 (2) - Institutional products (5) - - - - (5) 22 - Life reinsurance 16 - - - - 16 - (8) Distribution - 1 (10) - - (9) - - General insurance - 8 - 10 - 18 - - Interest charges and other - - - - (48) (48) (1) - Share in net results of associates (1) (2) - 8 - 5 446 30 Underlying earnings before tax 304 95 34 42 (48) 427 Over/(under) performance of (143) - fair value items (103)
(43) - (2) (26) (174)
303 30 Operating earnings before tax 201 52 34 40 (74) 253 Operating earnings before tax by line of business 266 10 Life and protection 177 46 12 15 - 250 Individual savings and (25) - retirement products (11) (27) - 2 - (36) Pensions and 23 28 asset management 16 26 32 5 - 79 (22) - Institutional products (20) - - - - (20) 62 - Life reinsurance 40 - - - - 40 - (8) Distribution - 1 (10) - - (9) - - General insurance - 8 - 10 - 18 - - Interest charges and other - - - - (74) (74) (1) - Share in net results of associates (1) (2) - 8 - 5 303 30 Operating earnings before tax 201 52 34 40 (74) 253 74 30 Gains/(losses) on investments 54 190 33 (1) 48 324 (231) (49) Impairment charges (145) 7 (54) (17) - (209) - 8 Other income/(charges) - - 8 (4) 1 5 146 19 Income before tax 110 249 21 18 (25) 373 120 (4) Income tax 71 (45) (5) - (1) 20 266 15 Net income 181 204 16 18 (26) 393 403 30 Net underlying earnings 275 73 33 33 (41) 373 345 30 Net operating earnings 232 41 34 31 (60) 278
FINANCIAL OVERVIEW, FY 2009 YEAR-TO-DATE GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated) Holding, United otherAmericas Kingdom The
United Other activities & Total
USD GBP Americas Netherlands
Kingdom countries eliminations EUR
Underlying earnings before tax by line of business 967 38 Life and protection 687 262 43 60 - 1,052 Individual savings and (84) - retirement products (59) (54) - 19 - (94) 59 21 Pensions and asset management 42 174 24 19 - 259 166 - Institutional products 118 - - - - 118 29 - Life reinsurance 21 - - - - 21 - (16) Distribution - 16 (19) - - (3) - - General insurance - 1 - 35 - 36 - - Interest charges and other - - - - (252) (252) (5) - Share in net results of associates (4) (1) - 28 - 23 1,132 43 Underlying earnings before tax 805 398 48 161 (252) 1,160 Over/(under) performance (42) 5 of fair value items (30) (247) 6 - (189) (460) 1,090 48 Operating earnings before tax 775 151 54 161 (441) 700 Operating earnings before tax by line of business 933 38 Life and protection 663 222 43 60 - 988 Individual savings and (394) - retirement products (280) (54) - 19 - (315) 45 26 Pensions and asset management 32 (33) 30 19 - 48 226 - Institutional products 161 - - - - 161 285 - Life reinsurance 203 - - - - 203 - (16) Distribution - 16 (19) - - (3) - - General insurance - 1 - 35 - 36 - - Interest charges and other - - - - (441) (441) (5) - Share in net results of associates (4) (1) - 28 - 23 1,090 48 Operating earnings before tax 775 151 54 161 (441) 700 8 90 Gains/(losses) on investments 6 224 101 7 94 432 (1,337) (163) Impairment charges (951) (111) (183) (23) (5) (1,273) (4) 59 Other income/(charges) (3) - 66 (387) 1 (323) (243) 34 Income before tax (173) 264 38 (242) (351) (464) 940 (29) Income tax 669 (23) (33) (43) 98 668 697 5 Net income 496 241 5 (285) (253) 204 1,048 56 Net underlying earnings 745 299 62 112 (193) 1,025 1,055 59 Net operating earnings 750 114 67 112 (325) 718AMERICAS
- Underlying earnings before tax increase to USD 446 million
- New life sales up 3% from previous quarter to USD 208 million
- Net deposits excluding IGP* total USD 1.4 billion, driven by strong pension sales
- Value of new business rises to USD 128 million as a result of higher margins
Underlying earnings before taxUnderlying earnings before tax for the fourth quarter of 2009 amounted to USD446 million.
- Earnings from Life & Protection were strong in the fourth quarter and totaled USD 269 million.
- Individual Savings & Retirement earnings amounted to USD 136 million. Withinvariable annuities, a write-down of intangible assets related to the MerrillLynch Life company acquisition of USD 22 million was offset by a positiveunlocking of deferred policy acquisition costs.
- Pensions & Asset Management earnings were in line with the same quarter last year as higher fees from higher asset balances were offset by increased employee benefit plan expenses.
- Institutional guaranteed products spreads declined significantly due to anaccumulation of cash necessary to run-off the business as well as theamortization of unrealized losses on assets transferred to other portfolios inexchange for cash.
- Earnings from Life Reinsurance totaled USD 22 million. Net reserve strengthening was partly offset by favorable mortality experience during the quarter.
Net incomeNet income amounted to USD 266 million, a strong improvement from the loss inQ4 2008. The improvement was the result of higher underlying earnings, theimproved performance of fair value items, gains on investments andsubstantially lower impairment charges.The underperformance of fair value items of USD 143 million was attributableto macro equity hedge losses (USD 72 million), negative revaluations of realestate related assets partly offset by strong private equity and hedge fundreturns (USD 36 million), and fair value annuity losses (USD 35 million)driven by a tightening in credit spreads and policyholder behavior assumptionchanges.
*IGP= institutional guaranteed products
Gains on investments totaled USD 74 million, primarily the result of profits realized by trading in the bond portfolio.
Impairments, though still above AEGON's long-term expectations, continued to trend down from the high levels experienced during the second half of 2008. During the fourth quarter, impairments amounted to USD 231 million.
Net income included a tax gain of USD 42 million related to cross borderintercompany reinsurance treaties. Tax gains from these internal transactionstotaled USD 590 million in 2009 and are a partial reversal of tax charges ofUSD 718 million during 2008.Commissions and expensesTotal commissions and expenses decreased 21% to USD 1.1 billion. The fourthquarter last year included substantial accelerated deferred policy acquisitioncosts amortization following lower equity markets. Operating expensesincreased 4% to USD 549 million as significant expense reductions were morethan offset by an increase in employee benefit plan expenses.Sales and depositsTotal new life sales increased 3% compared with Q3 2009. New premiumproduction for accident and health products increased 3% compared with Q3 2009as new initiatives more than offset the run-off of the automotive creditbusiness in the United States.Total gross deposits, excluding IGP*, increased 13% compared with Q3 2009. Asa result of active management of the fixed annuity book, deposits declined toUSD 648 million in Q4 2009, while variable annuity deposits continued todevelop favorably and amounted to USD 965 million. Mutual fund depositsincreased by 18% to USD 862 million as a result of improved market conditions.
Pension deposits increased 22% in the quarter to USD 3.3 billion. Net pension deposits remained very strong at USD 1.6 billion for the fourth quarter.
Value of new businessValue of new business improved to USD 128 million due primarily to highermargins in the variable annuity and life reinsurance businesses. The internalrate of return increased to 14.7%, mainly as a result of improved margins onvariable annuities.Revenue-generating investmentsRevenue-generating investments declined by 1% in the fourth quarter to USD 307billion at the end of December 2009 as outflows related to the run-off of theinstitutional spread-based business were partly offset by strong net inflowsfrom pension and retail businesses.AMERICAS - EARNINGS USD millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings beforetax by line of businessLife 189 193 (2) 159 19 653 769 (15)Accident and health 80 67 19 68 18 314 363 (13)Life and protection 269 260 3 227 19 967 1,132 (15)Fixed annuities 103 62 66 86 20 311 368 (15)Variable annuities 45 50 (10) (709) - (356) (587) 39Retail mutual funds (12) (8) (50) - - (39) 8 -Individual savings andretirement products 136 104 31 (623) - (84) (211) 60
Pensions and asset management 22 10 120 23 (4) 59 150 (61)Institutional guaranteed products (17) 1 - 127 - 119 544 (78)BOLI/COLI 15 9 67 4 - 47 50 (6)Institutional products (2) 10 - 131 - 166 594 (72)Life reinsurance 22 20 10 (170) - 29 (93) -Share in net results of associates (1) (1) - - - (5) 1 -Underlying earnings before tax 446 403 11 (412) - 1,132 1,573 (28)Over/(under) performanceof fair value items (143) (97) (47) (1,330) 89 (42) (2,434) 98Operating earnings before tax 303
306 (1) (1,742) - 1,090 (861) -
Operating earnings before taxby line of businessLife 187 197 (5) 70 167 636 593 7Accident and health 79 66 20 43 84 297 321 (7)Life and protection 266 263 1 113 135 933 914 2Fixed annuities 106 87 22 (110) - 315 (68) -Variable annuities (119) (164) 27 (1,185) 90 (670) (1,289) 48Retail mutual funds (12) (8) (50) - - (39) 8 -Individual savings andretirement products (25) (85) 71 (1,295) 98 (394) (1,349) 71Pensions and asset management 23 10 130 (11) - 45 91 (51)Institutional guaranteed products (36)
47 - (76) 53 185 (15) -BOLI/COLI 14 9 56 (8) - 41 26 58Institutional products (22) 56 - (84) 74 226 11 -Life reinsurance 62 63 (2) (465) - 285 (529) -Share in net results of associates (1) (1) - - - (5) 1 -Operating earnings before tax 303
306 (1) (1,742) - 1,090 (861) -
Gains/(losses) on investments 74 (98) - (10) - 8 (103) -Impairment charges (231) (287) 20 (499) 54 (1,337) (1,138) (17)Other income/(charges) - (5) - (1) - (4) 6 -Income before tax 146 (84) - (2,252) - (243) (2,096) 88Income tax 120 316 (62) 393 (69) 940 74 -Net income 266 232 15 (1,859) - 697 (2,022) - Net underlying earnings 403 359 12 (279) - 1,048 1,143 (8)Net operating earnings 345 295 17 (1,136) - 1,055 (491) - -Commissions and expenses 1,141 1,295 (12) 1,451 (21) 5,009 4,961 1of which operating expenses 549
539 2 527 4 2,227 2,167 3
For the amounts in euro see theFinancial Supplement.AMERICAS - SALES USD millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % New life salesLife single premiums 184 193 (5) 262 (30) 606 931 (35)Life recurring premiums annualized 189 183 3 179 6 715 852 (16)Total recurring plus 1/10 single 208 202 3 205 1 776 945 (18) Life 149 152 (2) 138 8 566 669 (15)BOLI/COLI 1 1 - 15 (93) 4 36 (89)Life reinsurance 58 49 18 52 12 206 240 (14)Total recurring plus 1/10 single 208
202 3 205 1 776 945 (18)
New premium production accidentand health insurance 184
178 3 205 (10) 758 870 (13)
Gross deposits (on and off balance)by line of businessFixed annuities 648 691 (6) 2,328 (72) 4,751 5,947 (20)Variable annuities 965 912 6 747 29 3,728 3,680 1Retail mutual funds 862 732 18 396 118 2,414 2,813 (14)Pensions and asset management 3,394 2,841 19 2,771 22 12,027 12,987 (7)Institutional guaranteed products 972 1,158 (16) 8,075 (88) 6,085 26,945 (77)Life reinsurance - 1 - 1 - 2 4 (50)Total gross deposits 6,841 6,335 8 14,318 (52) 29,007 52,376 (45)Total gross deposits excl.institutional guaranteed products 5,869
5,177 13 6,243 (6) 22,922 25,431 (10)
Net deposits (on and off balance)by line of businessFixed annuities (296) (278) (6) 896 - 538 103 -Variable annuities (51) 153 - (150) 66 415 (811) -Retail mutual funds 383 236 62 (219) - 467 778 (40)Pensions and asset management 1,361 839 62 24 - 3,584 2,660 35Institutional guaranteed products (10,320) (4,906) (110) 2,433 - (20,280) 3,203 -Life reinsurance (17) (17) - (25) 32 (72) (89) 19Total net deposits (8,940) (3,973) (125) 2,959 - (15,348) 5,844 -Total net deposits excl.institutional guaranteed products 1,380
933 48 526 162 4,932 2,641 87
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30, 2009 2009 %Revenue generating investments (total) 307,375 310,483 (1)Investments general account 123,560 125,712 (2)Investments for account of policyholders 71,915 68,927 4Off balance sheet investments third parties 111,900 115,844 (3) For the amounts in euro seethe Financial Supplement.THE NETHERLANDS
- Underlying earnings increase 27% to EUR 95 million
- Net income improves 65% to EUR 204 million
- Strong demand for pensions leads to new life sales of EUR 93 million
- Value of new business rises to EUR 66 million on higher margins and volumes
Underlying earnings before taxUnderlying earnings before tax amounted to EUR 95 million. Several separateprovision releases totaling EUR 36 million more than offset charges of EUR 22million related to a reorganization of the sales operations and EUR 9 millionfor the deposit guarantee scheme in the Netherlands following the failures oftwo banks, Icesave and DSB.- Earnings from Life & Protection increased toEUR 62 million. Life results improved mainly as a result of higher investmentincome, higher earnings from mortgages and lower costs, partly offset bycharges related to a reorganization of the sales operations. Earnings alsoincluded several releases of provisions.
- For Savings, improved margins were more than offset by charges related to a reorganization of the sales operations and the failures of Icesave and DSB, which led to an underlying loss of EUR 27 million.
- Pensions & Asset Management earnings declined compared with last year to EUR 53 million. Q4 2008 included a one-off dividend of EUR 75 million and exceptional technical results of EUR 37 million. Current quarter results included a release of provisions.
- Earnings from Distribution amounted to EUR 1 million. Lower volumes in the Dutch insurance market continue to have repercussions for the earnings of this business.
- General insurance earnings increased toEUR 8 million and included a charge related to the reorganization of the Dutchsales operations.Net incomeNet income increased by two-thirds compared with Q4 2008 to EUR 204 million.The improvement was a result of higher underlying earnings, lower impairmentcharges and increased gains on investments partly offset by anunderperformance on fair value items. Gains on investments totaled EUR 190million, mainly the result of adjustments in the bond portfolio, in partdriven by asset and liability management. Fair value items underperformed byEUR 43 million mainly because of the impact of fair value movements ofguarantees and related hedges. Impairments amounted to a positive EUR 7million as a result of the recovery of previously impaired securities.Commissions and expensesCommissions and expenses decreased by 15% compared with Q4 2008 to EUR 321million. As a result of significant cost savings, operating costs declined by13% to EUR 258 million.Sales and depositsAs a result of improved service and customer satisfaction, evidenced by recentsurveys, demand for AEGON's group pension products increased. This resulted inpension sales of EUR 72 million. Meanwhile, life sales rose to EUR 21 millionas a result of an increase in recurring premium production related tomortgages. In total, new life sales amounted to EUR 93 million.Value of new businessHigher volumes and margins in the mortgage business resulted in an increase inthe value of new business to EUR 66 million. The internal rate of return forAEGON's Dutch activities continues to be high at 14.9%, driven mainly by themortgage business.Revenue-generating investmentsRevenue-generating investments rose to EUR 70.9 billion at the end of December2009, up 2% compared with the previous quarter, primarily the result ofcontinued net inflows.THE NETHERLANDS - EARNINGS EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings before taxby line of businessLife 61 61 - (34) - 234 43 -Accident and health 1 9 (89) (3) - 28 23 22Life and protection 62 70 (11) (37) - 262 66 -Saving products (27) (8) - (20) (35) (54) (14) -Individual savings andretirement products (27) (8) - (20) (35) (54) (14) -Pensions and asset management 53 38 39 169 (69) 174 308 (44)Distribution 1 3 (67) (22) - 16 3 -General insurance 8 (2) - (15) - 1 8 (88)Share in net results of associates (2) 1 - - - (1) 7 -Underlying earnings before tax 95 102 (7) 75 27 398 378 5Over/(under) performanceof fair value items (43) 39 - 152 - (247) (165) (50)Operating earnings before tax 52 141 (63)
227 (77) 151 213 (29)
Operating earnings beforetax by line of businessLife 45 67 (33) 29 55 194 75 159Accident and health 1 9 (89) (3) - 28 23 22Life and protection 46 76 (39) 26 77 222 98 127Saving products (27) (8) - (20) (35) (54) (14) -Individual savings andretirement products (27) (8) - (20) (35) (54) (14) -Pensions and asset management 26 71 (63) 258 (90) (33) 111 -Distribution 1 3 (67) (22) - 16 3 -General insurance 8 (2) - (15) - 1 8 (88)
Share in net results of associates (2) 1 - - - (1) 7 -Operating earnings before tax 52 141 (63)
227 (77) 151 213 (29)
Gains/(losses) on investments 190 (34) - 84 126 224 20 -Impairment charges 7 (12) - (68) - (111) (138) 20Income before tax 249 95 162 243 2 264 95 178Income tax (45) (21) (114) (119) 62 (23) (1) -Net income 204 74 176 124 65 241 94 156 Net underlying earnings 73 78 (6) 80 (9) 299 326 (8)Net operating earnings 41 106 (61) 129 (68) 114 139 (18) Commissions and expenses 321 279 15 376 (15) 1,181 1,269 (7)of which operating expenses 258 206 25 297 (13) 873 934 (7)THE NETHERLANDS - SALES EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % New life salesLife single premiums 638 329 94 225 184 1,503 1,324 14Life recurring premiums annualized 29 20 45 18 61 89 86 3Total recurring plus 1/10 single 93 52 79 41 127 239 219 9 Life 21 19 11 20 5 82 97 (15)Pensions 72 33 118 21 - 157 122 29Total recurring plus 1/10 single 93 52 79 41 127 239 219 9 New premium productionaccident and health insurance 4 3 33 4 - 17 15 13New premium productiongeneral insurance 7 6 17 7 - 26 28 (7) Gross deposits (on and off balance)by line of businessSaving deposits 1,017 978 4 590 72 3,032 2,473 23Pensions and asset management 166 173 (4) 83 100 412 228 81Total gross deposits 1,183 1,151 3
673 76 3,444 2,701 28
Net deposits (on and off balance)by line of businessSaving deposits 454 440 3 (535) - 870 (699) -Pensions and asset management (123) 210 - 14 - (99) (38) (161)Total net deposits 331 650 (49)
(521) - 771 (737) -
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30, 2009 2009 %
Revenue generating investments (total) 70,861 69,656 2 Investments general account
36,144 35,496 2
Investments for account of policyholders 21,749 21,044 3 Off balance sheet investments third parties 12,968 13,116 (1)
UNITED KINGDOM
- Underlying earnings before tax increase to GBP 30 million
- New life sales up 9% compared with Q3 2009 to GBP 237 million
- Higher sales lead to value of new business of GBP 32 million, up 10% compared with Q3 2009
Underlying earnings before tax Underlying earnings before tax increased to GBP 30 million in the fourth quarter, mainly as a result of a strong recovery in financial markets and business growth.
- Earnings from Life & Protection amounted to GBP 10 million. Earnings in the fourth quarter last year had included a one-off benefit.
- Pensions & Asset Management earnings increased to GBP 28 million, due to a strong recovery in financial markets.
- Distribution recorded a loss of GBP 8 million as a result of lower income due to adverse market conditions and costs associated with adapting the business to the new environment.
Net incomeNet income amounted to GBP 15 million in Q4 2009 as the result of higherunderlying earnings, an improved performance of fair value items and gains oninvestments, partly offset by an increase in impairments. Gains on investmentstotaled GBP 30 million, mainly from bond trading. Impairments increased in thefourth quarter to GBP 49 million, mostly related to hybrid securities issuedby Irish and UK banks.Commissions and expensesTotal commissions and expenses were up 8% compared with Q4 2008 to GBP 186million, mainly as a result of a lower deferral of expenses and the release ofemployee benefit reserves in the fourth quarter last year. Operating expensesdecreased by 1%, as cost savings measures led to lower expenses.Sales and depositsNew life sales increased by 9% compared with Q3 2009 to GBP 237 million. Salesof group and individual pensions increased, though annuity production waslower, as planned following repricing. Gross deposits declined to GBP 270million, compared with a very strong third quarter.Value of new businessValue of new business increased compared with Q3 2009, in line with higherpension sales, to GBP 32 million. The internal rate of return on new businessremained stable at 13.5%.
Revenue-generating investments As a result of a further recovery in financial markets and net inflows, revenue-generating investments increased to GBP 55.8 billion at the end of December 2009.
UNITED KINGDOM - EARNINGS GBP millions Notes Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings before taxby line of businessLife 10 10 - 18 (44) 38 46 (17)Life and protection 10 10 - 18 (44) 38 46 (17)
Pensions and asset management 28 (18) - (8) - 21 68 (69)Distribution (8) (3) (167) 3 - (16) (1) -Underlying earnings before tax 30 (11) - 13 131 43 113 (62)Over/(under) performanceof fair value items - 6 - (15) - 5 (15) -Operating earnings before tax 30 (5) -
(2) - 48 98 (51)
Operating earnings before taxby line of businessLife 10 10 - 18 (44) 38 46 (17)Life and protection 10 10 - 18 (44) 38 46 (17)
Pensions and asset management 28 (12) - (23) - 26 53 (51)Distribution (8) (3) (167) 3 - (16) (1) -Operating earnings before tax 30 (5) -
(2) - 48 98 (51)
Gains/(losses) on investments 30 26 15 (16) - 90 (17) -Impairment charges (49) (70) 30 2 - (163) (18) -Other income/(charges) 8 8 43 (81) 28 (71) 59 (14) -Income before tax 19 (6) - 12 58 34 49 (31)Income tax attributable topolicyholder return (8) (43) 81 (28) 71 (59) 14 -Income before income taxon shareholders return 11 (49) - (16) - (25) 63 -
Income tax on shareholders return 4 16 (75) 8 (50) 30 1 -Net income 15 (33) -
(8) - 5 64 (92)
Net underlying earnings 30 (5) - 17 76 56 104 (46)Net operating earnings 30 (1) -
2 - 59 89 (34)
Commissions and expenses 186 167 11 173 8 687 662 4of which operating expenses 113 109 4 114 (1) 428 414 3 For the amounts in euro seethe Financial Supplement. UNITED KINGDOM - SALES GBP millions Notes Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % New life sales 9Life single premiums 1,171 1,066 10 1,548 (24) 4,571 6,470 (29)Life recurring premiums annualized 120 111 8 134 (10) 486 575 (15)Total recurring plus 1/10 single 237 218 9
289 (18) 943 1,222 (23) Life 31 40 (23) 66 (53) 183 251 (27)Pensions 206 178 16 223 (8) 760 971 (22)
Total recurring plus 1/10 single 237 218 9
289 (18) 943 1,222 (23)
Gross deposits (on and off balance)by line of businessPensions and asset management 270 491 (45) 152 78 1,076 542 99Total gross deposits 270 491 (45)
152 78 1,076 542 99
Net deposits (on and off balance)by line of businessPensions and asset management 98 402 (76)
11 - 269 (322) -Total net deposits 98 402 (76) 11 - 269 (322) -
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30, 2009 2009 %Revenue generating investments (total) 55,774 54,224 3Investments general account 7,031 6,779 4Investments for account of policyholders 45,975 44,795 3Off balance sheet investments third parties 2,768 2,650 4 For the amounts in euro seethe Financial Supplement.OTHER COUNTRIES
- Underlying earnings before tax increase to EUR 42 million
- New life sales increase 39% to EUR 57 million compared with Q3 2009, primarily driven by higher sales in Spain
- Value of new business rises to EUR 30 million, due mainly to growth in sales
Underlying earnings before taxUnderlying earnings before tax totaled EUR 42 million, driven mainly byfurther growth in Central & Eastern Europe (CEE) and Spain. Earnings for thesame quarter last year had included a sizeable one-off charge associated withthe company's Taiwanese operations. The sale of these operations was completedin August 2009, and results are no longer included in AEGON's earnings.- Earnings from Life & Protection increased toEUR 15 million, mainly as a result of growth in CEE - particularly in Slovakiaand the Czech Republic - as well as improved results from AEGON's jointventures in Spain. Results last year were impacted by an acceleratedamortization of deferred acquisition costs in Taiwan of EUR 43 million.
- Individual Savings & Retirement earnings improved to EUR 4 million as AEGON's Chinese asset management joint venture increased its asset balances on the back of a strong recovery in the Chinese equity market.
- Earnings from Pensions & Asset Management rose to EUR 5 million as a result of higher asset balances and cost efficiencies in CEE.
- General Insurance earnings remained high at EUR 10 million, while the fourth quarter last year had included a reserve release of EUR 2 million.
Net incomeNet income from Other Countries increased to EUR 18 million as a result ofhigher underlying earnings, lower losses on investments and lower impairments.Net income for the fourth quarter last year had included an equity impairmentin Taiwan of EUR 45 million.Commissions and expensesCommissions and expenses, excluding Taiwan, were unchanged compared with thefourth quarter last year. Operating expenses, also excluding Taiwan, were alsostable, despite continued growth in the business.Sales and depositsAs a result of strong growth in both single and recurring premium production,total new life sales increased 39% from the third quarter to EUR 57 million.
- In Spain, new life sales increased to EUR 30 million as a result of the introduction of new products and successful sales campaigns. Sales for the partnership with regional savings bank CAM, which are not consolidated in the company's accounts, amounted to EUR 26 million on a 100% basis;
- In CEE, new life sales remained unchanged at EUR 21 million, while new premium production for non-life increased to EUR 14 million as a result of a greater focus on sales of household insurance;
- In Asia, new life sales in China increased to EUR 6 million, as a result ofhigher recurring premium production in most distribution channels. AEGON'sjoint venture in India, which is not consolidated, recorded new life sales forthe quarter of EUR 7 million on a 100% basis.
Gross deposits decreased compared with the third quarter to EUR 591 million primarily as a result of the introduction of new retail mutual funds in China resulted in high inflows during the third quarter.
Value of new businessValue of new business increased 43% compared with the previous quarter to EUR30 million, mainly as a result of improved sales in both Spain and Hungary.The internal rate of return remained at a high level.
Revenue-generating investments Revenue-generating investments increased 6% during the quarter to EUR 12.3 billion at the end of December 2009. The increase was due mainly to market appreciation and net inflows.
OTHER COUNTRIES - EARNINGS EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Underlying earnings before taxby line of businessLife 15 19 (21) (41) - 58 11 -Accident and health - - - 1 - 2 5 (60)Life and protection 15 19 (21) (40) - 60 16 -Variable annuities (1) (1) - - - - (1) -Saving products - - - - - 1 - -Retail mutual funds 5 5 - 3 67 18 13 38Individual savings andretirement products 4 4 - 3 33 19 12 58
Pensions and asset management 5 4 25 2 150 19 12 58General insurance 10 9 11 12 (17) 35 37 (5)Share in net results of associates 8 6 33 6 33 28 16 75Underlying earnings before tax 42 42 - (17) - 161 93 73Over/(under) performanceof fair value items (2) (1) (100) - - - - -Operating earnings before tax 40 41 (2) (17) - 161 93 73 Operating earnings beforetax by line of businessLife 15 19 (21) (41) - 58 11 -Accident and health - - - 1 - 2 5 (60)Life and protection 15 19 (21) (40) - 60 16 -Variable annuities (3) (2) (50) - - - (1) -Saving products - - - - - 1 - -Retail mutual funds 5 5 - 3 67 18 13 38Individual savings andretirement products 2 3 (33) 3 (33) 19 12 58Pensions and asset management 5 4 25 2 150 19 12 58General insurance 10 9 11 12 (17) 35 37 (5)Share in net results of associates 8 6 33 6 33 28 16 75Operating earnings before tax 40 41 (2)
(17) - 161 93 73
Gains/(losses) on investments (1) 2 -
(10) 90 7 (10) -Impairment charges (17) (1) - (49) 65 (23) (68) 66Other income/(charges) (4) 2 - 1 - (387) 1 -Income before tax 18 44 (59) (75) - (242) 16 -Income tax - (13) - 9 - (43) (25) (72)Net income 18 31 (42) (66) - (285) (9) - Net underlying earnings 33 32 3 (10) - 112 64 75Net operating earnings 31 31 - (10) - 112 64 75 Commissions and expenses 88 81 9 175 (50) 340 494 (31)of which operating expenses 54 47 15
66 (18) 195 211 (8)
OTHER COUNTRIES - SALES EUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % New life salesLife single premiums 103 44 134 69 49 353 445 (21)Life recurring premiums annualized 47 37 27 52 (10) 160 189 (15)Total recurring plus 1/10 single 57 41 39
58 (2) 195 233 (16) Life 57 41 39 58 (2) 195 232 (16)Saving products - - - - - - 1 -
Total recurring plus 1/10 single 57 41 39
58 (2) 195 233 (16) New premium productionaccident and health insurance 1 1 - 2 (50) 5 6 (17)New premium productiongeneral insurance 14 6 133 10 40 30 40 (25) Gross deposits (on and off balance)Variable annuities 64 65 (2) 10 - 406 126 -Retail mutual funds 271 433 (37) 173 57 1,402 779 80Pensions and asset management 256 238 8 211 21 878 737 19Total gross deposits 591 736 (20) 394 50 2,686 1,642 64 Net deposits (on and off balance)Variable annuities 56 44 27 5 - 356 113 -Retail mutual funds 33 80 (59) (56) - 152 59 158Pensions and asset management 85 127 (33)
141 (40) 372 397 (6)Total net deposits 174 251 (31) 90 93 880 569 55
REVENUE GENERATING INVESTMENTS
Dec. 31, Sept. 30, 2009 2009 %Revenue generating investments (total) 12,327 11,667 6Investments general account 2,706 2,765 (2)
Investments for account of policyholders 2,413 2,275 6 Off balance sheet investments third parties 7,208 6,627 9
APPENDIX II --Tables
NET UNDERLYING EARNINGS GEOGRAPHICALLY
EUR millions Notes Q4 2009 Q3 2009 %
Q4 2008 % FY 2009 FY 2008 %
1Americas 275 255 8 (155) - 745 780 (4)The Netherlands 73 78 (6) 80 (9) 299 326 (8)United Kingdom 33 (6) - 19 74 62 131 (53)Other countries 33 32 3 (10) - 112 64 75Holding and other (41) (50) 18 (3) - (193) (67) (188)
Net underlying earnings 373 309 21
(69) - 1,025 1,234 (17)
OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS EUR millions
Operating earnings before tax 253 293 (14) (951) - 700 (46) -(Over)/under performanceof fair value items - Americas 103 76 36 933 (89) 30 1,660 (98)(Over)/under performanceof fair value items - The Netherlands 43 (39) - (152) - 247 165 50(Over)/under performanceof fair value items - United Kingdom - (7) - 19 - (6) 19 -(Over)/under performanceof fair value items - Other countries 2 1 100 - - - - -(Over)/under performanceof fair value items - Holding and other 26 27 (4) (30) - 189 (225) -Underlying earnings before tax 427 351 22
(181) - 1,160 1,573 (26)
Net underlying earnings 373 309 21
(69) - 1,025 1,234 (17)
AMERICAS - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS USD millions Over/(under) performance offair value items by line of businessLife and protection (3) 3 - (114) 97 (34) (218) 84Individual savings andretirement products (161) (189) 15 (672) 76 (310) (1,138) 73Pensions and asset management 1 - -
(34) - (14) (59) 76Institutional products (20) 46 - (215) 91 60 (583) -Life reinsurance 40 43 (7) (295) - 256 (436) -Total over/(under) performanceof fair value items (143) (97) (47)
(1,330) 89 (42) (2,434) 98
Total over/(under) performanceof fair value items in EUR (103) (76) (36)
(933) 89 (30) (1,660) 98
THE NETHERLANDS - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS EUR millions Over/(under) performance offair value items by line of businessLife and protection (16) 6 - 63 - (40) 32 -Pensions and asset management (27) 33 - 89 - (207) (197) (5)Total over/(under) performanceof fair value items (43) 39 -
152 - (247) (165) (50)
UNITED KINGDOM - OVER/UNDER PERFORMANCE OF FAIR VALUE ITEMS GBP millions Over/(under) performance offair value items by line of businessPensions and asset management - 6 - (15) - 5 (15) -Total over/(under) performance offair value items - 6 -
(15) - 5 (15) -
OTHER COUNTRIES - OVER/UNDER PERFORMANCEOF FAIR VALUE ITEMS EUR millions Over/(under) performance offair value items by line of businessVariable annuities (2) (1) (100) - - - - -Total over/(under) performance offair value items (2) (1) (100) - - - - -SALES EUR millions Q4 2009 Q3 2009 %
Q4 2008 % FY 2009 FY 2008 %
New life sales 549 484 13 598 (8) 2,045 2,631 (22)Gross deposits (on and off balance) 6,530 6,742 (3)
11,933 (45) 27,953 40,751 (31)
New life salesLife single premiums 2,161 1,732 25 2,327 (7) 7,422 10,532 (30)Life recurring premiums annualized 333 311 7 366 (9) 1,303 1,578 (17)Total recurring plus 1/10 single 549 484 13
598 (8) 2,045 2,631 (22) Life 211 212 - 265 (20) 885 1,101 (20)Saving products - - - - - - 1 -Pensions 299 238 26 283 6 1,011 1,341 (25)BOLI/COLI 1 - - 11 (91) 3 25 (88)Life reinsurance 38 34 12 39 (3) 146 163 (10)
Total recurring plus 1/10 single 549 484 13
598 (8) 2,045 2,631 (22) New premium productionaccident and health insurance 126 125 1 161 (22) 561 614 (9)New premium productiongeneral insurance 21 12 75 17 24 56 68 (18) Gross deposits (on and off balance)Fixed annuities 387 434 (11) 1,676 (77) 3,377 4,057 (17)Variable annuities 699 693 1 590 18 3,055 2,636 16Saving products 1,017 978 4 590 72 3,032 2,473 23Retail mutual funds 855 949 (10) 501 71 3,117 2,698 16Pensions and asset management 2,973 2,924 2 2,613 14 11,045 10,505 5
Institutional guaranteed products 598 764 (22) 5,963 (90) 4,325 18,380 (76)Life reinsurance 1 - - - - 2 2 -Total gross deposits 6,530 6,742 (3) 11,933 (45) 27,953 40,751 (31)Total gross deposits excl.institutional guaranteed products 5,932 5,978 (1)
5,970 (1) 23,628 22,371 6
Net deposits (on and off balance)by line of businessFixed annuities (226) (225) - 593 - 382 71 -Variable annuities 12 149 (92) (114) - 651 (441) -Saving deposits 454 440 3 (535) - 870 (699) -Retail mutual funds 304 255 19 (182) - 484 590 (18)Pensions and asset management 997 1,373 (27) 257 - 3,122 1,769 76
Institutional guaranteed products (7,153) (3,473) (106)
1,679 - (14,412) 2,185 -Life reinsurance (11) (12) 8 (19) 42 (51) (61) 16Total net deposits (5,623) (1,493) - 1,679 - (8,954) 3,414 -Total net deposits excl.
institutional guaranteed products 1,530 1,980 (23)
- - 5,458 1,229 - EMPLOYEE NUMBERS At At Dec. 31, Dec. 31, 2009 2008 Number of employees 28,382 31,425Agents 3,292 4,446Number of employees excl. agents 25,090 26,979
VALUE OF NEW BUSINESS AND IRR
VNB VNB VNB VNB VNBEUR millions, after tax Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Americas 85 63 35 124 (31) 293 412 (29)The Netherlands 66 51 29 13 - 184 43 -United Kingdom 35 34 3 60 (42) 170 234 (27)Other Countries 30 21 43 35 (14) 120 148 (19)Total 216 169 28 233 (7) 767 837 (8) IRR % IRR% IRR%EUR millions, after tax Q4 2009 Q3 2009 Q4 2008 Americas 14.7 12.1 12.4The Netherlands 14.9 21.8 10.8United Kingdom 13.5 13.4 14.0Other Countries 36.2 37.6 37.2Total 17.6 18.5 16.5
MODELED NEW BUSINESS,APE AND DEPOSITS
Premium business Premium business APE APEEUR millions Notes Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % 10Americas 235 251 (6) 279 (16) 997 1,097 (9)The Netherlands 120 87 38 75 60 328 300 9United Kingdom 250 247 1 341 (27) 1,070 1,514 (29)Other Countries 79 60 32 113 (30) 357 409 (13)Total 684 645 6 809 (15) 2,753 3,321 (17) Deposit business Deposit business Deposits DepositsEUR millions Q4 2009 Q3 2009 % Q4 2008 % FY 2009 FY 2008 % Americas 3,022 4,367 (31) 8,718 (65) 17,753 30,151 (41)Other Countries 108 95 14 23 - 525 98 -Total 3,130 4,462 (30) 8,742 (64) 18,278 30,249 (40) VNB/PVNBP SUMMARY Premium business Premium business VNB PVNBP VNB/ PVNBP VNB/ APE VNB PVNBP VNB/ VNB/ APE PVNBPEUR millions Notes Q4 2009 % % FY 2009 % % 11Americas 44 1,195 3.7 18.7 142 4,690 3.0 14.2The Netherlands 66 1,210 5.4 55.1 184 2,763 6.7 56.0United Kingdom 35 1,650 2.1 13.8 170 6,938 2.5 15.9Other Countries 26 556 4.6 32.4 115 2,690 4.3 32.2Total 170 4,611 3.7 24.9 611 17,080 3.6 22.2 Deposit business Deposit business VNB PVNBP VNB/ PVNBP VNB/ VNB PVNBP VNB/ VNB/ Deposits PVNBP DepositsEUR millions Notes Q4 2009 % % FY 2009 % % 11Americas 41 3,736 1.1 1.4 151 23,589 0.6 0.9Other Countries 5 307 1.5 4.2 5 1,230 0.4 0.9Total 46 4,043 1.1 1.5 156 24,819 0.6 0.9Notes:
1) Certain assets held by AEGON Americas, AEGON The Netherlands and AEGON UK are carried at
fair value, and managed on a total return basis, with no offsetting changes in the
valuation of related liabilities. These include assets such as hedge funds, private
equities, real estate limited partnerships, convertible bonds and structured products.
Underlying earnings exclude any over- or underperformance compared to management's
long-term expected return on these assets. Based on current holdings and asset class
returns, the long-term expected return on an annual basis is 8-10%, depending on the
asset class, including cash income and market value changes. The expected earnings from
these asset classes are net of DPAC where applicable.
In addition, certain products offered by AEGON Americas contain guarantees and are
reported on a fair value basis, including the segregated funds offered by AEGON Canada
and the total return annuities and guarantees on variable annuities of AEGON USA. The
earnings on these products are impacted by movements in equity markets and risk free
interest rates. Short-term developments in the financial markets may therefore cause
volatility in earnings. Included in underlying earnings is a long-term expected return on
these products, and any over- or underperformance compared to management's expected
return is excluded from underlying earnings. The fair value movements of certain
guarantees and the fair value change of derivatives that hedge certain risks on these
guarantees of AEGON the Netherlands and Variable Annuities Europe (included in Other
countries) are excluded from underlying earnings.
The Holding includes certain issued bonds that are held at fair value through profit or
loss. The interest rate risk on these bonds is hedged using swaps. The change in AEGON's
credit spread resulted in a loss of EUR 26 mln in Q4 2009 on the fair value movement on
these bonds.2) Net income refers to net income attributable to equity holders of AEGON N.V.3) New life sales is defined as new recurring premiums + 1/10 of single premiums.4) Deposits on and off balance sheet. In the previous quarters of 2009 gross saving deposits
of AEGON The Netherlands were overstated by EUR 130 million, EUR 192 million and EUR 817
million in Q1, Q2 and Q3, respectively. Net deposits were not impacted. Comparative
figures have been restated. 5) Return on equity is calculated by dividing the net underlying earnings after cost of
leverage by the average shareholders' equity excluding the preferred shares and the
revaluation reserve. 6) Capital securities that are denominated in foreign currencies are, for purposes of
calculating the capital base ratio, revalued to the period-end exchange rate. 7) All ratios exclude AEGON's revaluation reserve.
Included in other non-operating income/(charges) are charges made to policyholders with 8) respect to income tax.
There is an equal and opposite tax charge which is reported in the line Income tax 9) attributable to policyholder return.
Includes production on investment contracts without a discretionary participation feature
of which the proceeds are not recognized as revenues but are directly added to our
investment contract liabilities. 10) APE = recurring premium + 1/10 single premium. 11) PVNBP: Present Value New Business Premium.
a) a) 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 calculation of the IGD
ratio excludes the available and required capital of the UK With-Profit funds. In the UK
solvency surplus calculation the local regulator only allows the available capital number
of the With-Profits funds included in overall local available capital to be equal to the
amount of With-Profits funds' required capital. b) The results in this release are unaudited.
Currencies
Income statement items: average rate 1 EUR = USD 1.4071 (2008: USD 1.4660) Income statement items: average rate 1 EUR = GBP 0.8903 (2008: GBP 0.7961) Balance sheet items: closing rate 1 EUR = USD 1.4406 (2008: USD 1.3917) Balance sheet items: closing rate 1 EUR = GBP 0.8881 (2008: GBP 0.9525)
ADDITIONAL INFORMATION
The Hague, February 25, 2010
Press conference
9:00 am CET
Audio webcast on www.aegon.com
Analyst & investor presentation / conference call
15:00 am CET
Audio webcast on www.aegon.com
Call-in numbers (listen only):
USA: +1 480 629 9822UK: + 44 208 515 2301NL: +31 20 796 5332Supplements
AEGON's Q4 2009 Financial Supplement and Condensed Consolidated Interim Financial Statements are available on www.aegon.com.
Record date AGM
The record date for attending and voting at the Annual General Meeting of Shareholders of AEGON N.V. is March 30, 2010. The agenda will be available on AEGON's website from March 29, 2010.
About AEGON
As an international life insurance, pension and investment company based in The Hague, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 28,000 people and have more than 40 million customers across the globe.
Full year Full yearKey figures - EUR 2009 2008Underlying earningsbefore tax 1.2 billion 1.6 billionNew life sales 2.0 billion 2.6 billionGross deposits (excl.inst. guar. prod.) 23.6 billion 22.4 billionRevenue generatinginvestments(end of period) 361 billion 332 billionContact informationMedia relations: Greg Tucker+31(0)70 344 8956gcc-ir@aegon.com
Investor relations: Gerbrand Nijman
+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, operating earnings before tax, and value of new business. The reconciliation
of underlying earnings before tax and operating earnings before tax to the most
comparable IFRS measures is provided on page 8. Value of new business is not based on
IFRS, which are used to report AEGON's quarterly statements and should not be viewed as a
substitute for IFRS financial measures. AEGON believes that these non-GAAP measures,
together with the IFRS information, provide a meaningful measure 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: believe,
estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan,
continue, want, forecast, 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:
Changes in general economic conditions, particularly in the United States, the - Netherlands and the United Kingdom;
Changes in the performance of financial markets, including emerging markets, such as with - regard to:
- The frequency and severity of defaults by issuers in our fixed income investment
portfolios; and
- 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; - The frequency and severity of insured loss events;
Changes affecting mortality, morbidity and other factors that may impact the - profitability of our insurance products;
Changes affecting interest rate levels and continuing low or rapidly changing interest - rate levels;
Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange - rates;
Increasing levels of competition in the United States, the Netherlands, the United- Kingdom and emerging markets;- Changes in laws and regulations, particularly those affecting our operations, the
products we sell, and the attractiveness of certain products to our consumers;
Regulatory changes relating to the insurance industry in the jurisdictions in which we- operate;- Acts of God, acts of terrorism, acts of war and pandemics;- Changes in the policies of central banks and/or governments; Litigation or regulatory action that could require us to pay significant damages or- change the way we do business;- Customer responsiveness to both new products and distribution channels;
Competitive, legal, regulatory, or tax changes that affect the distribution cost of or - demand for our products;
Our failure to achieve anticipated levels of earnings or operational efficiencies as well- as other cost saving initiatives; and- 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.
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