FORM 6-K
Table of Contents

 

 

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

August 2011

 

 

AEGON N.V.

 

 

AEGONplein 50

2591 TV THE HAGUE

The Netherlands

 

 

 

 

 


Table of Contents

AEGON’s condensed consolidated interim financial statements Q2 2011, is 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: August 10, 2011     By  

/s/ E. Lagendijk

      E. Lagendijk
      Executive Vice President and General Counsel


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Condensed consolidated income statement

     p 2   

Condensed consolidated statement of comprehensive income

     p 3   

Condensed consolidated statement of financial position

     p 4   

Condensed consolidated statement of changes in equity

     p 5   

Condensed consolidated cash flow statement

     p 6   

Notes to the condensed consolidated interim financial statements

     p 7   

 

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CONDENSED CONSOLIDATED INCOME STATEMENT

 

EUR millions (except per share data)

   Notes      Q2 2011     Q2 2010     Ytd 2011     Ytd 2010  

Premium income

     4         4,501        5,264        10,778        11,427   

Investment income

     5         2,099        2,286        4,210        4,378   

Fee and commission income

        428        405        888        841   

Other revenues

        2        —          4        1   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

        7,030        7,955        15,880        16,647   

Income from reinsurance ceded

        477        426        907        906   

Results from financial transactions

     6         932        (4,978     2,045        1,314   

Other income

     7         (3     34        34        34   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total income

        8,436        3,437        18,866        18,901   

Benefits and expenses

     8         7,759        2,640        17,618        17,440   

Impairment charges / (reversals)

     9         106        106        170        276   

Interest charges and related fees

        117        99        228        195   

Other charges

     10         (7     116        21        116   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total charges

        7,975        2,961        18,037        18,027   

Share in net result of associates

        12        9        17        19   
     

 

 

   

 

 

   

 

 

   

 

 

 

Income / (loss) before tax

        473        485        846        893   

Income tax (expense) / benefit

        (69     (72     (115     (108
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income / (loss)

        404        413        731        785   
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income / (loss) attributable to:

           

Equity holders of AEGON N.V.

        403        413        730        784   

Non-controlling interests

        1        —          1        1   
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings and dividend per share (EUR per share)

           

Earnings per share 1

        (0.04     0.16        (0.09     0.35   
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share, excluding premium on core capital securities

        0.16        0.16        0.32        0.35   

Diluted earnings per share 1, 2

        (0.04     0.16        (0.09     0.35   

Earnings per share after potential attribution to convertible core capital
securities
1, 3

        —          0.13        —          0.30   

Diluted earnings per share after conversion of convertible core capital securities 1, 2

        —          0.12        —          0.27   

Dividend per common share

        —          —          —          —     
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income / (loss) per common share calculation

           

Net income / (loss)

        403        413        730        784   

Preferred dividend

        (59     (90     (59     (90

Coupons on perpetuals

        (43     (49     (87     (96

Coupons and premium on convertible core capital securities

        (375     —          (750     —     
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings attributable to common shareholders

        (74     274        (166     598   

Potential coupon on convertible core capital securities

        —          (43     —          (85
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings after potential attribution to convertible core capital securities

        (74     231        (166     513   

Weighted average number of common shares outstanding

        1,880        1,707        1,823        1,707   

Weighted average number of common shares outstanding, after conversion of convertible core capital securities

        —          2,207        —          2,207   

 

1 

After deduction of preferred dividend, coupons on perpetuals and coupons and premium on core capital securities.

2 

The potential conversion of the convertible core capital securities is taken into account in the calculation of diluted earnings per share if this would have a dilutive effect (i.e. diluted earnings per share would be lower than the earnings after potential attribution to convertible core capital securities).

3 

Reflect basic earnings per share. For Q2 2011, basic earnings per share is EUR (0.04)

 

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

EUR millions

   Q2 2011     Q2 2010     Ytd 2011     Ytd 2010  

Net income / (loss)

     404        413        731        785   

Other comprehensive income:

        

Gains / (losses) on revaluation of available-for-sale investments

     565        1,492        365        3,277   

(Gains) / losses transferred to the income statement on disposal and impairment of available-for-sale investments

     (158     (122     (219     (142

Changes in revaluation reserve real estate held for own use

     1        4        —          6   

Changes in cash flow hedging reserve

     84        311        (3     319   

Movement in foreign currency translation and net foreign investment hedging reserve

     (293     1,381        (1,173     2,234   

Equity movements of associates

     1        (10     (7     8   

Disposal of group assets

     —          (22     —          (22

Aggregate tax effect of items recognized in other comprehensive income

     (156     (659     (56     (1,237

Other

     (7     2        (6     (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period

     37        2,377        (1,099     4,436   

Total comprehensive income

     441        2,790        (368     5,221   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

        

Equity holders of AEGON N.V.

     441        2,790        (368     5,218   

Non-controlling interests

     —          —          —          3   

 

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

  

EUR millions

   Notes      June 30,
2011
     Dec. 31,
2010
 

ASSETS

        

Intangible assets

     11         4,016         4,359   

Investments

     12         132,837         143,188   

Investments for account of policyholders

     13         142,672         146,237   

Derivatives

        5,221         6,251   

Investments in associates

        743         733   

Reinsurance assets

        6,302         5,580   

Deferred expenses and rebates

     14         11,222         11,948   

Other assets and receivables

        8,512         8,776   

Cash and cash equivalents

        4,450         5,231   
     

 

 

    

 

 

 

Total assets

        315,975         332,303   

EQUITY AND LIABILITIES

        

Shareholders’ equity

        16,845         17,210   

Convertible core capital securities

     16         —           1,500   

Other equity instruments

        4,711         4,704   
     

 

 

    

 

 

 

Issued capital and reserves attributable to equity holders of AEGON N.V.

        21,556         23,414   

Non-controlling interests

        11         11   
     

 

 

    

 

 

 

Group equity

        21,567         23,425   
     

 

 

    

 

 

 

Trust pass-through securities

        131         143   

Subordinated borrowings

        16         —     

Insurance contracts

        94,390         100,506   

Insurance contracts for account of policyholders

        76,149         77,650   

Investment contracts

        20,578         23,237   

Investment contracts for account of policyholders

        68,058         69,527   

Derivatives

        5,563         5,971   

Borrowings

     17         9,409         8,518   

Other liabilities

        20,114         23,326   
     

 

 

    

 

 

 

Total liabilities

        294,408         308,878   
     

 

 

    

 

 

 

Total equity and liabilities

        315,975         332,303   
     

 

 

    

 

 

 

 

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY   

EUR millions

   Share
capital  2
     Retained
earnings
    Revaluation
reserves
    Other
reserves
    Convertible
core capital
securities
    Other equity
instruments
    Issued
capital  and
reserves 1
    Non-controlling
interests
    Total  

Six months ended June 30, 2011

                   

At beginning of year

     8,184         9,421        958        (1,353     1,500        4,704        23,414        11        23,425   

Net income recognized in the income statement

     —           730        —          —          —          —          730        1        731   

Other comprehensive income:

                   

Gains / (losses) on revaluation of available-for-sale investments

     —           —          365        —          —          —          365        —          365   

(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments

     —           —          (219     —          —          —          (219     —          (219

Changes in cash flow hedging reserve

     —           —          (3     —          —          —          (3     —          (3

Movement in foreign currency translation and net foreign investment hedging reserves

     —           —          —          (1,173     —          —          (1,173     —          (1,173

Equity movements of associates

     —           —          —          (7     —          —          (7     —          (7

Aggregate tax effect of items recognized in other comprehensive income

     —           —          (112     56        —          —          (56     —          (56

Other

     —           (5     —          —          —          —          (5     (1     (6
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           (5     31        (1,124     —          —          (1,098     (1     (1,099
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for 2011

     —           725        31        (1,124     —          —          (368     —          (368

Shares issued

     913         —          —          —          —          —          913        —          913   

Repurchase of convertible core capital securities

     —           —          —          —          (1,500     —          (1,500     —          (1,500

Preferred dividend

     —           (59     —          —          —          —          (59     —          (59

Coupons on perpetuals

     —           (87     —          —          —          —          (87     —          (87

Coupons and premium on convertible core capital securities

     —           (750     —          —          —          —          (750     —          (750

Share options

     —           —          —          —          —          7        7        —          7   

Other

     —           (14     —          —          —          —          (14     —          (14
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At end of period

     9,097         9,236        989        (2,477     —          4,711        21,556        11        21,567   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Six months ended June 30, 2010

                   

At beginning of year

     8,184         7,995        (1,709     (2,306     2,000        4,709        18,873        10        18,883   

Net income / (loss) recognized in the income statement

     —           784        —          —          —          —          784        1        785   

Other comprehensive income:

                   

Gains / (losses) on revaluation of available-for-sale investments

     —           —          3,277        —          —          —          3,277        —          3,277   

(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments

     —           —          (142     —          —          —          (142     —          (142

Changes in revaluation reserve real estate held for own use

     —           —          6        —          —          —          6        —          6   

Changes in cash flow hedging reserve

     —           —          319        —          —          —          319        —          319   

Movement in foreign currency translation and net foreign investment hedging reserves

     —           —          —          2,234        —          —          2,234        —          2,234   

Equity movements of associates

     —           —          —          8        —          —          8        —          8   

Disposal of group assets

     —           —          (22     —          —          —          (22     —          (22

Aggregate tax effect of items recognized in other comprehensive income

     —           —          (1,141     (96     —          —          (1,237     —          (1,237

Other

     —           (9     —          —          —          —          (9     2        (7
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           (9     2,297        2,146        —          —          4,434        2        4,436   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income / (loss) for 2010

     —           775        2,297        2,146        —          —          5,218        3        5,221   

Preferred dividend

     —           (90     —          —          —          —          (90     —          (90

Coupons on perpetual securities

     —           (96     —          —          —          —          (96     —          (96

Share options

     —           —          —          —          —          (7     (7     —          (7
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At end of period

     8,184         8,584        588        (160     2,000        4,702        23,898        13        23,911   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1

Issued capital and reserves attributable to equity holders of AEGON N.V.

2

For a breakdown of share capital please refer to note 15.

 

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CONDENSED CONSOLIDATED CASH FLOW STATEMENT   

EUR millions

   Ytd 2011     Ytd 2010  

Cash flow from operating activities

     (345     1,490   

Purchases and disposals of intangible assets

     (7     (11

Purchases and disposals of equipment and other assets

     (25     (53

Purchases, disposals and dividends of subsidiaries and associates

     (7     (169
  

 

 

   

 

 

 

Cash flow from investing activities

     (39     (233

Issuance and purchase of share capital

     913        —     

Dividends paid

     (59     (90

Issuances, repurchases and coupons of convertible core capital securities

     (2,250     —     

Issuances, repurchases and coupons of perpetuals

     (117     (129

Issuances and repayments on borrowings

     1,149        73   
  

 

 

   

 

 

 

Cash flow from financing activities

     (364     (146

Net increase / (decrease) in cash and cash equivalents

     (748     1,111   
  

 

 

   

 

 

 

Net cash and cash equivalents at January 1

     5,174        4,013   

Effects of changes in exchange rate

     (46     113   
  

 

 

   

 

 

 

Net cash and cash equivalents at end of period

     4,380        5,237   
  

 

 

   

 

 

 
     June 30,
2011
    June 30,
2010
 

Cash and cash equivalents

     4,450        5,328   

Bank overdrafts

     (70     (91
  

 

 

   

 

 

 

Net cash and cash equivalents

     4,380        5,237   
  

 

 

   

 

 

 

 

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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 second quarter ended June 30, 2011, have been prepared in accordance with IAS 34 ‘Interim financial reporting’ as adopted by the European Union (EU) 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 2010 consolidated financial statements of AEGON N.V. as included in AEGON’s Annual Report for 2010. AEGON’s annual report for 2010 is available on our website (www.aegon.com).

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 condensed consolidated interim financial statements were approved by the Executive Board on August 10, 2011.

The published figures in these condensed consolidated interim financial statements are unaudited.

2. Significant accounting policies

All accounting policies and methods of computation applied in the condensed consolidated interim financial statements are the same as those applied in the 2010 consolidated financial statements, which were prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as adopted by the European Union.

Taxes on income for the first six months of 2011 interim period are accrued using the tax rate that would be applicable to expected total annual earnings.

The following standards, interpretations, amendments to standards and interpretations became effective in 2011:

 

 

Amendment to IAS 24 - Related party disclosures

 

 

Amendment to IFRS 1 - First time adoption

 

 

Amendment to IFRIC 14 - Prepayments of a minimum funding requirement

 

 

Amendment to IAS 32 - Classification of Rights Issues

 

 

IFRIC 19 - Extinguishing financial liabilities with equity instruments

 

 

Improvements to IFRS (2010)

None of these new or revised standards and interpretations had a significant effect on the condensed consolidated interim financial statements for the period ended June 30, 2011.

AEGON has not early adopted any other standards, interpretations or amendments, that have been issued but are not yet effective.

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.

Exchange rates

The following exchange rates are applied for the condensed consolidated interim financial statements:

Income statement items: average rate 1 EUR = USD 1.4025 (2010: USD 1.3279); 1 EUR = GBP 0.8670 (2010: GBP 0.8696).

Balance sheet items: closing rate 1 EUR = USD 1.4499 (2010: USD 1.3362); 1 EUR = GBP 0.9031 (2010: GBP 0.8608).

 

 

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3. Segment information

3.1 Income statement

Three months ended June 30, 2011

 

EUR millions

   Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Three months ended June 30, 2011

                  

Underlying earnings before tax geographically

     325        74        10        59        (68     1        401        (4     397   

Fair value items

     (52     2        —          (3     30        —          (23     —          (23

Realized gains / (losses) on investments

     51        142        11        —          —          —          204        —          204   

Impairment charges

     (69     (3     (40     (4     —          —          (116     1        (115

Impairment reversals

     16        —          —          —          —          —          16        —          16   

Other income / (charges)

     (3     (11     1        (3     —          —          (16     —          (16

Run-off businesses

     10        —          —          —          —          —          10        —          10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     278        204        (18     49        (38     1        476        (3     473   

Income tax (expense) / benefit

     (41     (35     —          (10     14        —          (72     3        (69
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     237        169        (18     39        (24     1        404        —          404   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (31     (10     (17     53        5           

Revenues

                  

Life insurance gross premiums

     1,489        483        1,648        299        —          —          3,919        (69     3,850   

Accident and health insurance

     435        40        —          13        —          —          488        (1     487   

General insurance

     —          127        —          37        —          —          164        —          164   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     1,924        650        1,648        349        —          —          4,571        (70     4,501   

Investment income

     896        549        609        63        67        (66     2,118        (19     2,099   

Fee and commission income

     249        79        36        117        —          (53     428        —          428   

Other revenues

     1        —          —          —          1        —          2        —          2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,070        1,278        2,293        529        68        (119     7,119        (89     7,030   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     3        —          1        53        62           

Three months ended June 30, 2010

 

EUR millions

   Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Three months ended June 30, 2010

                  

Underlying earnings before tax geographically

     398        97        22        40        (76     2        483        —          483   

Fair value items

     (33     68        (14     (4     (14     —          3        —          3   

Realized gains / (losses) on investments

     17        23        3        8        97        —          148        (2     146   

Impairment charges

     (92     (6     (1     (9     —          —          (108     —          (108

Impairment reversals

     31        —          —          —          —          —          31        —          31   

Other income / (charges)

     (105     33        23        (11     —          —          (60     —          (60

Run-off businesses

     (10     —          —          —          —          —          (10     —          (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     206        215        33        24        7        2        487        (2     485   

Income tax (expense) / benefit

     (7     (45     (6     (9     (7     —          (74     2        (72
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     199        170        27        15        —          2        413        —          413   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (46     (14     (19     75        4           

Revenues

                  

Life insurance gross premiums

     1,772        520        2,008        357        —          —          4,657        (87     4,570   

Accident and health insurance

     485        32        —          13        —          —          530        (1     529   

General insurance

     —          124        —          41        —          —          165        —          165   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     2,257        676        2,008        411        —          —          5,352        (88     5,264   

Investment income

     1,089        547        597        58        91        (80     2,302        (16     2,286   

Fee and commission income

     231        90        41        115        —          (72     405        —          405   

Other revenues

     —          —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,577        1,313        2,646        584        91        (152     8,059        (104     7,955   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     —          —          2        72        78           

 

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Six months ended June 30, 2011

 

EUR millions

   Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Six months ended June 30, 2011

                  

Underlying earnings before tax geographically

     672        155        22        116        (150     —          815        (8     807   

Fair value items

     (64     (58     (1     (3     18        —          (108     —          (108

Realized gains / (losses) on investments

     76        177        40        2        —          —          295        —          295   

Impairment charges

     (152     (6     (40     (6     —          —          (204     1        (203

Impairment reversals

     41        1        —          —          —          —          42        —          42   

Other income / (charges)

     (3     (19     (5     8        —          —          (19     —          (19

Run-off businesses

     32        —          —          —          —          —          32        —          32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     602        250        16        117        (132     —          853        (7     846   

Income tax (expense) / benefit

     (102     (42     20        (36     38        —          (122     7        (115
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     500        208        36        81        (94     —          731        —          731   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (65     (20     (34     111        8           

Revenues

                  

Life insurance gross premiums

     3,066        2,354        3,510        668        —          —          9,598        (225     9,373   

Accident and health insurance

     875        149        —          45        —          —          1,069        (1     1,068   

General insurance

     —          259        —          78        —          —          337        —          337   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     3,941        2,762        3,510        791        —          —          11,004        (226     10,778   

Investment income

     1,850        1,069        1,208        119        132        (129     4,249        (39     4,210   

Fee and commission income

     519        174        73        233        —          (111     888        —          888   

Other revenues

     1        —          —          1        2        —          4        —          4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     6,311        4,005        4,791        1,144        134        (240     16,145        (265     15,880   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     3        1        1        111        124           

Six months ended June 30, 2010

 

EUR millions

   Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Six months ended June 30, 2010

                  

Underlying earnings before tax geographically

     735        201        50        86        (144     1        929        (3     926   

Fair value items

     (119     159        (11     (1     (41     —          (13     —          (13

Realized gains / (losses) on investments

     41        119        6        11        97        —          274        (2     272   

Impairment charges

     (247     (12     (12     (11     —          —          (282     —          (282

Impairment reversals

     47        5        3        —          —          —          55        —          55   

Other income / (charges)

     (105     33        46        (11     —          —          (37     —          (37

Run-off businesses

     (28     —          —          —          —          —          (28     —          (28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     324        505        82        74        (88     1        898        (5     893   

Income tax (expense) / benefit

     32        (112     (32     (22     21        —          (113     5        (108
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     356        393        50        52        (67     1        785        —          785   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (76     (28     (32     127        9           

Revenues

                  

Life insurance gross premiums

     3,320        2,269        3,955        645        —          —          10,189        (203     9,986   

Accident and health insurance

     918        140        —          40        —          —          1,098        (1     1,097   

General insurance

     —          259        —          85        —          —          344        —          344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     4,238        2,668        3,955        770        —          —          11,631        (204     11,427   

Investment income

     2,014        1,105        1,156        116        160        (138     4,413        (35     4,378   

Fee and commission income

     484        176        79        227        —          (125     841        —          841   

Other revenues

     1        —          —          1        —          —          2        (1     1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     6,737        3,949        5,190        1,114        160        (263     16,887        (240     16,647   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     —          —          2        125        136           

 

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Non-IFRS measures

This report includes the non-IFRS financial measure: underlying earnings before tax. The reconciliation of this measure to the most comparable IFRS measure is presented in the tables in this note. This non-IFRS measure is calculated by consolidating on a proportionate basis the revenues and expenses of our associated companies in Spain, India, Brazil and Mexico. AEGON believes that its non-IFRS measure provides meaningful information about the underlying operating results of our business including insight into the financial measures that senior management uses in managing the business.

Among other things our senior management is compensated based in part on AEGON's results against targets using the non-IFRS measure presented here. While many other insurers in our peer group present substantially similar non-IFRS measures, the non-IFRS measure presented in this document may nevertheless differ from the non-IFRS measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards and readers are cautioned to consider carefully the different ways in which AEGON and its peers present similar information before comparing them.

AEGON believes the non-IFRS measure shown herein, when read together with our reported IFRS financial statements, provides meaningful supplemental information for the investing public to evaluate AEGON’s business after eliminating the impact of current IFRS accounting policies for financial instruments and insurance contracts, which embed a number of accounting policy alternatives that companies may select in presenting their results (i.e. companies can use different local GAAPs) and that can make the comparability from period to period difficult.

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 include assets such as investments in 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 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 deferred policy acquisition costs (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 excluded is any over- or underperformance compared to management’s expected return. 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 New Markets) are excluded from underlying earnings, the long-term expected return for these guarantees is set at zero.

Holding and other activities include 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 AEGON’s credit spread used in the valuation of these bonds are excluded from underlying earnings and reported under fair value items.

Fair value items

Fair value items include the over- or underperformance of investments and guarantees held at fair value for which the expected long-term return is included in underlying earnings.

In addition, hedge ineffectiveness on hedge transactions, fair value changes on economic hedges without natural offset in earnings and for which no hedge accounting is applied and fair value movements on real estate are included under fair value items.

Realized gains or losses on investments

Includes realized gains and losses on available-for-sale investments, mortgage loans and loan portfolios.

 

 

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Impairment charges / reversals

Includes impairments / (reversals) on available-for-sale debt securities and impairments on shares including the effect of deferred policyholder acquisition costs, mortgage loans and loan portfolios on amortized cost and associates.

Other income or charges

Other income or charges is used to report any items which cannot be directly allocated to a specific line of business. Also items that are outside the normal course of business are included under this heading.

Other charges include restructuring charges that are considered other charges for segment reporting purposes because they are outside the normal course of business. In the condensed consolidated income statement, these charges are included in operating expenses.

Run-off businesses

Includes underlying results of business units where management has decided to exit the market and to run–off the existing block of business. Currently, this line includes the run-off of the institutional spread-based business, structured settlements blocks of business, Bank-Owned and Corporate-Owned Life Insurance (BOLI/COLI) business and life reinsurance business in the United States. AEGON has other blocks of business for which sales have been discontinued and of which the earnings are included in underlying earnings.

On April 26, 2011, AEGON publicly announced the decision of its Executive Board to divest its life reinsurance activities, Transamerica Reinsurance, to SCOR. These activities are no longer reported in underlying earnings but are reflected in the run-off businesses line in the segment reporting (both in 2011 and in 2010). More details on this transaction are given in note 18.

Also, in December 2010, AEGON publicly announced the decision of its Executive Board to discontinue new sales of

executive non-qualified benefit plans and related Bank-Owned and Corporate-Owned Life Insurance (BOLI/COLI) business in the United States. Earnings from the BOLI/COLI business are no longer reported in underlying earnings but reflected in the run-off businesses line in the segment reporting (both in 2011 and 2010).

The comparative figures, affecting the Americas segment, regarding the underlying earnings and the run-off businesses have been revised as follows:

 

     Reported     Reclassification     Revised  

EUR millions

         BOLI/COLI     Reinsurance        

Three months ended June 30, 2010

        

Underlying earnings before tax geographically

     522        (13     (26     483   

Fair value items

     3                      3   

Realized gains / (losses) on investments

     148                      148   

Impairment charges

     (108                   (108

Impairment reversals

     31                      31   

Other income / (charges)

     (60                   (60

Run-off businesses

     (49     13        26        (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     487                      487   

Income tax (expense) / benefit

     (74                   (74
  

 

 

       

 

 

 

Net income

     413                      413   
  

 

 

       

 

 

 
     Reported     Reclassification     Revised  

EUR millions

         BOLI/COLI     Reinsurance        

Six months ended June 30, 2010

        

Underlying earnings before tax geographically

     1,010        (25     (56     929   

Fair value items

     (13                   (13

Realized gains / (losses) on investments

     274                      274   

Impairment charges

     (282                   (282

Impairment reversals

     55                      55   

Other income / (charges)

     (37                   (37

Run-off businesses

     (109     25        56        (28
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     898                      898   

Income tax (expense) / benefit

     (113                   (113
  

 

 

       

 

 

 

Net income

     785                      785   
  

 

 

       

 

 

 

Share in earnings of associates

Earnings from the Company’s associates in insurance companies in Spain, India, Brazil and Mexico are reported on an underlying earnings basis. Other associates are included on a net income basis.

 

 

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3.2 Investments geographically

At June 30, 2011

 

                                 amounts in million EUR (unless otherwise stated)  

Americas
USD

     United
Kingdom
GBP
    

At June 30, 2011

   Americas      The
Netherlands
     United
Kingdom
     New
Markets
     Holding
& other
activities
     Eliminations     Total
EUR
 
      Investments                    
  1,806         52       Shares      1,245         632         57         70         —           (2     2,002   
  85,594         7,893       Debt securities      59,035         16,194         8,740         2,047         —           —          86,016   
  14,261         7       Loans      9,836         17,932         8         658         —           —          28,434   
  19,044         —         Other financial assets      13,135         41         —           44         452         —          13,672   
  1,018         —         Investments in real estate      702         2,011         —           —           —           —          2,713   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  121,723         7,952       Investments general account      83,953         36,810         8,805         2,819         452         (2     132,837   
  —           25,976       Shares      —           7,975         28,763         3,304         —           (6     40,036   
  —           12,834       Debt securities      —           14,662         14,211         256         —           —          29,129   
  83,383         7,076      

Separate accounts and investment funds

     57,509         —           7,835         1,267         —           —          66,611   
  —           3,494       Other financial assets      —           558         3,870         1,376         —           —          5,804   
  —           987       Investments in real estate      —           —           1,092         —           —           —          1,092   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  83,383         50,367      

Investments for account of policyholders

     57,509         23,195         55,771         6,203         —           (6     142,672   
  205,106         58,319       Investments on balance sheet      141,462         60,005         64,576         9,022         452         (8     275,509   
  119,813         —        

Off balance sheet investments third parties

     82,635         —           —           33,132         —           —          115,767   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  324,919         58,319      

Total revenue generating investments

     224,097         60,005         64,576         42,154         452         (8     391,276   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
      Investments                    
  100,337         7,882       Available-for-sale      69,203         16,654         8,727         1,899         5         —          96,488   
  14,261         7       Loans      9,836         17,932         8         658         —           —          28,434   
  —           —         Held-to-maturity      —           —           —           141         —           —          141   
  89,490         49,443      

Financial assets at fair value through profit or loss

     61,721         23,408         54,749         6,324         447         (8     146,641   
  1,018         987       Investments in real estate      702         2,011         1,092         —           —           —          3,805   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  205,106         58,319       Total investments on balance sheet      141,462         60,005         64,576         9,022         452         (8     275,509   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  118         8       Investments in associates      81         59         9         590         4         —          743   
  29,023         5,735       Other assets      20,018         10,169         6,351         1,765         28,037         (26,617     39,723   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  234,247         64,062       Consolidated total assets      161,561         70,233         70,936         11,377         28,493         (26,625     315,975   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

At December 31, 2010

 

                                 amounts in million EUR (unless otherwise stated)  

Americas

USD

     United
Kingdom
GBP
    

At December 31, 2010

   Americas      The
Netherlands
     United
Kingdom
     New
Markets
     Holding &
other
activities
     Eliminations     Total
EUR
 
      Investments                    
  1,737         53       Shares      1,300         945         62         72         —           (3     2,376   
  89,687         7,917       Debt securities      67,121         18,504         9,198         2,041         —           —          96,864   
  15,249         8       Loans      11,412         15,629         9         653         —           —          27,703   
  17,481         —         Other financial assets      13,083         40         —           45         293         —          13,461   
  974         —         Investments in real estate      729         2,055         —           —           —           —          2,784   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  125,128         7,978       Investments general account      93,645         37,173         9,269         2,811         293         (3     143,188   
  —           25,470       Shares      —           8,087         29,589         3,139         —           (5     40,810   
  —           13,573       Debt securities      —           14,435         15,768         223         —           —          30,426   
  79,308         6,393      

Separate accounts and investment funds

     59,353         —           7,427         1,309         —           —          68,089   
  —           3,250       Other financial assets      —           536         3,775         1,467         —           —          5,778   
  —           976       Investments in real estate      —           —           1,134         —           —           —          1,134   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  79,308         49,662       Investments for account of policyholders      59,353         23,058         57,693         6,138         —           (5     146,237   
  204,436         57,640       Investments on balance sheet      152,998         60,231         66,962         8,949         293         (8     289,425   
  115,297         —        

Off balance sheet investments third parties

     86,287         12,353         —           25,126         —           —          123,766   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  319,733         57,640      

Total revenue generating investments

     239,285         72,584         66,962         34,075         293         (8     413,191   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
      Investments                    
  102,792         7,899       Available-for-sale      76,929         19,261         9,177         1,879         4         —          107,250   
  15,249         8       Loans      11,412         15,629         9         653         —           —          27,703   
  —           —         Held-to-maturity      —           —           —           139         —           —          139   
  85,421         48,757      

Financial assets at fair value through profit or loss

     63,928         23,286         56,642         6,278         289         (8     150,415   
  974         976       Investments in real estate      729         2,055         1,134         —           —           —          3,918   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  204,436         57,640       Total investments on balance sheet      152,998         60,231         66,962         8,949         293         (8     289,425   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  114         8       Investments in associates      85         59         9         576         4         —          733   
  27,165         5,415       Other assets      20,331         11,626         6,290         1,703         30,824         (28,629     42,145   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  231,715         63,063       Consolidated total assets      173,414         71,916         73,261         11,228         31,121         (28,637     332,303   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

The decline in off balance sheet investments third parties in The Netherlands reflect a transfer of third party asset management operations from AEGON The Netherlands to AEGON Asset Management, included in New Markets.

 

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4. Premium income and premium to reinsurers

 

EUR millions

   Q2 2011      Q2 2010      Ytd 2011      Ytd 2010  

Gross

           

Life

     3,850         4,570         9,373         9,986   

Non-Life

     651         694         1,405         1,441   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,501         5,264         10,778         11,427   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Life

     380         371         742         698   

Non-Life

     87         91         168         169   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     467         462         910         867   
  

 

 

    

 

 

    

 

 

    

 

 

 

5. Investment income

 

EUR millions

   Q2 2011      Q2 2010      Ytd 2011      Ytd 2010  

Interest income

     1,785         2,057         3,622         3,934   

Dividend income

     273         184         501         357   

Rental income

     41         45         87         87   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

     2,099         2,286         4,210         4,378   
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment income related to general account

     1,432         1,651         2,903         3,141   

Investment income for account of policyholders

     667         635         1,307         1,237   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,099         2,286         4,210         4,378   
  

 

 

    

 

 

    

 

 

    

 

 

 

6. Results from financial transactions

 

EUR millions

   Q2 2011     Q2 2010     Ytd 2011     Ytd 2010  

Net fair value change of general account financial investments at FVTPL other than derivatives

     30        (26     157        20   

Realized gains and losses on financial investments

     277        184        381        335   

Gains and (losses) on investments in real estate

     (15     (43     (26     (47

Net fair value change of derivatives

     (78     553        (601     1,357   

Net fair value change on for account of policyholder financial assets at FVTPL

     728        (5,736     2,138        (498

Net fair value change on investments in real estate for account of policyholders

     5        20        11        72   

Net foreign currency gains and (losses)

     (1     52        (9     84   

Net fair value change on borrowings and other financial liabilities

     (18     18        (10     (9

Realized gains and (losses) on repurchased debt

     4        —          4        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     932        (4,978     2,045        1,314   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Net fair value changes on for account of policyholder financial assets at fair value through profit and loss are

offset by amounts in Claims and benefits reported in the Benefits and expenses line (note 8).

 

 

7. Other income

 

In 2011, other income mainly relates to a benefit related to a settlement of legal claims.

    

 

 

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8. Benefits and expenses

 

EUR millions

   Q2 2011     Q2 2010     Ytd 2011     Ytd 2010  

Claims and Benefits

     6,945        2,009        16,013        15,917   

Employee expenses

     517        552        1,054        1,067   

Administration expenses

     313        274        597        553   

Deferred expenses

     (371     (426     (758     (803

Amortization charges

     355        231        712        706   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     7,759        2,640        17,618        17,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Claims and benefits includes the claims and benefits paid to policyholders, including claims and benefits in excess of account value for products for which deposit accounting is applied and the change in valuation of liabilities for insurance and investment contracts. Claims and benefits

increased mainly as a result of changes in technical provisions resulting from fair value changes on for account of policyholder financial assets included in results from financial transactions (note 6).

 

 

9. Impairment charges / (reversals)

 

EUR millions

   Q2 2011     Q2 2010     Ytd 2011     Ytd 2010  

Impairment charges / (reversals) comprise:

        

Impairment charges on financial assets, excluding receivables 1

     121        134        209        327   

Impairment reversals on financial assets, excluding receivables 1

     (16     (31     (42     (55

Impairment charges / (reversals) on non-financial assets and receivables

     1        3        3        4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     106        106        170        276   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment charges on financial assets, excluding receivables, from:

        

Shares

     1        1        3        4   

Debt securities and money market instruments

     115        107        185        276   

Loans

     6        26        15        47   

Other

     (1     —          6        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     121        134        209        327   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment reversals on financial assets, excluding receivables, from:

        

Debt securities and money market instruments

     (14     (28     (38     (52

Loans

     (2     (3     (4     (3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (16     (31     (42     (55
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Impairment charges / (reversals) on financial assets, excluding receivables, are excluded from underlying earnings before tax for segment reporting (refer to note 3).

10. Other charges

 

In 2011, other charges includes an annual charge related to a bank tax charged by the Hungarian government of EUR 20 million.

    

 

 

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11. Intangible assets

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

Goodwill

     636         652   

VOBA

     2,932         3,221   

Future servicing rights

     407         444   

Software

     29         32   

Other

     12         10   
  

 

 

    

 

 

 

Total intangible assets

     4,016         4,359   
  

 

 

    

 

 

 

 

The decrease in goodwill and future servicing rights is mainly attributable to foreign currency effects. In addition, future servicing rights decreased due to amortization.

The decrease in value of business acquired (VOBA) is mainly attributable to foreign currency effects and amortization partly offset by the impact of shadow accounting.

 

 

12. Investments

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

Available-for-sale (AFS)

     96,488         107,250   

Loans

     28,434         27,703   

Held-to-maturity (HTM)

     141         139   

Financial assets at fair value through profit or loss (FVTPL)

     5,061         5,312   
  

 

 

    

 

 

 

Financial assets, excluding derivatives

     130,124         140,404   

Investments in real estate

     2,713         2,784   
  

 

 

    

 

 

 

Total investments for general account

     132,837         143,188   
  

 

 

    

 

 

 

Total financial assets, excluding derivatives

 

     AFS      FVTPL      HTM      Loans      Total  

Shares

     981         1,021         —           —           2,002   

Debt securities

     84,362         1,513         141         —           86,016   

Money market and other short term investments

     10,343         781         —           —           11,124   

Mortgages

     —           —           —           24,817         24,817   

Private loans

     —           —           —           804         804   

Deposits with financial institutions

     —           —           —           648         648   

Policy loans

     —           —           —           1,995         1,995   

Receivables out of share lease agreements

     —           —           —           21         21   

Other

     802         1,746         —           149         2,697   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2011

     96,488         5,061         141         28,434         130,124   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     AFS      FVTPL      HTM      Loans      Total  

Shares

     1,298         1,078         —           —           2,376   

Debt securities

     94,936         1,789         139         —           96,864   

Money market and other short term investments

     10,141         659         —           —           10,800   

Mortgages

     —           —           —           23,781         23,781   

Private loans

     —           —           —           829         829   

Deposits with financial institutions

     —           —           —           748         748   

Policy loans

     —           —           —           2,169         2,169   

Receivables out of share lease agreements

     —           —           —           25         25   

Other

     875         1,786         —           151         2,812   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Dec. 31, 2010

     107,250         5,312         139         27,703         140,404   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Government bond investments

 

Included in our available for sale debt securities and money market investments are EUR 949 million (December 31, 2010: EUR 1,250 million) of exposures to the central governments of the European peripheral

countries of Portugal, Italy, Ireland, Greece and Spain. The table below provides the amortized cost and fair value of these exposures.

 

 

Exposure to central governments of European peripheral countries

 

EUR millions

   June 30, 2011      Dec. 31, 2010  
     Amortized cost      Fair value      Amortized cost      Fair value  

Portugal

     13         9         33         32   

Italy

     89         85         114         112   

Ireland

     32         24         37         32   

Greece

     4         4         58         45   

Spain

     811         745         1,008         904   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     949         867         1,250         1,125   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

13. Investments for account of policyholders

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

Shares

     40,036         40,810   

Debt securities

     29,129         30,426   

Money market and short-term investments

     2,275         2,597   

Deposits with financial institutions

     2,945         2,630   

Separate accounts and unconsolidated investment funds

     66,611         68,089   

Other

     584         551   
  

 

 

    

 

 

 

Total investments for account of policyholders at fair value through profit or loss, excluding derivatives

     141,580         145,103   

Investment in real estate

     1,092         1,134   
  

 

 

    

 

 

 

Total investments for account of policyholders

     142,672         146,237   
  

 

 

    

 

 

 

 

14. Deferred expenses and rebates

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

DPAC for insurance contracts and investment contracts with discretionary participation features

     10,636         11,340   

Deferred transaction costs for investment management services

     371         380   

Unamortized interest rate rebates

     215         228   
  

 

 

    

 

 

 

Total deferred expenses and rebates

     11,222         11,948   
  

 

 

    

 

 

 

 

Deferred policy acquisition costs (DPAC) balances decreased, reflecting changes in foreign currency

exchange rates, amortization and the impact of shadow accounting partly offset by newly deferred expenses.

 

 

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15. Share capital

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

Share capital - par value

     310         278   

Share premium

     8,787         7,906   
  

 

 

    

 

 

 

Total share capital

     9,097         8,184   
  

 

 

    

 

 

 

Share capital - par value

     

Balance at January 1

     278         278   

Issuance

     32         —     
  

 

 

    

 

 

 

Balance

     310         278   
  

 

 

    

 

 

 

Share premium

     

Balance at January 1

     7,906         7,906   

Issuance

     881         —     
  

 

 

    

 

 

 

Balance

     8,787         7,906   
  

 

 

    

 

 

 

 

On March 1, 2011 AEGON completed the issue of 173,604,912 new common shares of AEGON N.V. with a par value of EUR 0.12. The shares were issued at a price of EUR 5.20 per share. The proceeds of EUR 903 million were used to fund part of the repurchase of the convertible core capital securities described in note 16.

The new shares have been listed on Euronext Amsterdam, the principal market for AEGON’s common shares.

On March 15, 2011, Vereniging AEGON exercised its option rights to purchase 41,042,000 class B preferred shares at par value of EUR 0.25 in order to avoid dilution of its voting rights following the issuance of 10% new common shares completed on March 1, 2011.

 

 

16. Convertible core capital securities

 

AEGON repurchased EUR 1.5 billion in principal amount of the original EUR 3 billion in convertible core capital securities from the Dutch State. The total payment to the Dutch State amounted to EUR 2,250 million of which EUR 1,500 million related to the repurchase of 375 million convertible core capital securities and EUR 750 million related to the premium attached to this repurchase. This repurchase was completed in two equal tranches on March 15 and June 15 respectively.

With these transactions AEGON has repurchased all of the EUR 3 billion core capital securities issued to the Dutch State at the height of the financial crisis in 2008.

 

 

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17. Borrowings

 

EUR millions

   June 30, 2011      Dec. 31, 2010  

Debentures and other loans

     8,901         7,743   

Commercial paper

     420         701   

Short term deposits

     18         17   

Bank overdrafts

     70         57   
  

 

 

    

 

 

 

Total borrowings

     9,409         8,518   
  

 

 

    

 

 

 

 

On April 14, 2011, AEGON The Netherlands sold EUR 1.5 billion Class A residential mortgage backed securities (RMBS) to a broad group of institutional investors. These securities consist of two tranches:

 

 

EUR 375 million of class A1 notes with an expected weighted average life of 1.9 years and priced at par with a coupon of three month Euribor plus 0.95 %; and

 

 

EUR 1,125 million of class A2 notes with an expected weighted average life of 4.9 years and priced at par with a coupon of three month Euribor plus 1.35 %.

The securities were issued under the Dutch SAECURE program. The net proceeds where used to finance a part of the existing Dutch mortgage portfolio of AEGON The Netherlands.

Debentures and other loans increased due to the sale of these residential mortgage backed securities, partly compensated by redemptions and negative impact of foreign currency exchange rates.

Included in Debentures and other loans is EUR 960 million relating to borrowings measured at fair value (2010: EUR 987 million).

Commercial paper, Short term deposits and Bank overdrafts vary with the normal course of business.

 

 

18. Commitments and contingencies

 

See note 19 for litigation with respect to Koersplan products.

There have been no material changes in contingent assets and liabilities reported in the 2010 consolidated financial statements of AEGON.

    

 

 

19. Events after the balance sheet date

 

Effective July 1, 2011, AEGON entered into a Joint Venture contract with Unnim, the entity which was created by the merger of Caixa Terrassa, Caixa Sabadell and Caixa Manlleu. AEGON Spain is the sole insurance partner of Unnim to provide life and pension insurance products.

On July 26, 2011, the Amsterdam Court of Appeal, an intermediate appeals court, ruled with respect to a specific AEGON unit-linked product (Koersplan). The Amsterdam Court of Appeal accepted AEGON’s positions that Koersplan products sold during the period 1989-1998 entailed an obligation on the part of customers to pay a premium for a death benefit. However, the Court ruled that AEGON should have more clearly informed its customers about the amount of

premium which the company charged in relation to the embedded death benefit. AEGON acknowledges that its level of communication could have been better at the time and has subsequently taken steps to substantially improve its communications with customers.

 

 

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In its decision, the Court ruled that customers are required to pay a reasonable premium. However, the Court went on to define what it considers to be a reasonable premium at a level below that charged by AEGON. The Court based its decision on a single industry example, which AEGON believes is not representative. It is AEGON’s view that, based on the arguments presented, the Court’s ruling was wrongly decided. AEGON will appeal the decision to the Supreme Court in the Netherlands. 

On August 9, 2011, AEGON completed the previously announced divestment of its life reinsurance business, Transamerica Reinsurance (TARe), to SCOR. The divestment resulted in a total after-tax consideration of USD 1.4 billion, consisting of cash proceeds of USD 0.9 billion and capital release of USD 0.5 billion.

AEGON has retained certain blocks of business consisting primarily of variable annuity guarantee products with a book value of USD 0.4 billion.

The divestment of Transamerica Reinsurance (TARe) consists of a series of reinsurance agreements between various statutory insurance entities and SCOR for the US domestic business. In addition, SCOR has acquired Transamerica International Reinsurance Ireland (TIRI), a company that includes reinsurance contracts that are assumed by AEGON US domestic companies which have been retroceded to TIRI, and has taken over the operational assets and systems of TARe.

The business residing in Transamerica International Reinsurance, Bermuda (TIRe) has been retroceded to SCOR. TIRe will continue to provide reserve credit security for redundant reserves to AEGON USA’s ceding companies. AEGON will maintain approximately half of the collateral requirements needed for reinsurance reserve financing. This obligation provides reserve credit security and will run-off over approximately 15 years.

Structuring the transaction as a reinsurance arrangement leaves AEGON exposed to a counter-party risk of SCOR not performing on the reinsurance contracts as the business matures. For such an event, certain levels of collateral related to the reinsured contracts have been placed in trust for AEGON’s benefit. SCOR is rated A2/A by Moody’s and Standard & Poor’s, both with positive outlooks.

The transaction will be accounted for primarily as a reinsurance transaction between AEGON and SCOR. Certain fixed assets and certain investment assets will be transferred with any related gain (loss) being recognized. As a result, the divestment will have no significant impact on shareholders’ equity. Earnings on the business retained as well as amortization of the prepaid cost of reinsurance asset will be reflected in the run-off businesses line in AEGON’s segment reporting.

The reinsurance business being retained by AEGON, which is comprised primarily of the variable annuity guarantee business, is substantially hedged for financial market risks and produces normalized results which are negligible. In addition, various administration, service and asset management contracts are part of the transaction. The combined result, consisting primarily of the amortization of the prepaid cost of reinsurance, is approximately USD 40 million before tax per annum initially. These costs are expected to trend down as the contracts mature. Transamerica Reinsurance realized underlying earnings before tax of USD 105 million in 2010.

 

 

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Management statement

The interim report for the six months ended June 30, 2011 consists of the condensed consolidated interim financial statements, the Q2 results release and the responsibility statement by the Company’s Executive Board. The information in this interim report is unaudited.

The Executive Board is responsible for preparing the condensed consolidated interim financial statements in accordance with Dutch law and those International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with IFRS as issued by the International Accounting Standards Board (IASB).

The Executive Board declares that, to the best of its knowledge, the condensed consolidated interim financial statements which have been prepared in accordance with IAS 34, “Interim Financial Reporting”, as adopted by the EU, with IFRS as issued by the IASB, give a true and fair view of the assets, liabilities, financial condition and profit or loss of AEGON N.V. and the undertakings included in the consolidation as a whole and that the Q2 results release includes a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

The Hague, August 10, 2011

A.R. Wynaendts

Chairman of the Executive Board and CEO

J.J. Nooitgedagt

Member of the Executive Board and CFO

 

 

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DISCLAIMERS

Cautionary note regarding non-GAAP measures

These condensed consolidated interim financial statements include a non-GAAP financial measures: underlying earnings before tax. The reconciliation of underlying earnings before tax to the most comparable IFRS measures is provided in Note 3 “Segment information” of notes to the condensed consolidated interim financial statements.

AEGON believes that this non-GAAP measure, together with the IFRS information, provide a meaningful measure for the investment community to evaluate AEGON’s business relative to the businesses of our peers.

Local currencies and constant currency exchange rates

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 this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:

 

 

Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom;

 

 

Changes in the performance of financial markets, including emerging markets, such as with regard to:

 

   

The frequency and severity of defaults by issuers in our fixed income investment portfolios; and

 

   

The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold;

 

 

The frequency and severity of insured loss events;

 

 

Changes affecting mortality, morbidity, persistence and other factors that may impact the profitability of our insurance products;

 

 

Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels;

 

 

Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates;

 

 

Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets;

 

 

Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our consumers;

 

 

Regulatory changes relating to the insurance industry in the jurisdictions in which we operate;

 

 

Acts of God, acts of terrorism, acts of war and pandemics;

 

 

Changes in the policies of central banks and/or governments;

 

 

Lowering of one or more of our debt ratings issued by recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and financial condition;

 

 

Lowering of one or more of insurer financial strength ratings of our insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability of its insurance subsidiaries and liquidity;

 

 

The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital we are required to maintain;

 

 

Litigation or regulatory action that could require us to pay significant damages or change the way we do business;

 

 

Customer responsiveness to both new products and distribution channels;

 

 

Competitive, legal, regulatory, or tax changes that affect the distribution cost of or demand for our products;

 

 

The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions;

 

 

Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives;

Further details of potential risks and uncertainties affecting the company are described in the company’s filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

 

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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 FIGURES IN 2011 AND 2012

 

Thursday, November 11    Result third quarter 2011
Friday, February 17, 2012    Results fourth quarter 2011
Thursday, May 10, 2012    Results first quarter 2012
Thursday, August 9, 2012    Results second quarter 2012
Thursday, November 8, 2012    Results third quarter 2012

PRESS RELEASE AND SUPPLEMENTS

AEGON’s Q2 2011 press release and Q2 2011 Financial Supplement are available on AEGON’s 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 28,000 people and serve some 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.

AEGON’s ambition is to be a leader in all its chosen markets by 2015.

 

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