THE HAGUE, The Netherlands, August 7 AEGON-N.V.
THE HAGUE, The Netherlands, August 7 /PRNewswire-FirstCall/ --
- Strong Capital Position With Excess Capital of Over EUR 0.8 Billion
- Solid Underlying Earnings in Turbulent Financial Markets, Down 2% at
Constant Currency
- Continued Growth of Life Sales and Deposits Results in 2% Increase in
VNB at Constant Currency
- US Credit Impairments of EUR 57 Million Pre-Tax Reflect the High
Quality of AEGON's Investment Portfolio
- Interim Dividend Unchanged at Eur 0.30 Per Share
AEGON's CEO Alex Wynaendts stated: "AEGON's capital position and cash
flows continue to be strong despite the ongoing turbulence in financial
markets. In this environment, AEGON's businesses performed well with solid
underlying earnings and growth in both sales and deposits. We are pleased by
the continued confidence of our customers. In the US, we achieved especially
strong fixed annuities deposits, a six-fold increase over the comparable
period. In the Netherlands new life sales were up significantly and our
business in the United Kingdom achieved strong sales growth across most lines
of business. These developments led to a further increase in AEGON's value of
new business and continued profitable growth. Clearly, the weakening of the
dollar and British pound had a considerable impact on our reported results.
Net income was affected by losses on investments as well as an increase in
credit impairments, which are trending towards our long-term pricing
assumptions. The recently completed EUR 315 million securitization of a block
of AEGON's UK business has increased our capital efficiency, one of our key
strategic priorities. Also as part of our growth strategy, we continued our
expansion in the emerging markets of Central and Eastern Europe and Asia. We
remain confident in AEGON's position and in our ability to grow our business
profitably while achieving greater capital efficiency."
KEY PERFORMANCE INDICATORS
NotesQ2Q2 At Ytd Ytd At
2008 2007 % constant 20082007 % constant
currency currency
amounts in %%
EUR millions
(except per
share data)
1
Underlying 2 596 679 (12) (2) 1,254 1,281 (2) 9
earnings
before tax
Net income 3 276 655 (58) (52)429 1,362 (69) (64)
New life sales 4 729 802 (9)3 1,415 1,627 (13) (3)
Total deposits 5 9,131 9,902 (8)5 17,767 22,878 (22) (12)
Value of new 212 235 (10)2 398467 (15) (5)
business (VNB)
Return on equity 6 11.2% 12.6% (11) 12.2% 11.6% 5
Strategic developments
'Unlocking the global potential'
In June 2008, AEGON introduced additional financial performance targets,
alongside the Group's value of new business (VNB) target, as part of an
ambitious strategy to ensure sustainable profitable growth in the coming
years:
- Grow VNB to EUR 1.25 billion by 2010.
- Average net underlying earnings growth of at least 10% per annum to
2012 from a 2007 base of EUR 2,033 million (at 2007 constant currency).
- Return on equity of at least 14% by 2010 and at least 15% by 2012
compared with 12% in 2007.
In order to achieve these targets AEGON has set out three strategic
priorities:
- to reallocate capital toward businesses with higher growth and return
prospects,
- to improve growth and returns from existing businesses, and
- to manage AEGON as an international Group.
It is AEGON's ambition to be a global leader, helping customers around
the world secure their financial futures and ensuring sustainable profitable
growth.
AEGON is executing its strategy and has launched several initiatives that
underpin the Group's commitment to achieve its targets:
- In July, AEGON released EUR 315 million of capital through an
innovative securitization. The securitization supports each of the
Group's three strategic priorities. This transaction added EUR 315
million of core capital and enhanced the Group's financial flexibility.
The transaction also improved the return on capital deployed in the
United Kingdom. To have executed this deal in the current difficult
market conditions is clear evidence of continued trust in AEGON's
capital position.
- AEGON merged its pension fund management company PTE AEGON with BRE
Bank's PTE Skarbiec-Emerytura, positioning AEGON as Poland's fifth
largest pension fund manager with a market share of approximately 6%.
- AEGON strengthened its position in the rapidly developing pension
market in Central & Eastern Europe (CEE) with the merger of the AEGON
Hungary Pension Fund with UNIQA and Public Service Pension Fund. As a
result of the merger, AEGON is now the second largest pension provider
in Hungary.
- In early July, AEGON finalized its acquisition of Turkish life and
pension company Ankara Emeklilik. Turkey has a low life insurance
penetration and the country's private pensions market has significant
growth potential.
Following the pension fund mergers in Poland and Hungary, AEGON has now 2
million pension fund members in the CEE region. It is AEGON's ambition to
have 2.3 million pension fund members in CEE by 2010.
- The joint venture with Caja de Ahorros de Santander y Cantabria in
Spain began operations during the quarter.
- In July, AEGON began selling life insurance policies in India with its
partner Religare.
- AEGON established a new asset management joint venture in China, AEGON
Industrial Fund Management Company. AEGON IFMC is a Chinese mutual fund
manager with approximately EUR 3 billion in assets under management.
Value of new business
VNB increased 2% at constant currency, driven by strong growth in the
Americas and the United Kingdom. However, due to the weakening of the US
dollar and the British pound, the reported VNB declined to EUR 212 million.
AEGON's internal rate of return remained fairly stable at 18% as the
Group continued to focus on writing profitable new business.
Return on equity
AEGON has been able to make progress on its return on equity target, by
increasing its RoE from 12.0% for the full year 2007 to 12.2% in the first
half of 2008.
Underlying earnings growth
At constant currency, AEGON was able to grow underlying earnings by 9% in
the first half of 2008.
Financial Highlights
FINANCIAL OVERVIEW
At At
constantconstant
Q2Q2 currency YtdYtd currency
EUR millions Notes2008 2007 %% 2008 2007 % %
1
Underlying
earnings
before tax
by line
of business
Life and 252 329 (23)(14) 504 589 (14) (5)
protection
Individual 115 155 (26)(14) 231 280 (18) (5)
savings and
retirement
products
Pensions and 129 1198 17 250 251 (0)8
asset management
Institutional products9967 48 72 207 154 3455
Life reinsurance 023 N.M.N.M. 4359 (27) (19)
Distribution 8 9 (11)(20) 1719 (11) (16)
General insurance 2014 43 36 3717 118 119
Interest charges (38) (47) (19)(10) (55) (105)(48) (44)
and other
Share in net 1110 10 14 2017 1823
results of
associates
Underlying 596 679 (12) (2) 1,254 1,281 (2)9
earnings
before tax
Over / (under)6263 (2) 10 (254) 102 N.M. N.M.
performance of
fair
value items
Operating earnings 658 742 (11) (1) 1,000 1,383 (28) (19)
before tax
Operating earnings
before tax by
line of business
Life and 266 348 (24)(14) 498 610 (18) (9)
protection
Individual savings 139 163 (15) (5) 81 299 (73) (66)
and retirement
products
Pensions and 109 117 (7) 2 196 263 (25) (18)
asset management
Institutional15588 76 100 100 188 (47) (39)
products
Life 339 (92)(88) 3475 (55) (47)
reinsurance
Distribution 8 9 (11)(20) 1719 (11) (16)
General insurance 2015 33 36 3717 118 119
Interest charges (53) (47) 13 21 17 (105)N.M. N.M.
and other
Share in net 1110 10 14 2017 1823
results of associates
Operating earnings 658 742 (11) (1) 1,000 1,383 (28) (19)
before tax
Gains/(losses) (226) (90)(151) (165)(265) 193 N.M. N.M.
on investments
Impairment charges (98) (4) N.M.N.M.(130)3 N.M. N.M.
Other income/(charges) 939 (77)(78) (45) 54 N.M. N.M.
Income before tax343 687 (50)(43) 560 1,633 (66) (60)
Income tax (67) (32) 109 160 (131) (271)(52) (42)
Net income 276 655 (58)(52) 429 1,362 (69) (64)
Net underlying 437 532 (18) (8) 940 986 (5)6
earnings
Net operating490 570 (14) (4) 757 1,054 (28) (20)
earnings
Underlying earnings geographically
Americas 441 504 (13) 2 919 982 (6)8
The Netherlands 116 1151 1 229 202 1313
United Kingdom4871 (32)(21) 93 137 (32) (22)
Other countries 2936 (19)(22) 6865 5 4
Holding and other(38) (47) (19)(10) (55) (105)(48) (44)
Underlying earnings 596 679 (12) (2) 1,254 1,281 (2)9
before tax
Operating earnings geographically
Americas 541 574 (6) 8 645 1,079 (40) (31)
The Netherlands 93 108 (14)(14) 177 207 (14) (14)
United Kingdom4871 (32)(21) 93 137 (32) (22)
Other countries 2936 (19)(22) 6865 5 4
Holding and other(53) (47) 13 21 17 (105)N.M. N.M.
Operating earnings 658 742 (11) (1) 1,000 1,383 (28) (19)
before tax
Commissions1,515 1,532 (1) 102,931 3,047 (4)6
and expenses
of which 772 799 (3) 71,555 1,594 (2)7
operating expenses
Operational highlights
Overview
AEGON's businesses delivered a solid underlying performance in the second
quarter of 2008. Reported results were significantly impacted by the
strengthening of the euro against both the US dollar and the British pound.
Underlying earnings, which exclude the effect of market fluctuations on
certain fair value items, were down 2% on a constant currency basis (down 12%
in euros), compared with a strong second quarter in 2007. The positive
earnings contribution of underlying growth in AEGON's businesses and more
favorable investment spreads in the Americas were offset by the negative
impact of lower equity and bond markets on earnings from fee generating
businesses.
The fair value movements of certain investment classes in the Netherlands
and the Americas, as well as a number of products containing financial
guarantees, the so called fair value items, outperformed their long-term
expected returns in the second quarter of 2008 driven by lower credit spreads
and favorable alternative investment returns in the Americas.
Net income was down to EUR 276 million due to lower gains on investments
and higher impairments.
Underlying earnings before tax
Underlying earnings before tax decreased by 2% at constant currency and
by 12% in euros. The 2% increase in earnings in the Americas (in USD) was the
result of business growth, higher institutional spread income partly offset
by lower equity markets, a life reinsurance reserve strengthening of USD 49
million and favorable payout mortality in 2007.
In the Netherlands, earnings were positively impacted by a one-off
release of accruals, partly offset by a lower investment performance. The
United Kingdom reported a decrease in its underlying earnings, due primarily
to the impact of lower asset values on fund-related fees and higher expenses
related to business investments. The decline in earnings from Other countries
is a reflection of investments in the life and pension businesses in Central
& Eastern Europe, lower technical results in Taiwan and a lower contribution
from AEGON's partnership with La Mondiale in France. The first time inclusion
of the Group's Chinese asset management joint venture had a positive impact
on earnings, as did the joint ventures with Spanish savings banks.
Operating earnings before tax
Operating earnings before tax decreased by 1% on a constant currency
basis (or 11% in euro) to EUR 658 million. The quarter showed a partial
reversal of the unprecedented widening in credit spreads seen in the first
quarter of 2008. This had a positive impact on the market value of AEGON's
EUR 4.2 billion synthetic CDO (collateralized debt obligation) program and
other credit-related financial instruments. AEGON's alternative asset
portfolio in the Americas outperformed long-term expectations during the
quarter. Private equity investments in the Netherlands, however,
underperformed long-term expectations.
Net income
Net income was down at EUR 276 million, the result of primarily currency
movements, lower gains on investments in the Americas and the Netherlands,
and an increase in impairments. Losses on investments were the result of
normal bond trading activity in the Americas. In the Netherlands the positive
movement in the market value of real estate and realized gains from shares
were more than offset by realized losses on bonds and fair value movements on
derivatives.
Net impairments totaled EUR 98 million pre tax in the second quarter of
2008. EUR 57 million is related to AEGON's US credit portfolio (7 bps),
including a first time impairment on subprime mortgage assets of EUR 41
million. Another EUR 26 million relates to the impairment of a US equity
investment and a further EUR 15 million to other impairments.
Commissions and expenses
Commissions and expenses declined 1% in the second quarter of 2008.
Operating expenses were 3% lower, due to the recent strengthening of the
euro. At constant currency, operating expenses increased 7%, due to further
investments in the business.
SALES
At At
constantconstant
Q2 Q2 currency YtdYtd currency
EUR millions 20082007% % 2008 2007 % %
New life sales
Life single 2,880 3,298 (13)(1) 5,637 7,173 (21) (12)
premiums
Life recurring 441 472 (7) 6 851910 (6)5
premiums
annualized
Total recurring729 802 (9) 31,415 1,627 (13) (3)
plus 1/10 single
New premium141 160 (12) 2 307336 (9)5
production accident
and health insurance
New premium production 16 13 23 32 32 25 2831
general
insurance
Gross deposits
(on and off
balance) by line of
business
Fixed annuities875 156 N.M. N.M. 1,181349 N.M. N.M.
Variable annuities 717 741 (3)111,402 1,424 (2) 12
Saving deposits688 728 (5)(5) 1,336 1,297 3 3
Retail mutual funds908 554 64 831,472 1,138 2945
Pensions and 2,461 2,924 (16)(4) 5,644 6,085 (7)6
asset
management
Institutional3,481 4,799 (27) (16) 6,730 12,585 (47) (38)
guaranteed
products
Life reinsurance 1 0 N.M. N.M. 2 0 N.M. N.M.
Total gross deposits 9,131 9,902 (8) 5 17,767 22,878 (22) (12)
Net deposits
(on and off
balance) by line of
business
Fixed annuities(24) (1,334) 98 98 (819)(2,650) 6964
Variable annuities(102) (141) 28 16 (254) (316) 2010
Saving deposits114 180 (37) (37) 42115 (63) (63)
Retail mutual funds416 198 110138 587390 5171
Pensions and 180 1,020 (82) (81) 1,350756 79 100
asset management
Institutional 401(605) N.M. N.M.(794) 1,341 N.M. N.M.
guaranteed
products
Life reinsurance (14) 0 N.M. N.M. (29) 0 N.M. N.M.
Total net deposits 971(682) N.M. N.M. 83 (364)N.M. N.M.
REVENUE GENERATING
INVESTMENTS
At June At Mar.
30 31
Notes 20082008%
Revenue 7344,200 339,8331
generating
investments
(total)
Investments126,613 125,3591
general
account
Investments125,460 126,273 (1)
for account of
policyholders
Off balance 92,127 88,2014
sheet
investments
third parties
Sales
New life sales increased by 3% at constant currency. Due to currency
movements, new life sales declined to EUR 729 million. Sales of group
pensions and annuities in the Netherlands showed strong growth. Sales in the
United Kingdom were up significantly across most lines of business while
retail life sales in the Americas also continued to grow. However, sales of
both life reinsurance and bank- and corporate-owned life insurance in the
Americas were lower. Unit-linked sales in CEE were impacted by equity market
volatility while life sales in Taiwan decreased because of a shift in sales
from life products to variable annuity deposits.
Deposits
Total gross deposits increased by 5% at constant currency. Due to
currency movements, gross deposits declined to EUR 9.1 billion. In the
Americas, fixed annuities sales had their most successful quarter since 2003,
benefiting from a steepening of the yield curve, a new distribution
relationship and demand from customers for guaranteed, stable return products.
Variable annuity deposits increased primarily as a result of continued
strong sales through broker/dealers, fee planners and banks as well as the
inclusion of Merrill Lynch's life insurance companies.
Net deposits were positive in the second quarter of 2008, mainly the
result of the large increase in fixed annuities sales as well as the decline
in the decrement rate of fixed annuities. Higher net inflows in the Americas
in mutual funds and institutional fee-based business contributed to the
increase in net deposits as well. Retail mutual funds in the Americas
continued to experience positive net inflows despite negative market
sentiment, a result of the successful development of a dedicated wholesaling
organization.
Asia showed a strong increase in total gross deposits as well as net
deposits, a result of the inclusion of AEGON's new asset management joint
venture in China, and successful variable annuity sales in Taiwan.
AEGON's investment portfolio
During the second quarter, higher interest rates partly offset by
narrowing credit spreads led to a further decrease in revaluation of fixed
income assets. Most of the bonds in AEGON's portfolio are classified as
'available for sale'. Under IFRS any changes in the fair value of such assets
are reflected in the revaluation reserve as part of the Group's shareholders'
equity. Since the end of the first quarter 2008, AEGON's revaluation reserve
has declined by EUR 933 million primarily as a consequence of higher interest
rates. Under IFRS, the related benefit of higher interest rates on the value
of liabilities is not reported. AEGON has limited direct equity exposure in
its investment portfolio, reflected in a positive revaluation of EUR 10
million related to equities.
Unlike impairments, revaluations have no impact on the Group's earnings.
Fixed income assets are impaired if AEGON decides to sell at a loss or
otherwise does not expect to receive full principal and interest on a
particular investment. AEGON is a long-term investor and generally intends to
retain large parts of its portfolio until maturity. Moreover, as a result of
the Group's effective asset and liability management, AEGON has ample
liquidity in its investment portfolio and does not expect to be a forced
seller of assets. In the Americas, the realized losses in second quarter
earnings reflect normal trading activity in its bond portfolio.
AEGON's credit risks are concentrated primarily in the United States.
Over the last few years, the Group has structured its US investment portfolio
defensively to weather a stressed credit environment. As a result, net
impairments on credit investments totaled just EUR 57 million in the second
quarter, reflection of the continued high quality of the Group's investment
portfolio.
Impairments include EUR 41 million in AEGON's US subprime mortgage
portfolio of EUR 2.5 billion. However, the credit risk is concentrated
primarily in a certain segment, floating rate subprime assets, with over 72%
rated AAA and AA. At the end of June, these investments, totaling EUR 1.0
billion, showed an unrealized net loss of EUR 388 million. While there is
clearly a risk of future impairments in this area, should the markets
continue to decline, AEGON believes its exposure is of manageable size.
Revenue generating investments
Revenue generating investments totaled EUR 344 billion at the end of June
2008, up 1% from March 2008.
Capital management
At the end of June, shareholders' equity totaled EUR 11.6 billion, a
decrease of EUR 1 billion compared with the end of March 2008. AEGON's
revaluation reserve declined by EUR 933 million to minus EUR 2,959 million.
Foreign currency translation effects had a positive impact of EUR 118
million. The positive impact of net income (EUR 276 million), however, was
more than offset by paid coupons on perpetuals (EUR 45 million) and dividends
on common and preferred shares of EUR 290 million and EUR 112 million
respectively.
AEGON applies leverage tolerances to its capital base, which reflects the
capital employed in its core activities. This capital base consists of three
elements: shareholders' equity, perpetual capital securities and subordinated
and senior debt. AEGON aims to ensure that shareholders' equity accounts for
at least 70% of its overall capital base, perpetual capital securities 25%
and subordinated and senior debt a maximum of 5%. AEGON manages its economic
exposure to currency revaluations in its capital base. AEGON has raised the
majority of its perpetual capital securities denominated in US dollars. These
securities are part of Group equity and, as a result, are carried in the
balance sheet at the original EUR/USD exchange rate. At the end of June 2008,
shareholders' equity excluding the revaluation reserve represented 74% of
AEGON's total capital base. Group equity, which includes other equity
instruments (such as perpetual capital securities) and minority interests,
represented 95% of total capital 8,9).
AEGON is maintaining its dividend policy and will continue to offer
attractive dividends, depending on cash flows and capital position.
During the second quarter, AEGON's capital position and cash flows
remained strong, despite continued turmoil in the financial markets. The
total 2008 dividend will be determined in March 2009 in line with AEGON's
existing dividend policy.
AEGON's capital position remained strong, with EUR 1.8 billion of
financial flexibility, which includes excess capital of over EUR 0.8 billion
plus leverage capacity. The financial flexibility excludes the recent
securitization of EUR 315 million and capacity for further securitizations.
Excess capital is available capital minus required capital.
Cash flows from AEGON's businesses remained strong as well, with the cash
flows to the holding company being affected by the continued strength of the
euro against the US dollar over the past years.
AEGON believes it can execute its strategy with its current strong
capital position and cash flow generation. In addition, AEGON will use
securitizations, such as the recently announced EUR 315 million
securitization of a book of unit-linked business within the UK operations, to
accelerate redeployment of capital as part of its overall strategy.
Interim dividend
The 2008 interim dividend amounts to EUR 0.30. The interim dividend will
be paid in cash or stock at the election of the shareholder. The value of the
stock dividend will be approximately equal to the cash dividend. AEGON
intends to neutralize the dilutive effect of the stock dividend.
AEGON shares will be quoted ex-dividend on August 8, 2008. The record
date is August 12, 2008. The election period for shareholders will run from
August 8 up to and including August 29, 2008. The stock fraction will be
based on the average share price on Euronext Amsterdam from September 1
through September 5, 2008. The stock dividend ratio will be announced on
September 5, 2008 after closing of Euronext Amsterdam. The dividend will be
payable as of September 15, 2008.
Americas
- Underlying earnings up 2%, reflecting the resilience of the business
- Fixed annuity gross deposits reach USD 1.3 billion - best sales quarter
since 2003
- Value of new business up 16% to USD 156 million
- USD 87 million of credit impairments pre tax, reflecting high quality
of investment portfolio
Overview
Global financial market turmoil continued to present challenges for the
Americas during the second quarter of 2008. However the fundamentals of the
business remain solid with underlying earnings before tax up 2% and higher
sales across all retail businesses, namely fixed and variable annuities,
mutual funds and life insurance. However, sales of both life reinsurance and
bank- and corporate-owned life insurance and institutional guaranteed
products were lower.
The total investment portfolio experienced USD 126 million of pre tax
impairments of which USD 87 million were credit impairments, including USD 63
million of impairments related to 2006 vintage subprime mortgages. While this
is a change from the benign credit environment experienced during the last
few years, these results are trending towards our long-term pricing
assumptions.
Underlying earnings before tax
- Life & Protection earnings were in line with the same quarter in 2007.
Favorable mortality and lower expenses related to the Kansas City
consolidation were offset by unfavorable health claims experience.
- The 13% decline in Individual Savings & Retirement earnings was driven
by strong mortality results and increased earnings from rising equity
markets in the second quarter of 2007, offset by additional earnings
from Merrill Lynch.
- Pensions & Asset Management earnings increased 4% on continued positive
net flows.
- Total Institutional grew 74%. The decrease in short-term rates
continued to produce strong positive spreads on institutional
guaranteed products. BOLI/COLI earnings increased USD 2 million.
- Life Reinsurance earnings declined to USD 1 million on a one-off
reserve strengthening of USD 49 million and unfavorable mortality.
Operating earnings before tax
Operating earnings before tax increased 8% to USD 832 million as earnings
on fair value items overperformed. Fair value items include alternative
investments, credit related instruments, total return annuities and
guarantees on variable annuities like GMWB and Canadian segregated funds. The
total overperformance was USD 141 million versus an overperformance of USD 94
million last year. These results were predominately the result of strong
alternative asset performance and a partial recovery of mark-to-market
adjustments on the credit related instruments. <start_table.
- Life & Protection earnings were unchanged as the performance of fair
value items while positive, was unfavorable relative to the same period
last year.
- Individual Savings & Retirement declined 3% on the decrease in
underlying earnings and partly offset by favorable performance of fair
value assets and total return annuities.
- Pension & Asset Management remained almost unchanged.
- Institutional earnings increased on strong underlying earnings in
addition to over performance of alternative asset strategies and
credit related instruments.
- Life Reinsurance operating earnings declined to USD 7 million as a
result of lower underlying earnings and less favorable performance of
fair value items.
Net income
Net income of USD 454 million in the second quarter of 2008 was down 14%
driven primarily by the increased impairment charges and realized losses,
reflecting normal trading activity in our bond portfolio.
Commissions and expenses
Total commissions and expenses increased 10%. Operating expenses
increased 5% and commissions increased 10% on higher production.
Sales and deposits
Total new life sales in the Americas were down 7% driven by declines in
both the Reinsurance and BOLI/COLI lines of business.
Retail life production was up 5%. Sales of high net worth products
continued the positive momentum established during the second half of 2007,
with universal life products being the primary driver of growth in that
market. This was offset by weak variable universal life sales resulting from
the downturn in the equity markets.
Total gross deposits were relatively unchanged as strong fixed annuity
and mutual fund sales were offset by declines in the pension and
institutional businesses.
Fixed annuity deposits reached USD 1.3 billion, representing the best
sales quarter since 2003 benefiting from a steepening of the yield curve,
wider credit spreads, a new distribution relationship and demand from
customers for guaranteed, stable return products.
Total variable annuity deposits were up 5%. Sales through the bank and
broker dealer/fee planner channels were up 33% and 44% respectively. This
strong increase was offset by lower sales in Canada and lower sales in the
direct and agency channel.
Retail mutual fund deposits increased 28% over the comparable period last
year with a dedicated wholesaling organization now firmly in place.
A lack of terminal funding sales contributed to a 9% decline in pension
deposits year-over-year. Sales of managed assets were up significantly.
The on-going liquidity disruption and wide credit spreads in the
financial markets continued to be challenging with respect to new
spread-based institutional sales, which were down 31% over the second quarter
of 2007.
Value of new business
VNB for the second quarter of 2008 of USD 156 million was up 16% compared
to last year. The increase was primarily driven by strong fixed annuity
production, increased life volume and returns, and longer duration, higher
margin institutional sales. The internal rate of return of 12.4% was down
slightly over the second quarter of 2007.
Please refer to page 25 of this release for further details on AEGON's
VNB.
Revenue generating investments
Total revenue generating investments at the end of June 2008 were stable
at USD 318 billion compared to the end of March 2008.
AMERICAS - EARNINGS
Q2Q2Ytd Ytd
USD millions Notes 2008 2007% 2008 2007%
1
Underlying earnings before tax by
line of business
Life 214 190 13 373 3439
Accident and health 94 116 (19) 209 232 (10)
Life and protection 308 3061 582 5751
Fixed annuities 105987 200 1849
Variable annuities6896 (29) 138 162 (15)
Retail mutual funds3 8 (63)712 (42)
Individual savings and 176 202 (13) 345 358 (4)
retirement products
Pensions and asset management 5048495897
Institutional guaranteed products14177 83 282 171 65
BOLI/COLI 1412 1735336
Institutional products 15589 74 317 204 55
Life reinsurance 132 (97) 6679 (16)
Share in net results of associates 1 10 2 0 N.M.
Underlying earnings before tax 691 6782 1,407 1,3058
Over / (under) performance 14194 50 (419) 129 N.M.
of fair value items
Operating earnings before tax832 7728 988 1,434 (31)
Operating earnings before tax by
line of business
Life 232 209 11 367 3641
Accident and health 98 122 (20) 207 239 (13)
Life and protection 330 331 (0) 574 603 (5)
Fixed annuities 133 147 (10) 141 245 (42)
Variable annuities6957 21 (34) 126 N.M.
Retail mutual funds3 8 (63)712 (42)
Individual savings 205 212 (3) 114 383 (70)
and retirement products
Pensions and asset management 5456 (4) 9298 (6)
Institutional guaranteed products218 108 102 119 218 (45)
BOLI/COLI 1711 5534326
Institutional products 235 119 97 153 250 (39)
Life reinsurance 753 (87) 53 100 (47)
Share in net results of associates 1 10 2 0 N.M.
Operating earnings before tax832 7728 988 1,434 (31)
Gains/(losses) on investments(73)7 N.M. (144) 181 N.M.
Impairment charges (126) (11) N.M. (147)5 N.M.
Income before tax633 768 (18) 697 1,620 (57)
Income tax (179) (239) (25) (282) (466) (39)
Net income 454 529 (14) 415 1,154 (64)
Net underlying earnings 502 4805 1,024 9567
Net operating earnings 616 541 14 727 1,041 (30)
Commissions and expenses 1,328 1,204 10 2,497 2,3964
of which operating expenses 555 5305 1,102 1,0624
For the amounts in euro see Financial Supplement.
AMERICAS - SALES
Q2 Q2 Ytd Ytd
USD millions2008 2007% 20082007%
New life sales
Life single premiums 218 283 (23) 459 933 (51)
Life recurring premiums 240 253 (5) 478 501 (5)
annualized
Total recurring plus 262 281 (7) 524 594 (12)
1/10 single
Life 184 1755 371 3477
BOLI/COLI 6 17 (65) 20 77 (74)
Life reinsurance 72 89 (19) 133 170 (22)
Total recurring 262 281 (7) 524 594 (12)
plus 1/10 single
New premium production 215 2093 452 4286
accident and
health insurance
Gross deposits (on and off balance) by
line of business
Fixed annuities1,349 211 N.M. 1,808 464 N.M.
Variable annuities 1,047 99752,021 1,8897
Retail mutual funds 886 690 281,659 1,431 16
Pensions and asset management 3,1303,165 (1) 7,382 6,635 11
Institutional 5,4336,526 (17) 10,303 16,724 (38)
guaranteed products
Life reinsurance 10 N.M. 3 0 N.M.
Total gross deposits 11,846 11,5892 23,176 27,143 (15)
Net deposits
(on and off balance)
by line of business
Fixed annuities (62) (1,798) 97 (1,254) (3,521) 64
Variable annuities (228)(192) (19)(507) (423) (20)
Retail mutual funds 474 223 113 721 468 54
Pensions and asset management4891,141 (57) 2,133 1,9629
Institutional guaranteed 576 (766) N.M. (1,216) 1,782 N.M.
products
Life reinsurance (21) 0 N.M. (44) 0 N.M.
Total net deposits 1,228 (1,392) N.M.(167)268 N.M.
REVENUE GENERATING
INVESTMENTS
Notes At June At Mar.
30 31
20082008 %
Revenue generating
investments (total)7 317,728 317,075 0
Investments 132,235 132,172 0
general account
Investments for 75,183 76,192 (1)
account of
policyholders
Off balance sheet110,310 108,711 1
investments
third parties
For the amounts in euro see Financial Supplement.
The Netherlands
- Underlying earnings before tax up 1%
- Life sales up 28%, driven by strong growth in group pensions and
immediate annuities
- Net income primarily affected by lower gains on investments
Overview
The Netherlands reported an increase in underlying earnings before tax of
1% in the second quarter of 2008 as a release in accruals more than offset a
lower investment performance. Private equity investments showed an
underperformance, reflected in a decline in operating earnings. Sales were up
significantly, driven by both group pensions and immediate annuities.
Underlying earnings before tax
- Earnings from Life & Protection and Individual Savings both decreased
primarily as a result of a lower investment performance.
- Earnings in Pensions & Asset Management more than doubled to EUR 60
million, primarily the result of a one-time release of accruals.
- Earnings from Distribution remained stable.
- General insurance earnings more than doubled as the claim experience
improved, which was partly offset by higher expenses. Last year's
quarter was affected by higher catastrophe expenses as a result of
storm damages.
Operating earnings before tax
Operating earnings were negatively impacted by an underperformance of
private equity investments of EUR 23 million.
Net income
Net income declined to EUR 5 million as higher underlying earnings were
offset by losses on investments and negative movements of fair value items
and impairments. The positive movement in the market value of real estate and
realized gains of shares were more than offset by realized losses on bonds
and fair value movements on derivatives.
Commissions and expenses
Commissions and expenses increased by 7% as lower commission expenses
were more than offset by higher operating expenses. Commissions paid on life
insurance sales declined as a consequence of a shift in business mix and a
change in the level and structure of commissions. Operating expenses
increased due to higher IT, staff and marketing expenses.
Sales and deposits
Group pension sales were strong and included the sale of one large
contract. Renewal rates of pension contracts improved, the result of the
efforts to improve quality and efficiency in the business.
Sales of individual life single premium products (annuities) were up
significantly as well. Regular premium individual life production was down as
commissions paid to agents were lowered. The decline in commissions paid and
therefore in sales was in line with market developments and expectations.
Sales in accident & health were down as the market became saturated and
the decline in more mature products was partially offset by new innovative
products. General insurance remained flat.
Gross deposits were down versus last year, but total net deposits were
strong at EUR 182 million.
Value of new business
VNB declined to EUR 11 million. The internal rate of return declined to
10.4%, close to AEGON's own minimum hurdle rate of 11%.
Revenue generating investments
At the end of June 2008, revenue generating investments totaled EUR 65
billion, down fractionally from March 2008 levels. The decrease is a
reflection of lower bond markets.
THE NETHERLANDS - EARNINGS
Q2Q2 Ytd Ytd
EUR millions Notes 2008 2007 % 2008 2007%
Underlying earnings before tax by 1
line of business
Life 29 59 (51) 6187 (30)
Accident and health49 (56) 1219 (37)
Life and protection 33 68 (51) 73 106 (31)
Saving products06 N.M.111 (91)
Individual savings and 06 N.M.111 (91)
retirement products
Pensions and asset management 60 29 107 11171 56
Distribution 8801916 19
General insurance 93 20019(3) N.M.
Share in net results of associates 61 N.M.6 1 N.M.
Underlying earnings before tax 116 1151 229 202 13
Over / (under) performance of fair
value items (23) (7) N.M. (52)5 N.M.
Operating earnings before tax 93 108 (14) 177 207 (14)
Operating earnings before tax by
line of business
Life 29 59 (51) 6187 (30)
Accident and health49 (56) 1219 (37)
Life and protection 33 68 (51) 73 106 (31)
Saving products06 N.M 111 (91)
Individual savings and retirement
products 06 N.M.111 (91)
Pensions and asset management 37 22 685976 (22)
Distribution 8801916 19
General insurance 93 20019(3) N.M.
Share in net results of associates 61 N.M.6 1 N.M.
Operating earnings before tax 93 108 (14) 177 207 (14)
Gains/(losses) on investments (129) (16) N.M (178) 122 N.M.
Impairment charges(4) 4 N.M. (21) (1) N.M.
Other income/(charges) 0 31 N.M.031 N.M.
Income before tax(40) 127 N.M. (22) 359 N.M.
Income tax45 76 414635 (31)
Net income 5 203 (98) 24 394 (94)
Net underlying earnings 92 876 184 149 23
Net operating earnings75 80 (6) 145 154 (6)
Commissions and expenses 299 2797 609 5736
of which operating expenses 207 1937 426 3938
THE NETHERLANDS - SALES
Q2Q2 Ytd Ytd
EUR millions 2008 2007% 2008 2007%
New life sales
Life single premiums 443 239 85888 618 44
Life recurring premiums2429 (17)50 53 (6)
annualized
Total recurring plus 1/10 single 6853 28139 115 21
Life 2324 (4)54 48 13
Pensions 4529 55 85 67 27
Total recurring plus 1/10 single 6853 28139 115 21
New premium production accident
and health insurance3 4 (25) 9 11 (18)
New premium production 7 70 15 147
general insurance
Gross deposits (on and off balance) by
line of business
Saving deposits 688 728 (5) 1,3361,2973
Pensions and asset management 80 158 (49) 127 268 (53)
Total gross deposits 768 886 (13) 1,4631,565 (7)
Net deposits (on and off balance) by
line of business
Saving deposits 114 180 (37)42 115 (63)
Pensions and asset management 68(5) N.M. 104 (1,082) N.M.
Total net deposits182 1754146(967) N.M.
REVENUE GENERATING
INVESTMENTS
At At
NotesJune Mar.
30 31
2008 2008%
Revenue generating 7 64,814 64,965 (0)
investments (total)
Investments31,977 31,4602
general account
Investments for20,032 20,649 (3)
account of
policyholders
Off balance sheet 12,805 12,856 (0)
investments
third parties
United Kingdom
- Underlying earnings decline on lower financial markets and higher
expenses
- Strong sales growth across most lines of business
- Record value of new business, driven by higher margins and volumes
Overview
Underlying earnings before tax declined 21% in the second quarter of
2008, due primarily to the impact of lower bond and equity markets on
fund-related charges in the pension business and higher expenses, due to
growth of and investment in the business. Sales were up 10%, the result of
strong growth across most lines of business, with the exception of individual
pensions. The value of new business rose by 31% in local currency, supported
by higher margins and volumes.
Underlying earnings before tax
- Earnings from Life & Protection came in at GBP 11 million. Results were
lower than last year due to favorable mortality in 2007 and an increase
in commissions and expenses in 2008. Both the annuity and individual
protection business continue to experience strong underlying growth.
- Earnings from Pensions & Asset Management were 16% lower as a decline
in asset values led to lower income from fund-related charges and an
increase in commissions and expenses.
- Lower sales and the cost of new investments resulted in a decrease in
earnings from distribution activities. Like in the first quarter of
this year, more difficult market conditions for investment products
and concerns over the UK housing market contributed to the overall
decline in sales.
Net income
Net income decreased by 59% mainly due to a favorable tax item as result
of a change in the UK corporation tax rates of GBP 38 million in 2007. Lower
operating earnings and impairments of GBP 9 million added to the decline in
net income.
Commissions and expenses
Total commissions and expenses rose 6%. Operating expenses were higher as
a result of recent business growth and investments in the asset management
and distribution businesses. Higher amortization charges as a result of
maturing of the portfolio also led to an increase in expenses.
Sales and deposits
Overall, new life sales were up 10%. Sales were strong across most lines
of business, with the exception of individual pensions.
Annuities and protection continued their strong growth trend, a
reflection of the strategy to expand into higher margin products. Growth of
group pension sales is driven by both new pension schemes, including one
large contract, as well as continued increases in existing schemes. Sales of
individual pensions were lower following strong sales last year, a result of
exceptional activity following 'Pension A-Day' in May 2006. Also, investment
bonds showed sales growth, in particular offshore bonds. Meanwhile, recent
financial market volatility led to lower sales of retail mutual funds and
managed assets.
Value of new business
VNB increased 31% to GBP 51 million as a result of further improvement in
margins and volumes. Much of the improvement in margins was concentrated in
the Life & Protection business. In the quarter, the internal rate of return
on new business rose to 13.4%.
Please refer to page 25 for more detailed information on VNB.
Revenue generating investments
At the end of June 2008, revenue generating investments totaled GBP 51
billion, in line with the level at the end of March 2008.
UNITED KINGDOM - EARNINGS
Q2 Q2 Ytd Ytd
GBP millions Notes 2008 2007 % 2008 2007%
Underlying earnings before tax by
line of business *)
Life 11 15 (27) 19 20 (5)
Life and protection 11 15 (27) 19 20 (5)
Pensions and asset management 27 32 (16) 55 70 (21)
Distribution 01 N.M. (2) 2 N.M.
Underlying earnings before tax38 48 (21) 72 92 (22)
Gains/(losses) on investments 0 (6)N.M.2 (5) N.M.
Impairment charges(9) 0 N.M. (9) 0 N.M.
Other income/(charges) 10 65 20 (35) 15 N.M.
Income before tax 35 47 (26) 30 102 (71)
Income tax attributable to
policyholder return (6) 21 N.M. 35 14 (150)
Income before income tax on
shareholders return 29 68 (57) 65 116 (44)
Income tax on shareholders return (3) (5)(40) (8) (15) (47)
Net income26 63 (59) 57 101 (44)
Net underlying earnings 31 68 (54) 61 105 (42)
Net operating earnings31 68 (54) 61 105 (42)
Commissions and expenses 172 162 6 329 3068
of which operating expenses 102 97 5 200 1877
*) In the UK, underlying earnings equals operating earnings
For the amounts in euro see Financial Supplement.
UNITED KINGDOM - SALES
Q2 Q2Ytd Ytd
GBP millionsNotes 2008 2007% 2008 2007 %
New life sales 11
Life single premiums 1,728 1,764 (2)3,226 3,591 (10)
Life recurring premiums 166132 26 307 246 25
annualized
Total recurring plus 1/10 single 339308 10 630 605 4
Life 59 46 28 11494 21
Pensions 2802627 516 511 1
Total recurring plus 1/10 single 339308 10 630 605 4
Gross deposits (on and off balance) by
line of business
Pensions and asset management1921920 304 377 (19)
Total gross deposits 1921920 304 377 (19)
Net deposits (on and off balance) by
line of business
Pensions and asset management (207)62 N.M. (248) 118 N.M.
Total net deposits (207)62 N.M. (248) 118 N.M.
REVENUE GENERATING
INVESTMENTS
At At
June Mar.
Notes 30 31
2008 2008 %
Revenue generating investments (total)7 50,508 50,551 (0)
Investments general account4,406 4,233 4
Investments for account of policyholders 43,592 43,611 (0)
Off balance sheet investments third parties2,510 2,707 (7)
For the amounts in euro see Financial Supplement.
Other countries
- Underlying earnings before tax declined to EUR 29 million
- Deposits tripled to EUR 540 million, driven by retail mutual fund and
variable annuity sales in Asia
- Revenue generating investments 31% higher, driven by pensions in CEE
and the inclusion of an asset management joint venture in China
Overview
Other countries reported a 19% decrease in underlying earnings before tax
in the second quarter of 2008. Deposits nearly tripled as a result of the
first time inclusion of AEGON's asset management joint venture in China,
strong growth of variable annuity deposits in Taiwan as well as growth of the
pension business in CEE. However, continued weakness in financial markets
resulted in a 20% decline in new life sales. Other countries generated less
value of new business, mainly a reflection of lower sales.
Underlying earnings before tax
- Earnings from Life & Protection decreased to EUR 7 million as a result
of increased losses in Taiwan due to lower technical results, sales
and investment income and growth in the Czech Republic.
- Earnings from Individual Savings & Retirement products increased to EUR
3 million due primarily to the first time inclusion of AEGON's asset
management joint venture in China.
- Pensions & Asset Management earnings decreased to EUR 3 million as a
result of lowered government prescribed asset management fee rates to
80 bps in Hungary. Increased production led to higher costs.
- Earnings from General insurance were unchanged as a result of a benign
claims environment.
- The share in earnings from associate companies declined due to lower
contributions from France.
Net income
Net income for Other countries increased 11% as a result of lower taxes
and higher gains on investments, only partly offset by a decline in
underlying earnings.
Commissions and expenses
Commissions and expenses increased by 27%, a result mainly of higher
expenses. Expenses increased as a result of a growing in-force, investments
in new ventures and the inclusion of a number of newly acquired companies.
Commissions remained at the same level, reflecting a change in business mix.
Sales and deposits
In CEE, regular premium sales increased strongly as a result of the
successful development of broker networks in Slovakia and the Czech Republic
and steady growth in Poland. However, this was more than offset by the
decline in single premium sales in Poland because of weakness in the equity
markets. Overall, new life sales in CEE declined to EUR 27 million.
In Asia, new life sales in Taiwan decreased to EUR 16 million as a result
of lower equity markets and the ongoing shift in sales from traditional to
unit-linked products. Unit-linked products accounted for 81% of new life
sales for Taiwan in the second quarter of 2008. Variable annuity deposits
showed significant growth amounting to EUR 47 million. In China, new life
sales increased to EUR 4 million as a result of strong single premium
unit-linked sales in the bank channel. Sales increases in China stem
primarily from recent efforts to expand AEGON's distribution network in the
country and the introduction of new products.
In Spain, new life sales increased strongly to EUR 19 million mainly as a
result of higher sales within AEGON's joint ventures with savings banks. The
partnership with CAM, which is not consolidated in AEGON's accounts, saw a
decrease in new life sales to EUR 13 million. CAM is currently in the process
of implementing a new sales strategy to grow sales going forward.
Individual Savings & Retirement deposits increased strongly to EUR 387
million primarily as a result of the first time inclusion of AEGON's asset
management joint venture in China and higher variable annuity deposits in
Taiwan.
Sales of mortgages in Hungary continued to grow with a total of EUR 29
million provided.
Pensions & Asset Management deposits increased slightly to EUR 153
million. Continued strong pension deposits in CEE were partly offset by lower
deposits in the asset management business.
General insurance new premium production rose strongly to EUR 9 million
as a result of continued successful sales of motor insurance and home
insurance in Hungary.
Value of new business
VNB from Other countries decreased to EUR 38 million primarily as a
result of lower sales. In Asia, the decrease in VNB was due largely to lower
production and a change in product mix in Taiwan. In CEE, VNB was down 10% as
sales of single premium unit-linked policies in Poland continued to be
adversely affected by weak equity markets. In Spain, VNB decreased mainly due
to lower sales from CAM. Asia accounted for 24% of VNB from Other countries,
CEE for 47% and France and Spain for the remaining 29%. Other countries
accounted for 18% of AEGON's total VNB. By 2010, AEGON strives for Other
countries' contribution to VNB to reach between 30% and 35%.
The internal rate of return in Asia rose as a result of product
re-pricing and changes in product mix. The small reduction in the internal
rate of return in CEE is a reflection of lower rates of return on the Czech
and Slovakian businesses. In Spain, AEGON's bank distribution partnerships
continued to deliver high rates of return.
Please refer to page 25 for more detailed VNB information.
Revenue generating investments
Revenue generating investments increased 31% compared with the end of
March as a result of the first time inclusion of an asset management joint
venture in China and pension funds in CEE.
OTHER COUNTRIES -
EARNINGS
Q2 Q2 Ytd Ytd
EUR millions Notes 2008 2007 % 2008 2007%
Underlying earnings before tax by
line of business *)
Life6 10 (40) 23 18 28
Accident and health 11 0 32 50
Life and protection 7 11 (36) 26 20 30
Variable annuities (2) 0 N.M. (1) 0 N.M.
Saving products 1 (1)N.M.1 (1) N.M.
Retail mutual funds 41 N.M.51 N.M.
Individual savings and retirement
products30 N.M.50 N.M.
Pensions and asset management 35 (40)69 (33)
General insurance 11 12 (8) 18 20 (10)
Share in net results of associates 58 (38) 13 16 (19)
Underlying earnings before tax 29 36 (19) 68 655
Gains/(losses) on investments 53 67 550
Impairment charges 00 0(1) 0 N.M.
Income before tax 34 39 (13) 72 703
Income tax(14) (21)(33) (24) (35) (31)
Net income 20 18 1148 35 37
Net underlying earnings17 16 644 31 42
Net operating earnings 17 16 644 31 42
Commissions and expenses 116 91 27 207 170 22
of which operating expenses49 42 1792 81 14
*) In Other countries, underlying earnings equals operating earnings.
OTHER COUNTRIES - SALES
Q2 Q2 Ytd Ytd
EUR millions Notes 2008 2007 % 2008 2007 %
New life sales 11
Life single premiums 121249 (51) 293 521 (44)
Life recurring premiums annualized 55 59 (7) 94 114 (18)
Total recurring plus 1/10 single67 84 (20) 123 166 (26)
Life66 83 (20) 122 165 (26)
Saving products 1 1 0 11 0
Total recurring plus 1/10 single67 84 (20) 123 166 (26)
New premium production accident and
health insurance 1 1 0 33 0
New premium production general insurance 9 6 5017 11 55
Gross deposits (on and off balance)
Variable annuities 47 1 N.M. 823 N.M.
Retail mutual funds340 43 N.M. 388 61 N.M.
Pensions and asset management 153138 11 304 264 15
Total gross deposits 540182 197 774 328 136
Net deposits (on and off balance)
Variable annuities 43 1 N.M. 772 N.M.
Retail mutual funds110 32 N.M. 116 38 N.M.
Pensions and asset management 81 85 (5) 173 187 (7)
Total net deposits 234118 98 366 227 61
REVENUE GENERATING
INVESTMENTS
At At
June Mar.
30 31
Notes 2008 2008%
Revenue generating investments (total)7 13,995 10,724 31
Investments general account5,086 4,8784
Investments for account of policyholders 2,732 2,6553
Off balance sheet investments third parties6,177 3,191 94
Appendix II - Tables
NET UNDERLYING EARNINGS
GEOGRAPHICALLY
Q2 Q2Ytd Ytd
EUR millionsNotes 2008 2007% 2008 2007%
1
Americas321 356 (10) 669 720(7)
The Netherlands 92 876184 14923
United Kingdom 39 101 (61)79 156 (49)
Other countries 17 166 443142
Holding and other activities(32) (28) (14) (36) (70) 49
Net underlying earnings 437 532 (18) 940 986(5)
OVER / UNDER PERFORMANCE
OF FAIR VALUE
ITEMS
EUR millions
Operating earnings before tax 658 742 (11) 1,000 1,383 (28)
(Over) / under performance of
fair value items - Americas(100) (70) (43) 274 (97) N.M.
(Over) / under performance of
fair value items - The Netherlands 237 N.M.52(5) N.M.
(Over) / under performance of
fair value items - Holding and other 15- N.M. (72)- N.M.
activities
Underlying earnings before tax 596 679 (12) 1,254 1,281(2)
Net underlying earnings 437 532 (18) 940 986(5)
AMERICAS - OVER / UNDER
PERFORMANCE OF FAIR
VALUE ITEMS
USD millions
Over / (under) performance of fair value
items by line of business
Life and protection 22 26 (15)(8)29 N.M.
Individual savings and 29 11 164 (231)26 N.M.
retirement products
Pensions and asset management 46 (33)(3) 8 N.M.
Institutional products 80 30 167 (164)45 N.M.
Life reinsurance 6 21 (71) (13)21 N.M.
Total over / (under) performance141 94 50 (419) 129 N.M.
of fair
value items
Total over / (under) performance100 70 43 (274)97 N.M.
of fair
value items in EUR
NETHERLANDS - OVER / UNDER
PERFORMANCE OF FAIR VALUE
ITEMS
EUR millions
Over / (under) performance of fair value
items by line of business
Pensions and asset management (23) (7) N.M. (52) 5 N.M.
Total over / (under) performance (23) (7) N.M. (52) 5 N.M.
of fair
value items
EXPLANATION
Certain assets held by AEGON Americas and AEGON The Netherlands 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 assets 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 annuity products 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 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 15 mln
in Q2 2008 on the fair value movement on these bonds.
SALES
Q2 Q2Ytd Ytd
EUR millions 2008 2007 % 20082007%
New life sales 729 802 (9) 1,415 1,627 (13)
Gross deposits9,1319,902 (8) 17,767 22,878 (22)
(on and off balance)
New life sales
Life single premiums 2,880 3,298 (13) 5,637 7,173 (21)
Life recurring premiums 441 472 (7)851 910 (6)
annualized
Total recurring plus729 802 (9) 1,415 1,627 (13)
1/10 single
Life280 307 (9)564 615 (8)
Saving products 1 1 0 1 10
Pensions398 416 (4)750 825 (9)
BOLI/COLI 4 12 (67) 13 58 (78)
Life reinsurance 46 66 (30) 87 128 (32)
Total recurring plus 1/10 single729 802 (9) 1,415 1,627 (13)
New premium production accident
and health insurance141 160 (12)307 336 (9)
New premium production general
insurance16 13 23 32 25 28
Gross deposits (on and off balance)
Fixed annuities 875 156 N.M. 1,181 349 N.M.
Variable annuities 717 741 (3) 1,402 1,424 (2)
Saving products 688 728 (5) 1,336 1,2973
Retail mutual funds 908 554 64 1,472 1,138 29
Pensions and asset management 2,461 2,924 (16) 5,644 6,085 (7)
Institutional guaranteed 3,481 4,799 (27) 6,730 12,585 (47)
products
Life reinsurance 1 0 N.M. 2 0 N.M.
Total gross deposits 9,131 9,902 (8) 17,767 22,878 (22)
Net deposits (on and off balance) by
line of business
Fixed annuities (24) (1,334) 98(819) (2,650) 69
Variable annuities (102) (141) 28(254) (316) 20
Saving deposits 114 180 (37) 42 115 (63)
Retail mutual funds 416 198 110 587 390 51
Pensions and asset management 180 1,020 (82) 1,350 756 79
Institutional guaranteed products 401(605)N.M. (794) 1,341 (159)
Life reinsurance(14) 0 N.M.(29) 0 N.M.
Total net deposits 971 (682) N.M. 83(364) N.M.
EMPLOYEE NUMBERS At At
At June At Dec.
30 31
20082007
Number of employees 31,558 30,414
VALUE OF NEW
BUSINESS AND
IRR
VNB VNBVNB VNB
EUR EUREUR EUR
Q2 Q2 Ytd Ytd
EUR millions, after tax 2008 2007% 20082007 %
Americas 100 991 179 212 (16)
The Netherlands11 15 (27) 22 30 (27)
United Kingdom 64 58 10 117 116 1
Asia9 22 (59) 14 34 (59)
Central and Eastern18 20 (10) 41 3324
Europe
Other European 11 21 (48) 25 42 (40)
Countries
Total 212 235 (10) 98 467 (15)
IRR % IRR%
Americas 12.4 12.7
The Netherlands10.4 11.5
United Kingdom 13.4 12.8
Asia 24.9 13.4
Central and Eastern
Europe 47.7 49.6
Other European
Countries 49.0 47.5
Total 18.0 19.0
MODELED NEW
BUSINESS, APE
AND Premium Premium
DEPOSITSbusiness business
APE APE
NotesQ2 Q2 Ytd Ytd
EUR millions 2008 20072008 2007
12
Americas268 307 562 642
The Netherlands 97 56 171 123
United Kingdom 424 431 802 877
Asia 20 39 37 74
Central and Eastern
Europe 29 30 53 57
Other European
Countries58 58 117 122
Total 895 922 1,7431,896
Deposit Deposit
business business
Deposits Deposits
Americas 6,6278,086 12,624 18,894
Asia 71 141
Central and Eastern
Europe 128 29 11
Other European
Countries 33 87
Total 6,6498,098 12,676 18,913
VNB/PVNBP Premium Premium
SUMMARY business business
Notes VNB PVNBP VNB/ VNB/ VNB PVNBP VNB/ VNB/
PVNBP APE PVNBP APE
Q2 Ytd
EUR millions 2008%%2008%%
13
Americas 48 1,395 3.4 18.0 972,833 3.4 17.2
The Netherlands 11 833 1.3 10.8 22 1,45 1.5 13.1
United Kingdom 64 2,840 2.3 15.11175,413 2.2 14.5
Asia 8 119 6.7 40.1 13 218 5.8 33.9
Central and 13 175 7.6 46.5 25 341 7.4 47.3
Eastern
Europe
Other European 11 442 2.5 19.3 25 984 2.6 21.4
Countries
Total 155 5,804 2.7 17.3299 11,247 2.7 17.1
Deposit Deposit
business business
VNB PVNBP VNB/ VNB/ VNB PVNBP VNB/ VNB/
PVNBP Deposits PVNBP Deposits
13
Americas 52 7,461 0.7 0.882 14,289 0.6 0.6
Asia161 1.2 9.5 1112 1.2 9.7
Central and
Eastern Europe 4 119 3.7 35.616520 3.1 54.6
Other European
Countries 0 3 3.6 3.6 0 8 3.2 3.2
Total 57 7,645 0.7 0.9 100 14,929 0.7 0.8
Notes:
1) 2007 Q1 information has been adjusted to reflect the retrospective
application of the change in accounting principles relating to
guarantees in the Netherlands and, where applicable, the change in
definition of operating earnings to include AEGON's share in the net
results of associates and a new line of business format. These changes
were implemented in Q2 2007.
2) Certain assets held by AEGON Americas and AEGON The Netherlands 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 and convertible
bonds. Underlying earnings exclude any over- or underperformance comp
