Securities and Exchange Commission
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d/16 of
the Securities Exchange Act of 1934
November 2009
AEGON N.V.
AEGONplein 50
2591 TV THE HAGUE
The Netherlands
AEGONs unaudited condensed consolidated interim financial statements for the nine month period ended September 30, 2009 are included as appendix and incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AEGON N.V. | ||||||
(Registrant) | ||||||
Date: November 20, 2009 | By | /s/ E. Lagendijk | ||||
E. Lagendijk | ||||||
Executive Vice President and | ||||||
General Counsel |
p 4 | ||
p 5 | ||
p 6 | ||
p 7 | ||
p 8 | ||
Notes to the condensed consolidated interim financial statements |
p 9 |
Unaudited |
Page 3 |
CONDENSED CONSOLIDATED BALANCE SHEET
EUR millions |
Notes | Sept. 30, 2009 |
Dec. 31, 2008 | |||
ASSETS |
||||||
Intangible assets |
6 | 4,575 | 5,425 | |||
Investments |
4 | 132,617 | 130,481 | |||
Investments for account of policyholders |
5 | 119,647 | 105,400 | |||
Derivatives |
3,341 | 8,057 | ||||
Investments in associates |
716 | 595 | ||||
Reinsurance assets |
4,844 | 5,013 | ||||
Defined benefit assets |
371 | 448 | ||||
Deferred tax assets |
442 | 1,447 | ||||
Deferred expenses and rebates |
7 | 11,155 | 12,794 | |||
Other assets and receivables |
6,397 | 7,376 | ||||
Cash and cash equivalents |
7,578 | 10,223 | ||||
Total assets |
291,683 | 287,259 | ||||
EQUITY AND LIABILITIES |
||||||
Shareholders equity |
11,649 | 6,055 | ||||
Convertible core capital securities |
3,000 | 3,000 | ||||
Other equity instruments |
4,708 | 4,699 | ||||
Minority interest |
6 | 6 | ||||
Group equity |
19,363 | 13,760 | ||||
Trust pass-through securities |
133 | 161 | ||||
Subordinated borrowings |
8 | 41 | ||||
Insurance contracts |
92,403 | 97,377 | ||||
Insurance contracts for account of policyholders |
67,468 | 60,808 | ||||
Investment contracts |
29,109 | 36,231 | ||||
Investment contracts for account of policyholders |
53,817 | 45,614 | ||||
Derivatives |
3,880 | 6,089 | ||||
Borrowings |
9 | 7,144 | 5,339 | |||
Provisions |
493 | 495 | ||||
Defined benefit liabilities |
2,082 | 2,080 | ||||
Deferred revenue liability |
61 | 42 | ||||
Deferred tax liabilities |
660 | 424 | ||||
Other liabilities |
14,718 | 18,237 | ||||
Accruals |
344 | 561 | ||||
Total liabilities |
272,320 | 273,499 | ||||
Total equity and liabilities |
291,683 | 287,259 | ||||
Unaudited |
Page 4 |
CONDENSED CONSOLIDATED INCOME STATEMENT
EUR millions (except per share data) |
Notes | Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Premium income |
10 | 4,396 | 5,274 | 14,936 | 17,181 | |||||||||
Investment income |
11 | 2,228 | 2,463 | 6,669 | 7,321 | |||||||||
Fee and commission income |
399 | 408 | 1,179 | 1,266 | ||||||||||
Other revenues |
2 | 1 | 3 | 4 | ||||||||||
Total revenues |
7,025 | 8,146 | 22,787 | 25,772 | ||||||||||
Income from reinsurance ceded |
426 | 401 | 1,341 | 1,150 | ||||||||||
Results from financial transactions |
12 | 11,860 | (9,358 | ) | 11,628 | (20,566 | ) | |||||||
Other income |
(4 | ) | 5 | (2 | ) | 5 | ||||||||
Total income |
19,307 | (806 | ) | 35,754 | 6,361 | |||||||||
Benefits and expenses |
18,956 | (1,074 | ) | 34,753 | 5,212 | |||||||||
Impairment charges / (reversals) |
13 | 310 | 444 | 1,153 | 579 | |||||||||
Interest charges and related fees |
93 | 164 | 319 | 370 | ||||||||||
Other charges |
14 | (2 | ) | 2 | 384 | 2 | ||||||||
Total charges |
19,357 | (464 | ) | 36,609 | 6,163 | |||||||||
Share in result of associates |
6 | (1 | ) | 18 | 19 | |||||||||
Income / (loss) before tax |
(44 | ) | (343 | ) | (837 | ) | 217 | |||||||
Income tax |
189 | 14 | 648 | (117 | ) | |||||||||
Net income / (loss) |
145 | (329 | ) | (189 | ) | 100 | ||||||||
Net income / (loss) attributable to: |
||||||||||||||
Equity holders of AEGON N.V. |
145 | (329 | ) | (189 | ) | 100 | ||||||||
Earnings and dividend per share (EUR per share) |
||||||||||||||
Earnings per share 1,3 |
0.06 | (0.25 | ) | (0.29 | ) | (0.10 | ) | |||||||
Earnings per share after potential attribution to convertible core capital securities 1,3 |
0.02 | |||||||||||||
Diluted earnings per share 1,2 |
0.06 | (0.25 | ) | (0.29 | ) | (0.10 | ) | |||||||
Dividend per common share |
| | | 0.30 | ||||||||||
Net income per common share calculation |
||||||||||||||
Net income |
145 | (329 | ) | (189 | ) | 100 | ||||||||
Preferred dividend |
| | (122 | ) | (112 | ) | ||||||||
Coupons on perpetuals |
(44 | ) | (49 | ) | (137 | ) | (140 | ) | ||||||
Earnings attributable to common shareholders |
101 | (378 | ) | (448 | ) | (152 | ) | |||||||
Potential coupon on convertible core capital securities |
(64 | ) | ||||||||||||
Earnings after potential attribution to convertible core capital securities |
37 | (378 | ) | (448 | ) | (152 | ) | |||||||
Weighted average number of common shares outstanding |
1,605 | 1,504 | 1,546 | 1,504 | ||||||||||
Notes:
1 | After deduction of preferred dividend and coupons on perpetuals. |
2 | The potential conversion of the convertible core capital securities is not taken into account in the calculation of diluted earnings per share as this would have an anti-dilutive effect (i.e. diluted earnings per share would be higher than the earnings after potential attribution to convertible core capital securities). |
3 | Figures for Q3 2008, Ytd 2009 and Ytd 2008 reflect Basic earnings per share. For Q3 2009, Basic earnings per share reflect the earnings after potential attribution to convertible core capital securities. |
Unaudited |
Page 5 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR millions |
Notes | Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Net income / (loss) |
145 | (329 | ) | (189 | ) | 100 | ||||||||
Other comprehensive income: |
||||||||||||||
Gross movement in foreign currency translation reserve |
(453 | ) | 1,126 | (422 | ) | 156 | ||||||||
Gross movement in revaluation reserves |
4,768 | (3,384 | ) | 7,713 | (6,945 | ) | ||||||||
Tax relating to components of other comprehensive income |
(1,428 | ) | 836 | (2,266 | ) | 1,976 | ||||||||
Other |
31 | (7 | ) | 29 | (7 | ) | ||||||||
Other comprehensive income for the period |
2,918 | (1,429 | ) | 5,054 | (4,820 | ) | ||||||||
Total comprehensive income |
3,063 | (1,758 | ) | 4,865 | (4,720 | ) | ||||||||
Total comprehensive income attributable to: |
||||||||||||||
Equity holders of AEGON N.V. |
3,063 | (1,760 | ) | 4,865 | (4,722 | ) | ||||||||
Minority interest |
| 2 | | 2 | ||||||||||
Unaudited |
Page 6 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EUR millions |
Total Share capital |
Retained earnings |
Revaluation and hedging reserves |
Other reserves |
Convertible core capital securities |
Other equity instruments |
Issued capital and reserves1 |
Minority interest |
Total | |||||||||||||||
Nine months ended September 30, 2009 |
||||||||||||||||||||||||
At beginning of year |
7,347 | 8,093 | (7,167 | ) | (2,218 | ) | 3,000 | 4,699 | 13,754 | 6 | 13,760 | |||||||||||||
Revaluations |
| | 7,063 | | | | 7,063 | | 7,063 | |||||||||||||||
Disposal of group assets |
| | 59 | | | | 59 | | 59 | |||||||||||||||
Gains/(losses) transferred to income statement on disposal and impairment |
| | 605 | | | | 605 | | 605 | |||||||||||||||
Equity movements of associates |
| | | 29 | | | 29 | | 29 | |||||||||||||||
Foreign currency translation differences |
| | (20 | ) | | | | (20 | ) | | (20 | ) | ||||||||||||
Movement in foreign currency translation reserve and net foreign investment hedging reserves |
| | | (363 | ) | | | (363 | ) | | (363 | ) | ||||||||||||
Aggregate tax effect of items recognized directly in equity |
| | (2,325 | ) | | | | (2,325 | ) | | (2,325 | ) | ||||||||||||
Other |
| | 6 | | | | 6 | | 6 | |||||||||||||||
Net income / (loss) recognized directly in equity |
| | 5,388 | (334 | ) | | | 5,054 | | 5,054 | ||||||||||||||
Net income / (loss) recognized in the income statement |
| (189 | ) | | | | | (189 | ) | | (189 | ) | ||||||||||||
Total comprehensive income / (loss) for the first Nine months ended September 30, 2009 |
| (189 | ) | 5,388 | (334 | ) | | | 4,865 | | 4,865 | |||||||||||||
Shares issued |
829 | (14 | ) | | | | | 815 | | 815 | ||||||||||||||
Treasury shares |
| 171 | | | | | 171 | | 171 | |||||||||||||||
Preferred dividend |
| (122 | ) | | | | | (122 | ) | | (122 | ) | ||||||||||||
Coupons on perpetuals (net of tax) |
| (137 | ) | | | | | (137 | ) | | (137 | ) | ||||||||||||
Expenses convertible core capital securities (net of tax) |
| (1 | ) | | | | | (1 | ) | | (1 | ) | ||||||||||||
Share options |
| | | | | 9 | 9 | | 9 | |||||||||||||||
Other |
| 3 | | | | | 3 | | 3 | |||||||||||||||
At end of period |
8,176 | 7,804 | (1,779 | ) | (2,552 | ) | 3,000 | 4,708 | 19,357 | 6 | 19,363 | |||||||||||||
1 Issued capital and reserves attributable to equity holders of AEGON N.V. |
||||||||||||||||||||||||
Nine months ended September 30, 2008 |
| |||||||||||||||||||||||
At beginning of year |
7,359 | 10,349 | (516 | ) | (2,041 | ) | | 4,795 | 19,946 | 16 | 19,962 | |||||||||||||
Revaluations |
| | (7,327 | ) | | | | (7,327 | ) | | (7,327 | ) | ||||||||||||
Gains/(losses) transferred to income statement on disposal and impairment |
| | 640 | | | | 640 | | 640 | |||||||||||||||
Equity movements of associates |
| | | (41 | ) | | | (41 | ) | | (41 | ) | ||||||||||||
Foreign currency translation differences |
| | (206 | ) | | | | (206 | ) | | (206 | ) | ||||||||||||
Movement in foreign currency translation reserve and net foreign investment hedging reserves |
| | | 129 | | | 129 | | 129 | |||||||||||||||
Aggregate tax effect of items recognized directly in equity |
| | 2,003 | | | | 2,003 | | 2,003 | |||||||||||||||
Other |
| 32 | (52 | ) | | | | (20 | ) | 2 | (18 | ) | ||||||||||||
Net income / (loss) recognized directly in equity |
| 32 | (4,942 | ) | 88 | | | (4,822 | ) | 2 | (4,820 | ) | ||||||||||||
Net income / (loss) recognized in the income statement |
| 100 | | | | | 100 | | 100 | |||||||||||||||
Total comprehensive income / (loss) for the first Nine months ended September 30, 2008 |
| 132 | (4,942 | ) | 88 | | | (4,722 | ) | 2 | (4,720 | ) | ||||||||||||
Treasury shares |
| (217 | ) | | | | | (217 | ) | | (217 | ) | ||||||||||||
Other equity instruments redeemed |
| | | | | (114 | ) | (114 | ) | | (114 | ) | ||||||||||||
Dividends paid on common shares |
| (548 | ) | | | | | (548 | ) | | (548 | ) | ||||||||||||
Preferred dividend |
| (112 | ) | | | | | (112 | ) | | (112 | ) | ||||||||||||
Coupons on perpetuals (net of tax) |
| (140 | ) | | | | | (140 | ) | | (140 | ) | ||||||||||||
Share options |
| | | | | 12 | 12 | | 12 | |||||||||||||||
At end of period |
7,359 | 9,464 | (5,458 | ) | (1,953 | ) | | 4,693 | 14,105 | 18 | 14,123 | |||||||||||||
1 Issued capital and reserves attributable to equity holders of AEGON N.V. |
Unaudited |
Page 7 |
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
EUR millions |
Notes | Ytd 2009 | Ytd 2008 | |||||
Cash flow from operating activities |
(4,785 | ) | 1,774 | |||||
Purchases and disposals of intangible assets |
(4 | ) | (6 | ) | ||||
Purchases and disposals of equipment and other assets |
(134 | ) | 90 | |||||
Purchases, disposals and dividends of subsidiaries and associates |
(53 | ) | (164 | ) | ||||
Cash flow from investing activities |
(191 | ) | (80 | ) | ||||
Issuance and purchase of share capital |
1,000 | (217 | ) | |||||
Dividends paid |
(122 | ) | (660 | ) | ||||
Issuances, repayments and coupons of convertible capital securities |
(121 | ) | | |||||
Issuances, repayments and coupons of perpetuals |
(184 | ) | (301 | ) | ||||
Issuances, repayments and finance interest on borrowings |
2,126 | 720 | ||||||
Cash flow from financing activities |
2,699 | (458 | ) | |||||
Net increase/(decrease) in cash and cash equivalents |
(2,277 | ) | 1,236 | |||||
Net cash and cash equivalents at January 1 |
9,506 | 7,385 | ||||||
Effects of changes in exchange rate |
46 | (16 | ) | |||||
Net cash and cash equivalents at end of period |
7,275 | 8,605 | ||||||
Unaudited |
Page 8 |
Notes to the condensed consolidated interim financial statements
Amounts in EUR millions, unless otherwise stated
1. Basis of presentation
The condensed consolidated interim financial statements as at and for the 9 month period ended September 30, 2009, have been prepared in accordance with IAS 34 Interim financial reporting as adopted by the European Union (EU) and with IFRS as issued by the International Accounting Standards Board (IASB). It does not include all of the information required for a full set of financial statements prepared in accordance with IFRS and should therefore be read together with the 2008 consolidated financial statements of AEGON N.V. as included in AEGONs Annual Report for 2008.
The condensed consolidated interim financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value.
The published figures in these condensed consolidated interim financial statements are unaudited.
2. Significant accounting policies
Except for the changes highlighted below, all accounting policies and methods of computation applied in the condensed consolidated interim financial statements are the same as those applied in the 2008 consolidated financial statements, which were prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted by the European Union.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2009:
IFRS 8 Operating segments. This standard requires disclosure of information about the Groups operating segments and replaces the requirement to determine primary (geographical) and secondary (business) reporting segments of the Group.
Under IFRS 8, AEGONs operating segments are based on the businesses as presented in internal reports that are regularly reviewed by the executive board which is regarded as the chief executive decision maker. The operating segments are:
| AEGON Americas. Main business lines include life and protection, individual savings and retirement, pensions and asset management, institutional products and life reinsurance. |
| AEGON The Netherlands. Main business lines include life and protection, individual savings and retirement, pensions and asset management, distribution and general insurance. |
| AEGON United Kingdom. Main business lines include life and protection, pensions and asset management and distribution. |
| Other countries. Other countries include the country units Central and Eastern Europe, other European countries, European variable annuities and Asia. Main business lines include life and protection, pensions and asset management and general insurance. |
| Holding and other activities. Includes finance, employee and other administrative expenses of the group staff functions. |
This report includes a non-IFRS financial measure: Underlying earnings before tax. AEGON believes this non-IFRS measure, together with the IFRS measure (Net income), provides a meaningful measure for the investing public to evaluate AEGONs business relative to the businesses of our peers. In addition, underlying earnings is a key performance indicator on which the executive board manages AEGONs performance. The reconciliation of this measure to the most comparable IFRS measure is shown in note 3 - Segment information.
The adoption of IFRS 8 had no impact on equity or net income. In accordance with the transitional requirements of the standard, AEGON has provided full comparative information.
Unaudited |
Page 9 |
Underlying earnings
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 includes 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 managements long-term expected return on assets. Based on current holdings and asset returns, the long-term expected return on an annual basis is 8-10%, depending on 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 managements 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, because the long-term expected return for these guarantees is set at zero.
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 fair value movement resulting from changes in AEGONs credit spread are excluded from underlying earnings.
IAS 1 (revised) Presentation of financial statements
The revised standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line.
In addition, the standard introduces the statement of comprehensive income: it presents all items of recognized income and expenses, either in one single statement, or in two linked statements. AEGON has elected to present two statements. The adoption of this standard had no impact on equity or net income. In accordance with the transitional requirements of the standard, AEGON has provided full comparative information.
IFRS 2 Share-based Payment Vesting Conditions and Cancellations
The Standard has been amended to clarify the definition of vesting conditions and to prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. The adoption of this amendment had no impact on the financial position or performance of the Group.
Amendment to IFRS 7 Financial Instruments: Disclosures. The amendment increases the disclosure requirements about fair value measurement and amends the disclosure about liquidity risk. The amendment introduces a three-level hierarchy for fair value measurement disclosures about financial instruments and requires some specific quantitative disclosures for those instruments classified in the lowest level in the hierarchy. These disclosures will help to improve comparability between entities about the effects of fair value measurements. In addition, the amendment clarifies and enhances the existing requirements for the disclosure of liquidity risk primarily requiring a separate liquidity risk analysis for derivative and non-derivative financial liabilities. It also requires a maturity analysis for financial assets where the information is needed to understand the nature and context of liquidity risk. The Group will make additional relevant disclosures in its consolidated financial statements for the year ending December 31, 2009.
IAS 23 Borrowing Costs (revised)
The standard has been revised to require capitalization of borrowing costs on qualifying assets. This amendment is not relevant to the Group as the Group already has a policy to capitalize borrowing costs.
In addition, the following new standards, amendments to existing standards and interpretations are mandatory for the first time for the financial year beginning January 1, 2009 but are not currently relevant for the Group:
| IFRIC 16 Hedges of a net investment in a foreign operation; |
| Amendments to IAS 39 Eligible hedged items; |
| Improvements to IFRS (2008). |
Unaudited |
Page 10 |
Critical accounting estimates
Certain amounts recorded in the condensed consolidated interim financial statements reflect estimates and assumptions made by management. Actual results may differ from the estimates made. Interim results are not necessarily indicative for full year results.
Exchange rates
The following exchange rates are applied for the condensed consolidated interim financial statements:
Income statement items: average rate 1 EUR = USD 1.3720 (2008: USD 1.5197); 1 EUR = GBP 0.8855 (2008: GBP 0.7825).
Balance sheet items: closing rate 1 EUR = USD 1.4643 (2008: USD 1.4303; year-end 2008: USD 1.3917); 1 EUR = GBP 0.9093 (2008: GBP 0.7903; year-end 2008: GBP 0.9525).
Unaudited |
Page 11 |
3. Segment information
3.1 Income statement
Three months ended September 30, 2009
Segment information
EUR millions |
Americas | The Netherlands |
United Kingdom |
Other countries |
Holding and other activities |
Eliminations | Total | ||||||||||||||
Three months ended September 30, 2009 |
|||||||||||||||||||||
Underlying earnings before tax geographically |
289 | 102 | (13 | ) | 42 | (68 | ) | (1 | ) | 351 | |||||||||||
Over/(under) performance of fair value items |
(76 | ) | 39 | 7 | (1 | ) | (27 | ) | | (58 | ) | ||||||||||
Total operating earnings before tax |
213 | 141 | (6 | ) | 41 | (95 | ) | (1 | ) | 293 | |||||||||||
Gains/(losses) on investments |
(73 | ) | (34 | ) | 30 | 2 | (25 | ) | | (100 | ) | ||||||||||
Impairment charges |
(227 | ) | (12 | ) | (80 | ) | (1 | ) | | | (320 | ) | |||||||||
Impairment reversals |
35 | | | | | | 35 | ||||||||||||||
Other income/(charges) |
(3 | ) | | 49 | 2 | | | 48 | |||||||||||||
Income before tax |
(55 | ) | 95 | (7 | ) | 44 | (120 | ) | (1 | ) | (44 | ) | |||||||||
Income tax |
221 | (21 | ) | (30 | ) | (13 | ) | 32 | | 189 | |||||||||||
Net income |
166 | 74 | (37 | ) | 31 | (88 | ) | (1 | ) | 145 | |||||||||||
Inter-segment underlying earnings |
(3 | ) | (1 | ) | 1 | (1 | ) | 4 | |||||||||||||
Revenues |
|||||||||||||||||||||
Life insurance gross premiums |
1,417 | 483 | 1,740 | 165 | | | 3,805 | ||||||||||||||
Accident and health insurance |
406 | 34 | | 16 | | | 456 | ||||||||||||||
General insurance |
| 97 | | 38 | | | 135 | ||||||||||||||
Total gross premiums |
1,823 | 614 | 1,740 | 219 | | | 4,396 | ||||||||||||||
Investment income |
925 | 557 | 690 | 42 | 43 | (29 | ) | 2,228 | |||||||||||||
Fee and commission income |
217 | 97 | 54 | 31 | | | 399 | ||||||||||||||
Other revenues |
1 | | | 1 | | | 2 | ||||||||||||||
Total revenues |
2,966 | 1,268 | 2,484 | 293 | 43 | (29 | ) | 7,025 | |||||||||||||
Inter-segment revenues |
| (1 | ) | | | 30 | |||||||||||||||
Three months ended September 30, 2008
|
|
||||||||||||||||||||
Americas | The Netherlands |
United Kingdom |
Other countries | Holding and other activities |
Eliminations | Total | |||||||||||||||
Three months ended September 30, 2008 |
|||||||||||||||||||||
Underlying earnings before tax geographically |
388 | 74 | 35 | 42 | (45 | ) | 6 | 500 | |||||||||||||
Over/(under) performance of fair value items |
(453 | ) | (126 | ) | | | 123 | | (456 | ) | |||||||||||
Total operating earnings before tax |
(65 | ) | (52 | ) | 35 | 42 | 78 | 6 | 44 | ||||||||||||
Gains/(losses) on investments |
33 | (25 | ) | (4 | ) | (5 | ) | 26 | | 25 | |||||||||||
Impairment charges |
(328 | ) | (49 | ) | (15 | ) | (18 | ) | | | (410 | ) | |||||||||
Impairment reversals |
3 | | | | | | 3 | ||||||||||||||
Other income/(charges) |
5 | | (8 | ) | | (2 | ) | | (5 | ) | |||||||||||
Income before tax |
(352 | ) | (126 | ) | 8 | 19 | 102 | 6 | (343 | ) | |||||||||||
Income tax |
(26 | ) | 72 | 10 | (10 | ) | (32 | ) | | 14 | |||||||||||
Net income |
(378 | ) | (54 | ) | 18 | 9 | 70 | 6 | (329 | ) | |||||||||||
Inter-segment underlying earnings |
(16 | ) | (4 | ) | 1 | (2 | ) | 21 | |||||||||||||
Revenues |
|||||||||||||||||||||
Life insurance gross premiums |
1,451 | 574 | 2,286 | 353 | | | 4,664 | ||||||||||||||
Accident and health insurance |
417 | 34 | | 17 | | | 468 | ||||||||||||||
General insurance |
| 99 | | 43 | | | 142 | ||||||||||||||
Total gross premiums |
1,868 | 707 | 2,286 | 413 | | | 5,274 | ||||||||||||||
Investment income |
1,130 | 612 | 616 | 77 | 58 | (30 | ) | 2,463 | |||||||||||||
Fee and commission income |
220 | 100 | 55 | 33 | | | 408 | ||||||||||||||
Other revenues |
| | | 1 | | | 1 | ||||||||||||||
Total revenues |
3,218 | 1,419 | 2,957 | 524 | 58 | (30 | ) | 8,146 | |||||||||||||
Inter-segment revenues |
| | 1 | | 29 | ||||||||||||||||
Unaudited |
Page 12 |
Nine months ended September 30, 2009
Segment information
EUR millions |
Americas | The Netherlands |
United Kingdom |
Other countries |
Holding and other activities |
Eliminations | Total | ||||||||||||||
Nine months ended September 30, 2009 |
|||||||||||||||||||||
Underlying earnings before tax geographically |
501 | 303 | 14 | 119 | (202 | ) | (2 | ) | 733 | ||||||||||||
Over/(under) performance of fair value items |
73 | (204 | ) | 6 | 2 | (163 | ) | | (286 | ) | |||||||||||
Total operating earnings before tax |
574 | 99 | 20 | 121 | (365 | ) | (2 | ) | 447 | ||||||||||||
Gains/(losses) on investments |
(48 | ) | 34 | 68 | 8 | 46 | | 108 | |||||||||||||
Impairment charges |
(862 | ) | (121 | ) | (129 | ) | (6 | ) | (5 | ) | | (1,123 | ) | ||||||||
Impairment reversals |
56 | 3 | | | | | 59 | ||||||||||||||
Other income/(charges) |
(3 | ) | | 58 | (383 | ) | | | (328 | ) | |||||||||||
Income before tax |
(283 | ) | 15 | 17 | (260 | ) | (324 | ) | (2 | ) | (837 | ) | |||||||||
Income tax |
598 | 22 | (28 | ) | (43 | ) | 99 | | 648 | ||||||||||||
Net income |
315 | 37 | (11 | ) | (303 | ) | (225 | ) | (2 | ) | (189 | ) | |||||||||
Inter-segment underlying earnings |
(16 | ) | (10 | ) | 2 | (4 | ) | 28 | |||||||||||||
Revenues |
|||||||||||||||||||||
Life insurance gross premiums |
4,388 | 2,493 | 5,356 | 690 | | | 12,927 | ||||||||||||||
Accident and health insurance |
1,298 | 180 | | 58 | | | 1,536 | ||||||||||||||
General insurance |
| 363 | | 110 | | | 473 | ||||||||||||||
Total gross premiums |
5,686 | 3,036 | 5,356 | 858 | | | 14,936 | ||||||||||||||
Investment income |
3,058 | 1,631 | 1,785 | 159 | 162 | (126 | ) | 6,669 | |||||||||||||
Fee and commission income |
657 | 296 | 140 | 86 | | | 1,179 | ||||||||||||||
Other revenues |
1 | | | 2 | | | 3 | ||||||||||||||
Total revenues |
9,402 | 4,963 | 7,281 | 1,105 | 162 | (126 | ) | 22,787 | |||||||||||||
Inter-segment revenues |
1 | (2 | ) | 2 | | 125 | |||||||||||||||
Nine months ended September 30, 2008
Americas | The Netherlands |
United Kingdom |
Other countries |
Holding and other activities |
Eliminations | Total | |||||||||||||||
Nine months ended September 30, 2008 |
|||||||||||||||||||||
Underlying earnings before tax geographically |
1,307 | 303 | 128 | 110 | (108 | ) | 14 | 1,754 | |||||||||||||
Over/(under) performance of fair value items |
(727 | ) | (317 | ) | | | 195 | | (849 | ) | |||||||||||
Total operating earnings before tax |
580 | (14 | ) | 128 | 110 | 87 | 14 | 905 | |||||||||||||
Gains/(losses) on investments |
(61 | ) | (64 | ) | (1 | ) | | 25 | | (101 | ) | ||||||||||
Impairment charges |
(431 | ) | (70 | ) | (27 | ) | (19 | ) | | | (547 | ) | |||||||||
Impairment reversals |
10 | | | | | | 10 | ||||||||||||||
Other income/(charges) |
5 | | (53 | ) | | (2 | ) | | (50 | ) | |||||||||||
Income before tax |
103 | (148 | ) | 47 | 91 | 110 | 14 | 217 | |||||||||||||
Income tax |
(210 | ) | 118 | 44 | (34 | ) | (35 | ) | | (117 | ) | ||||||||||
Net income |
(107 | ) | (30 | ) | 91 | 57 | 75 | 14 | 100 | ||||||||||||
Inter-segment underlying earnings |
(55 | ) | (24 | ) | 1 | (4 | ) | 82 | |||||||||||||
Revenues |
|||||||||||||||||||||
Life insurance gross premiums |
4,345 | 2,602 | 7,071 | 1,187 | | | 15,205 | ||||||||||||||
Accident and health insurance |
1,248 | 186 | | 60 | | | 1,494 | ||||||||||||||
General insurance |
| 362 | | 120 | | | 482 | ||||||||||||||
Total gross premiums |
5,593 | 3,150 | 7,071 | 1,367 | | | 17,181 | ||||||||||||||
Investment income |
3,414 | 1,740 | 1,899 | 203 | 171 | (106 | ) | 7,321 | |||||||||||||
Fee and commission income |
692 | 312 | 178 | 84 | | | 1,266 | ||||||||||||||
Other revenues |
2 | | | 2 | | | 4 | ||||||||||||||
Total revenues |
9,701 | 5,202 | 9,148 | 1,656 | 171 | (106 | ) | 25,772 | |||||||||||||
Inter-segment revenues |
1 | | 1 | | 104 | ||||||||||||||||
Unaudited |
Page 13 |
3.2 Investments geographically
At September 30, 2009
INVESTMENTS GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated) | |||||||||||||||||||
Americas | United Kingdom |
The | United | Other | Holding & other |
Total | |||||||||||||
USD | GBP | At September 30, 2009 |
Americas | Netherlands | Kingdom | countries | activities | Eliminations | EUR | ||||||||||
Investments | |||||||||||||||||||
1,707 | 47 | Shares |
1,165 | 641 | 52 | 54 | | (3 | ) | 1,909 | |||||||||
86,776 | 6,722 | Bonds |
59,261 | 20,584 | 7,392 | 1,942 | 1,054 | | 90,233 | ||||||||||
18,011 | 10 | Loans |
12,300 | 12,154 | 11 | 682 | | | 25,147 | ||||||||||
18,490 | | Other financial assets |
12,627 | 127 | | 87 | | | 12,841 | ||||||||||
728 | | Investments in real estate |
497 | 1,990 | | | | | 2,487 | ||||||||||
125,712 | 6,779 | Investments general account |
85,850 | 35,496 | 7,455 | 2,765 | 1,054 | (3 | ) | 132,617 | |||||||||
| 21,897 | Shares |
| 6,786 | 24,081 | 847 | | (7 | ) | 31,707 | |||||||||
| 13,186 | Bonds |
| 13,356 | 14,501 | 157 | | | 28,014 | ||||||||||
68,927 | 3,774 | Separate accounts and investment funds |
47,072 | | 4,151 | 1,070 | | | 52,293 | ||||||||||
| 5,152 | Other financial assets |
| 902 | 5,666 | 201 | | | 6,769 | ||||||||||
| 786 | Investments in real estate |
| | 864 | | | | 864 | ||||||||||
68,927 | 44,795 | Investments for account of policyholders |
47,072 | 21,044 | 49,263 | 2,275 | | (7 | ) | 119,647 | |||||||||
194,639 | 51,574 | Investments on balance sheet |
132,922 | 56,540 | 56,718 | 5,040 | 1,054 | (10 | ) | 252,264 | |||||||||
115,844 | 2,650 | Off balance sheet investments third parties |
79,112 | 13,116 | 2,914 | 6,627 | | | 101,769 | ||||||||||
310,483 | 54,224 | Total revenue generating investments |
212,034 | 69,656 | 59,632 | 11,667 | 1,054 | (10 | ) | 354,033 | |||||||||
Investments | |||||||||||||||||||
101,293 | 6,688 | Available-for-sale |
69,174 | 21,253 | 7,355 | 1,889 | 1,054 | | 100,725 | ||||||||||
18,011 | 10 | Loans |
12,300 | 12,154 | 11 | 682 | | | 25,147 | ||||||||||
| | Held-to-maturity |
| | | 56 | | | 56 | ||||||||||
74,607 | 44,090 | Financial assets at fair value through profit or loss |
50,951 | 21,143 | 48,488 | 2,413 | | (10 | ) | 122,985 | |||||||||
728 | 786 | Investments in real estate |
497 | 1,990 | 864 | | | | 3,351 | ||||||||||
194,639 | 51,574 | Total investments on balance sheet |
132,922 | 56,540 | 56,718 | 5,040 | 1,054 | (10 | ) | 252,264 | |||||||||
98 | 13 | Investments in associates |
67 | 55 | 14 | 578 | 4 | (2 | ) | 716 | |||||||||
29,026 | 6,243 | Other assets |
19,823 | 6,437 | 6,865 | 1,231 | 14,646 | (10,299 | ) | 38,703 | |||||||||
223,763 | 57,830 | Consolidated total Assets |
152,812 | 63,032 | 63,597 | 6,849 | 15,704 | (10,311 | ) | 291,683 | |||||||||
At December 31, 2008
INVESTMENTS GEOGRAPHICALLY
|
|||||||||||||||||||
amounts in million EUR (unless otherwise stated) | |||||||||||||||||||
Americas USD |
United Kingdom GBP |
At December 31, 2008 |
Americas | The Netherlands |
United Kingdom |
Other countries |
Holding & other activities |
Eliminations | Total EUR | ||||||||||
Investments |
|||||||||||||||||||
1,436 | 39 | Shares |
1,031 | 1,297 | 41 | 183 | 52 | (2 | ) | 2,602 | |||||||||
83,846 | 4,915 | Bonds |
60,247 | 18,298 | 5,161 | 4,827 | 20 | | 88,553 | ||||||||||
19,194 | 10 | Loans |
13,792 | 10,416 | 10 | 1,116 | | | 25,334 | ||||||||||
15,635 | | Other financial assets |
11,235 | 112 | | 117 | | | 11,464 | ||||||||||
679 | | Investments in real estate |
488 | 2,040 | | | | | 2,528 | ||||||||||
120,790 | 4,964 | Investments general account |
86,793 | 32,163 | 5,212 | 6,243 | 72 | (2 | ) | 130,481 | |||||||||
| 17,360 | Shares |
| 6,416 | 18,225 | 167 | | (9 | ) | 24,799 | |||||||||
| 12,675 | Bonds |
| 11,675 | 13,307 | 330 | | | 25,312 | ||||||||||
58,943 | 2,381 | Separate accounts and investment funds |
42,353 | | 2,500 | 1,420 | | | 46,273 | ||||||||||
| 6,376 | Other financial assets |
| 1,042 | 6,693 | 150 | | | 7,885 | ||||||||||
| 1,077 | Investments in real estate |
| | 1,131 | | | | 1,131 | ||||||||||
58,943 | 39,869 | Investments for account of policyholders |
42,353 | 19,133 | 41,856 | 2,067 | | (9 | ) | 105,400 | |||||||||
179,733 | 44,833 | Investments on balance sheet |
129,146 | 51,296 | 47,068 | 8,310 | 72 | (11 | ) | 235,881 | |||||||||
106,434 | 2,289 | Off balance sheet investments third parties |
76,478 | 11,783 | 2,403 | 5,299 | | | 95,963 | ||||||||||
286,167 | 47,122 | Total revenue generating investments |
205,624 | 63,079 | 49,471 | 13,609 | 72 | (11 | ) | 331,844 | |||||||||
Investments |
|||||||||||||||||||
94,444 | 4,859 | Available-for-sale |
67,862 | 19,110 | 5,101 | 2,602 | 72 | | 94,747 | ||||||||||
19,194 | 10 | Loans |
13,792 | 10,416 | 10 | 1,116 | | | 25,334 | ||||||||||
| | Held-to-maturity |
| | | 2,269 | | | 2,269 | ||||||||||
65,416 | 38,887 | Financial assets at fair value through profit or loss |
47,004 | 19,730 | 40,826 | 2,323 | | (11 | ) | 109,872 | |||||||||
679 | 1,077 | Investments in real estate |
488 | 2,040 | 1,131 | | | | 3,659 | ||||||||||
179,733 | 44,833 | Total investments on balance sheet |
129,146 | 51,296 | 47,068 | 8,310 | 72 | (11 | ) | 235,881 | |||||||||
30 | 13 | Investments in associates |
21 | 55 | 13 | 503 | 4 | (2 | ) | 594 | |||||||||
36,795 | 7,192 | Other assets |
26,440 | 12,460 | 7,552 | 1,660 | 17,395 | (14,723 | ) | 50,784 | |||||||||
216,558 | 52,038 | Consolidated total Assets |
155,607 | 63,811 | 54,633 | 10,473 | 17,471 | (14,736 | ) | 287,259 | |||||||||
Unaudited |
Page 14 |
4. Investments
INVESTMENTS
EUR millions |
Notes | Sept. 30, 2009 | Dec. 31, 2008 | |||
Available-for-sale (AFS) |
100,725 | 94,747 | ||||
Loans |
25,147 | 25,333 | ||||
Held-to-maturity (HTM) |
56 | 2,270 | ||||
Financial assets at fair value through profit or loss (FVTPL) |
4,202 | 5,603 | ||||
Financial assets, excluding derivatives |
130,130 | 127,953 | ||||
Investments in real estate |
2,487 | 2,528 | ||||
Total Investments for general account |
132,617 | 130,481 | ||||
Total financial assets, excluding derivatives
AFS | FVTPL | HTM | Loans | Total | ||||||
Shares |
1,069 | 840 | | | 1,909 | |||||
Bonds |
88,532 | 1,645 | 56 | | 90,233 | |||||
Money market and other short term investments |
10,173 | 242 | | | 10,415 | |||||
Mortgages |
| | | 21,081 | 21,081 | |||||
Private loans |
| | | 780 | 780 | |||||
Deposits with financial institutions |
| | | 1,079 | 1,079 | |||||
Policy loans |
| | | 2,000 | 2,000 | |||||
Receivables out of share lease agreements |
| | | 44 | 44 | |||||
Other |
951 | 1,475 | 0 | 163 | 2,589 | |||||
Sept. 30, 2009 |
100,725 | 4,202 | 56 | 25,147 | 130,130 | |||||
AFS | FVTPL | HTM | Loans | Total | ||||||
Shares |
1,429 | 1,173 | | | 2,602 | |||||
Bonds |
84,019 | 2,282 | 2,255 | | 88,556 | |||||
Money market and other short term investments |
8,318 | 146 | | | 8,464 | |||||
Mortgages |
| | | 20,166 | 20,166 | |||||
Private loans |
| | | 822 | 822 | |||||
Deposits with financial institutions |
| | | 1,640 | 1,640 | |||||
Policy loans |
| | | 2,473 | 2,473 | |||||
Receivables out of share lease agreements |
| | | 54 | 54 | |||||
Other |
981 | 2,002 | 15 | 178 | 3,176 | |||||
Dec. 31, 2008 |
94,747 | 5,603 | 2,270 | 25,333 | 127,953 | |||||
Exposure to capital securities in the financial sector
The value of our investments in deeply subordinated securities in the financial services sector may be significantly impacted if issuers of certain securities with optional deferral features exercise the option to defer coupon payments or defer as a condition of receiving state support. These securities are broadly referred to as capital securities which can be categorized as Trust Preferred, Hybrid, Tier 1 or Upper Tier 2.
The Trust Preferred category is comprised of capital securities issued by US-based financial services entities where the capital securities typically have an original maturity of 30 years (callable after 10 years) and generally have common structural features, including a cumulative coupon in the event of deferral. The Hybrid category is comprised of capital securities issued by financial services entities which typically have an original maturity of more than 30 years and may be perpetual. In addition, Hybrids have other features that may not be consistent across issues such as a cumulative or non-cumulative coupon, capital replacement and an alternative payment mechanism, and could also be subordinate to the traditional Trust Preferred in the companys capital structure. Capital securities categorized as Tier 1 are issued by non-US banks and are perpetual with a non-cumulative deferrable coupon. Capital securities categorized as Upper Tier 2 are also issued by non-US banks but these positions are generally perpetual where the deferrable coupon is cumulative.
Deferral of coupons might trigger recognition of impairment losses. AEGON has exposures to a number of capital securities issued by companies that received state support. Our total exposure to capital securities of companies that received state support amount to EUR 1,207 million, with unrealized losses of EUR 371 million.
Unaudited |
Page 15 |
Impairment assessments following coupon deferrals are performed by AEGON on a security-by-security basis and losses will be recognized when appropriate. In Q3 2009, AEGON recognized EUR 126 million of impairment losses on capital securities based on announced coupon deferrals before September 30, 2009.
5. Investments for account of policyholders
INVESTMENTS FOR ACCOUNT OF POLICYHOLDERS
Sept. 30, 2009 | Dec. 31, 2008 | |||
Shares |
31,707 | 24,799 | ||
Debt securities |
28,014 | 25,312 | ||
Money market and short-term investments |
3,263 | 3,761 | ||
Deposits with financial institutions |
2,593 | 3,070 | ||
Separate accounts and unconsolidated investment funds |
52,293 | 46,273 | ||
Other |
913 | 1,054 | ||
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives |
118,783 | 104,269 | ||
Investment in real estate |
864 | 1,131 | ||
Total investments for account of policyholders |
119,647 | 105,400 | ||
6. Intangible assets
INTANGIBLE ASSETS
Sept. 30, 2009 | Dec. 31, 2008 | |||
Goodwill |
715 | 720 | ||
VOBA |
3,318 | 4,119 | ||
Future servicing rights |
490 | 522 | ||
Software |
21 | 29 | ||
Other |
31 | 35 | ||
Total intangible assets |
4,575 | 5,425 | ||
VOBA balances decreased significantly primarily reflecting the impact of shadow accounting. Shadow accounting ensures that all gains and losses on investments affect the measurement of the insurance assets and liabilities in the same way, regardless of whether they are realized or unrealized and regardless of whether the unrealized gains and losses are recognized in the income statement or directly in equity in the revaluation reserve. In some instances, realized gains or losses on investments have a direct effect on the measurement of the insurance assets and liabilities. For example, some insurance contracts include benefits that are contractually based on the investment returns realized by the insurer. In addition, realization of gains or losses on available-for-sale investments can lead to unlocking of VOBA or DPAC and can also affect the outcome of the liability adequacy test to the extent that it considers actual future investment returns. For similar changes in unrealized gains and losses, shadow accounting is applied. If an unrealized gain or loss triggers a shadow accounting adjustment to VOBA, DPAC or the insurance liabilities, the corresponding adjustment is recognized in shareholders equity in the revaluation reserve, together with the unrealized gain or loss.
Unaudited |
Page 16 |
7. Deferred expenses and rebates
DEFERRED EXPENSES AND REBATES
Sept. 30, 2009 | Dec. 31, 2008 | |||
DPAC for insurance contracts and investment contracts with discretionary participation features |
10,583 | 12,224 | ||
Deferred transaction costs for investment management services |
314 | 307 | ||
Unamortized interest rate rebates |
258 | 263 | ||
Total Deferred expenses and rebates |
11,155 | 12,794 | ||
DPAC balances decreased significantly primarily reflecting the impact of shadow accounting; refer to VOBA balances (Note 6) for an explanation of Shadow accounting).
8. Share capital
SHARE CAPITAL
Sept. 30, 2009 | Dec. 31, 2008 | ||||
Share capital - par value |
270 | 251 | |||
Share premium |
7,906 | 7,096 | |||
Total share capital |
8,176 | 7,347 | |||
Share capital - par value |
|||||
Balance at January 1 |
251 | 258 | |||
Issuance |
19 | | |||
Withdrawal |
| (12 | ) | ||
Share dividend |
| 5 | |||
Balance |
270 | 251 | |||
Share premium |
|||||
Balance at January 1 |
7,096 | 7,101 | |||
Issuance |
810 | | |||
Share dividend |
| (5 | ) | ||
Balance |
7,906 | 7,096 | |||
On August 13, 2009 AEGON completed a share issuance raising EUR 1 billion of capital. As part of the issuance 157.8 mln ordinary shares of a par value of EUR 0.12 were issued and 32.7 million treasury shares were re-issued. The shares were issued at EUR 5.25 per share.
Expenses relating to this share issuance amounting to EUR 14 million have been charged to retained earnings.
9. Borrowings
BORROWINGS
Sept. 30, 2009 | Dec. 31, 2008 | |||
Debentures and other loans |
5,670 | 3,840 | ||
Commercial paper |
789 | 428 | ||
Short term deposits |
382 | 354 | ||
Bank overdrafts |
303 | 717 | ||
Total borrowings |
7,144 | 5,339 | ||
During Q2 2009 AEGON issued senior unsecured notes with a nominal value of EUR 1 billion due April 29, 2012. The notes, issued at a price of 99.675, carry a coupon of 7%. In addition AEGON borrowed EUR 900 million from the European Central Bank, under its Long Term Refinancing Operation (LTRO) program. The borrowing has a 1 year term and bears 1% interest per annum. The borrowing is fully collateralized.
Unaudited |
Page 17 |
10. Premium income
PREMIUM INCOME
Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Gross |
||||||||||||
Life |
3,805 | 4,664 | 12,927 | 15,205 | ||||||||
Non-Life |
591 | 610 | 2,009 | 1,976 | ||||||||
4,396 | 5,274 | 14,936 | 17,181 | |||||||||
Reinsurance |
||||||||||||
Life |
(335 | ) | (310 | ) | (1,041 | ) | (928 | ) | ||||
Non-Life |
(74 | ) | (76 | ) | (230 | ) | (232 | ) | ||||
Total |
3,987 | 4,888 | 13,665 | 16,021 | ||||||||
11. Investment income
INVESTMENT INCOME
|
| |||||||||||
Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Interest income |
1,967 | 2,220 | 6,047 | 6,539 | ||||||||
Dividend income |
221 | 194 | 494 | 621 | ||||||||
Rental income |
40 | 49 | 128 | 161 | ||||||||
Total investment income |
2,228 | 2,463 | 6,669 | 7,321 | ||||||||
Investment income related to general account |
1,461 | 1,749 | 4,692 | 5,119 | ||||||||
Investment income account of policyholders |
767 | 714 | 1,977 | 2,202 | ||||||||
Total |
2,228 | 2,463 | 6,669 | 7,321 | ||||||||
12. Result from financial transactions
RESULT FROM FINANCIAL TRANSACTIONS
|
| |||||||||||
Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Net fair value change of general account financial investments at FVTPL other than derivatives |
151 | (459 | ) | 117 | (606 | ) | ||||||
Realized gains and losses on financial investments |
32 | | 158 | (69 | ) | |||||||
Gains and (losses) on investments in real estate |
(105 | ) | (1 | ) | (141 | ) | 63 | |||||
Net fair value change of derivatives |
184 | 193 | (726 | ) | (23 | ) | ||||||
Net fair value change on for account of policyholder financial assets at FVTPL |
11,666 | (9,207 | ) | 12,520 | (19,800 | ) | ||||||
Net fair value change on investments in real estate for account of policyholders |
12 | (71 | ) | (122 | ) | (326 | ) | |||||
Net foreign currency gains and (losses) |
(32 | ) | 87 | (46 | ) | 13 | ||||||
Net fair value change on borrowings and other financial liabilities |
(51 | ) | 100 | (142 | ) | 182 | ||||||
Realized gains and (losses) on repurchased debt |
3 | | 10 | | ||||||||
Total |
11,860 | (9,358 | ) | 11,628 | (20,566 | ) | ||||||
In Q3 2009, result from financial transactions included a loss of EUR 27 mln in respect of AEGONs own credit spread on bonds issued by the company, reflecting the narrowing of credit spreads seen in the market in the third quarter of 2009 (Q3 2008: gain of EUR 123 million). For the nine month period ended September 30, 2009 the loss amounted to EUR 163 million (2008: gain EUR 195 million).
Net fair value changes on for account of policyholder financial assets at fair value through profit or loss are offset by higher amounts in the benefits and expenses line.
Unaudited |
Page 18 |
13. Impairment charges/(reversals)
IMPAIRMENT CHARGES / (REVERSALS)
Q3 2009 | Q3 2008 | Ytd 2009 | Ytd 2008 | |||||||||
Impairment charges / (reversals) comprise: |
||||||||||||
Impairment charges on financial assets, excluding receivables |
344 | 440 | 1,199 | 589 | ||||||||
Impairment reversals on financial assets, excluding receivables |
(34 | ) | (2 | ) | (58 | ) | (9 | ) | ||||
Impact of the above impairments on the valuation of insurance assets and liabilities |
| 4 | | (4 | ) | |||||||
Impact charges on non-financial assets and receivables |
| 2 | 12 | 3 | ||||||||
Total |
310 | 444 | 1,153 | 579 | ||||||||
Impairment charges on financial assets, excluding receivables, from: |
||||||||||||
Shares |
9 | 23 | 90 | 62 | ||||||||
Debt securities and money market instruments |
306 | 404 | 1,009 | 500 | ||||||||
Loans |
29 | 13 | 100 | 27 | ||||||||
Total |
344 | 440 | 1,199 | 589 | ||||||||
Impairment reversals on financial assets, excluding receivables, from: |
||||||||||||
Debt securities and money market instruments |
(29 | ) | (2 | ) | (52 | ) | (9 | ) | ||||
Loans |
(5 | ) | | (6 | ) | | ||||||
Total |
(34 | ) | (2 | ) | (58 | ) | (9 | ) | ||||
14. Other charges
Year-to-date 2009, other charges include a loss of EUR 385 million resulting from the sale of AEGON Taiwan. The proceeds from the sale amounted to EUR 11 million. The value of the assets and liabilities sold amounted to EUR 4,457 million and EUR 4,159 million respectively. Unrealized losses for an amount of EUR 94 million, reflecting revaluation reserves, foreign currency translation reserves and net investment hedges were recycled through the income statement. Sales expenses amounted to EUR 4 million.
15. Business combinations
On August 31, 2009 AEGON completed the sale of its Taiwanese life insurance business to Zhongwei Company Ltd, announced on April 22, 2009. Control on AEGON Taiwan was already transferred to the acquirer in Q2 2009, upon signing of the agreement. Refer to note 14 Other charges for the impact of the disposal on AEGONs result.
On June 23, 2009 AEGON has completed its acquisition of Banca Transilvanias 50% shareholding in BT AEGON, the Romanian pension business the two companies set up last year. The agreement to buy Banca Transilvanias stake was originally announced in January of this year. AEGON paid approximately EUR 11 million for the shareholding, which gives AEGON full control of the pension business. As part of the transaction, AEGON and Banca Transilvania have signed a distribution agreement under which Banca Transilvania will continue to offer AEGON life insurance and pension products.
16. Commitments and contingencies
On May 13, 2009 a lower court in The Netherlands ruled in respect of a dispute regarding AEGONs KoersPlan product, which is a unit-linked product, sold in substantial volumes in The Netherlands. The dispute regards transparency issues and the charges, including insurance premium included in this product. AEGON believes the court decided incorrectly and intends to appeal. The decision does not have a direct effect on claims brought by individual clients but, if this decision is ultimately upheld on appeal and/or by the Dutch Supreme Court and is followed by other courts in The Netherlands in individual cases, it could have a material negative effect on AEGONs financial position or profitability.
On June 5, 2009, the Dutch Supreme Court ruled in three disputes regarding securities lending (aandelenlease), including a dispute regarding AEGONs Sprintplan product. This product was sold in the past by AEGON the Netherlands. AEGON believes these decisions are broadly in line with the earlier decisions by lower courts regarding these types of products and the policy followed by us in respect of these products which is based upon the arrangement made previously between consumers representative organizations and another supplier of these types of products in The Netherlands. AEGON does not expect the Dutch Supreme Court decision to have a material adverse effect on the companys financial position or profitability.
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On August 5, 2009, the Enterprise Chamber of the Amsterdam court of appeals in the Netherlands ruled in favor of AEGON in connection with a dispute with unions and employers in the harbors of Rotterdam regarding the consolidation of equity of OPTAS, a life insurance company AEGON acquired at the beginning of 2007. The court rejected a request to order a restatement of AEGONs financial statements over 2007. The foundation representing the employers and insured harbor employees in the harbors appealed to the Dutch Supreme Court.
There have been no other material changes in contingent assets and liabilities reported in the 2008 consolidated financial statements of AEGON
17. Events after the balance sheet date
On October 29, 2009, AEGON has notified the Dutch State and Vereniging AEGON that it will exercise its option to repay EUR 1 billion of the EUR 3 billion in core capital which the company secured last year through its largest shareholder, Vereniging AEGON and which was funded by the Dutch State. AEGON first announced its intention to repay the Dutch State in August when it raised EUR 1 billion in a successful equity issue. The amount will be repaid on November 30, 2009 including 8.5% accrued interest from May 22, 2009, amounting to EUR 44 million, in accordance with the terms of AEGONs agreement with the Dutch State. The Dutch Central Bank has given its consent for the repayment.
Under the terms of AEGONs agreement with the Dutch State, the premium for repayment amounts to a maximum of 13% depending on the volume weighted average share price of AEGON shares on the five trading days from November 23 until November 27.
The repayment of EUR 1 billion, the accrued interest and premium for repayment will be reflected in group equity. The repayment of EUR 1 billion will be reflected in convertible core capital securities. The accrued interest and premium for repayment are not tax deductible and will be reflected in retained earnings. Consequently, there will be no significant impact on the 2009 income statement.
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Cautionary note regarding non-GAAP measures
These condensed consolidated interim financial statements include certain non-GAAP financial measures: underlying earnings before tax and operating earnings before tax. The reconciliation of underlying earnings before tax and operating earnings before tax to the most comparable IFRS measures is provided on page 12 and 13.
AEGON believes that these non-GAAP measures, together with the IFRS information, provide a meaningful measure for the investment community to evaluate AEGONs business relative to the businesses of our peers.
Local currencies and constant currency exchange rates
These condensed consolidated interim financial statements contain certain information about investments in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. 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 these condensed consolidated interim financial statements 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. AEGON undertakes 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 AEGON holds; |
| The frequency and severity of insured loss events; |
| Changes affecting mortality, morbidity and other factors that may impact the profitability of AEGONs 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 AEGONs operations, the products AEGON sells, and the attractiveness of certain products to AEGONs consumers; |
| Regulatory changes relating to the insurance industry in the jurisdictions in which AEGON operates; |
| Acts of God, acts of terrorism, acts of war and pandemics; |
| Effects of deliberations of the European Commission regarding the aid we received from the Dutch State in December 2008 |
| Changes in the policies of central banks and/or governments; |
| Litigation or regulatory action that could require AEGON to pay significant damages or change the way AEGON does 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 AEGONs products; |
| AEGONs failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives; and |
| The impact AEGONs adoption of the International Financial Reporting Standards may have on AEGONs reported financial results and financial condition. |
Further details of potential risks and uncertainties affecting the company are described in the companys 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 companys expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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CORPORATE AND SHAREHOLDER INFORMATION
HEADQUARTERS
AEGON N.V.
P.O. Box 85
2501 CB The Hague
The Netherlands
Telephone: + 31 70 344 32 10
www.aegon.com
GROUP CORPORATE COMMUNICATIONS & INVESTOR RELATIONS
AEGON N.V.
P.O. Box 85
2501 CB The Hague
The Netherlands
MEDIA
Telephone: + 31 70 344 83 44
E-mail: gcc-ir@aegon.com
ANALYSTS AND INVESTORS
Telephone: + 31 70 344 83 05 or + 1 877 548 96 68 - toll free USA only
E-mail: ir@aegon.com
PUBLICATION DATE RESULTS
Thursday, February 25 | Results fourth quarter 2009 | |
Thursday, May 12 | Results first quarter 2010 and Embedded Value report 2009 | |
Thursday, August 12 | Results second quarter 2010 | |
Thursday, November 11 | Results third quarter 2010 |
SUPPLEMENTS
AEGONs Q3 2009 press release and Q3 2009 Financial Supplement are available on AEGONs website www.aegon.com.
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ABOUT AEGON
Throughout their working lives and into retirement, millions of people around the world rely on AEGON to help them secure their long-term financial futures.
As an international life insurance, pension and investment company, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 29,000 people and serve over 40 million customers across the globe.
AEGON uses its strength and expertise to create added value for customers, employees, shareholders and the wider community. AEGON does this by encouraging innovation and by growing its businesses profitably and sustainably.
AEGONs aim is to be a leading force in global financial services.
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