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

November 2011

 

 

AEGON N.V.

 

 

AEGONplein 50

2591 TV THE HAGUE

The Netherlands

 

 

 

 

 


Table of Contents

AEGON’s condensed consolidated interim financial statements Q3 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: November 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      Q3 2011     Q3 2010     Ytd 2011     Ytd 2010  
     
                 

Premium income

     4         4,306        4,893        15,084        16,320   

Investment income

     5         1,914        2,352        6,124        6,730   

Fee and commission income

     6         96        427        984        1,268   

Other revenues

              1        2        5        3   

Total revenues

        6,317        7,674        22,197        24,321   

Income from reinsurance ceded

     7         976        488        1,883        1,394   

Results from financial transactions

     8         (8,105     10,140        (6,060     11,454   

Other income

     9         -        -        34        34   

Total income

        (812     18,302        18,054        37,203   
     

Benefits and expenses

     10         (1,053     17,393        16,565        34,833   

Impairment charges / (reversals)

     11         137        108        307        384   

Interest charges and related fees

        133        136        361        331   

Other charges

     12         (5     7        16        123   

Total charges

        (788     17,644        17,249        35,671   
     

Share in net result of associates

              8        11        25        30   

Income / (loss) before tax

        (16     669        830        1,562   

Income tax (expense) / benefit

              76        (12     (39     (120

Net income / (loss)

              60        657        791        1,442   
     

Net income / (loss) attributable to:

               

Equity holders of AEGON N.V.

        60        657        790        1,441   

Non-controlling interests

              -        -        1        1   
     

Earnings and dividend per share (EUR per share)

               

Earnings per share 1

        0.01        0.32        (0.08     0.67   

Earnings per share, excluding premium on convertible core capital securities

        0.01        0.35        0.33        0.70   

Diluted earnings per share 1, 2

        0.01        0.32        (0.08     0.67   
     

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

        -        0.30        -        0.62   

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

        -        0.28        -        0.55   
     

Dividend per common share

              -        -        -        -   
     

Net income / (loss) per common share calculation

               

Net income / (loss)

        60        657        790        1,441   

Preferred dividend

        -        -        (59     (90

Coupons on perpetuals

        (45     (46     (132     (142

Coupons and premium on convertible core capital securities

              -        (63     (750     (63

Earnings attributable to common shareholders

        15        548        (151     1,146   

Potential coupon on convertible core capital securities

              -        (32     -        (95

Earnings after potential attribution to convertible core capital securities

        15        516        (151     1,051   
     

Weighted average number of common shares outstanding

        1,880        1,707        1,842        1,707   

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

              -        2,165        -        2,193   

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 Q3 2011, basic earnings per share is EUR 0.01

 

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

  

EUR millions

     Q3 2011        Q3 2010        Ytd 2011        Ytd 2010   
     

Net income / (loss)

     60        657        791        1,442   
     

Other comprehensive income:

            

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

     1,483        2,724        1,848        6,001   

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

     (119     (93     (338     (235

Changes in revaluation reserve real estate held for own use

     3        (2     3        4   

Changes in cash flow hedging reserve

     910        (66     907        253   

Movement in foreign currency translation and net foreign investment hedging reserve

     1,032        (1,511     (141     723   

Equity movements of associates

     (1     2        (8     10   

Disposal of group assets

     -        -        -        (22

Aggregate tax effect of items recognized in other comprehensive income

     (734     (748     (790     (1,985

Other

     10        (4     4        (11

Other comprehensive income for the period

     2,584        302        1,485        4,738   

Total comprehensive income

     2,644        959        2,276        6,180   
     

Total comprehensive income attributable to:

            

Equity holders of AEGON N.V.

     2,643        961        2,275        6,179   

Non-controlling interests

     1        (2     1        1   

 

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

          
         
 
Sept. 30,
2011
  
  
    
 
Dec. 31,
2010
  
  

EUR millions

     Notes                     
   

ASSETS

          

Intangible assets

     13         3,564         4,359   

Investments

     14         143,006         143,188   

Investments for account of policyholders

     15         139,599         146,237   

Derivatives

     16         14,483         6,251   

Investments in associates

        747         733   

Reinsurance assets

     17         8,497         5,580   

Deferred expenses and rebates

     18         11,204         11,948   

Other assets and receivables

        9,399         8,776   

Cash and cash equivalents

              7,322         5,231   

Total assets

        337,821         332,303   
   

EQUITY AND LIABILITIES

          

Shareholders’ equity

        19,443         17,210   

Convertible core capital securities

     20         -         1,500   

Other equity instruments

              4,716         4,704   

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

        24,159         23,414   

Non-controlling interests

              12         11   

Group equity

        24,171         23,425   
   

Trust pass-through securities

        154         143   

Subordinated borrowings

        18         -   

Insurance contracts

        102,765         100,506   

Insurance contracts for account of policyholders

        74,934         77,650   

Investment contracts

        20,904         23,237   

Investment contracts for account of policyholders

        66,816         69,527   

Derivatives

     16         12,112         5,971   

Borrowings

     21         9,811         8,518   

Other liabilities

              26,136         23,326   

Total liabilities

        313,650         308,878   

    

                          

Total equity and liabilities

              337,821         332,303   

 

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY  
EUR millions    Share
capital 1
     Retained
earnings
    Revaluation
reserves
    Other
reserves
    Convertible
core capital
securities
    Other equity
instruments
    Issued
capital and
reserves 2
   

Non-

controlling
interests

     Total  

Nine months ended September 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

     -         790        -        -        -        -        790        1         791   

Other comprehensive income:

                          

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

     -         -        1,848        -        -        -        1,848        -         1,848   

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

     -         -        (338     -        -        -        (338     -         (338

Changes in revaluation reserve real estate held for own use

     -         -        3        -        -        -        3        -         3   

Changes in cash flow hedging reserve

     -         -        907        -        -        -        907        -         907   

Movement in foreign currency translation and net foreign investment hedging reserves

     -         -        -        (141     -        -        (141     -         (141

Equity movements of associates

     -         -        -        (8     -        -        (8     -         (8

Aggregate tax effect of items recognized in other comprehensive income

     -         -        (793     3        -        -        (790     -         (790

Other

     -         4        -        -        -        -        4        -         4   

Total other comprehensive income

     -         4        1,627        (146     -        -        1,485        -         1,485   

Total comprehensive income for 2011

     -         794        1,627        (146     -        -        2,275        1         2,276   

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

     -         (132     -        -        -        -        (132     -         (132

Coupons and premium on convertible core capital securities

     -         (750     -        -        -        -        (750     -         (750

Share options and incentive plans

     -         -        -        -        -        12        12        -         12   

Other

     -         (14     -        -        -        -        (14     -         (14

At end of period

     9,097         9,260        2,585        (1,499     -        4,716        24,159        12         24,171   

Nine months ended September 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

     -         1,441        -        -        -        -        1,441        1         1,442   
       

Other comprehensive income:

                          

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

     -         -        6,001        -        -        -        6,001        -         6,001   

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

     -         -        (235     -        -        -        (235     -         (235

Changes in revaluation reserve real estate held for own use

     -         -        4        -        -        -        4        -         4   

Changes in cash flow hedging reserve

     -         -        253        -        -        -        253        -         253   

Movement in foreign currency translation and net foreign investment hedging reserves

     -         -        -        723        -        -        723        -         723   

Equity movements of associates

     -         -        -        10        -        -        10        -         10   

Disposal of group assets

     -         -        (22     -        -        -        (22     -         (22

Aggregate tax effect of items recognized in other comprehensive income

     -         -        (1,956     (29     -        -        (1,985     -         (1,985

Other

     -         (11     -        -        -        -        (11     -         (11

Total other comprehensive income

     -         (11     4,045        704        -        -        4,738        -         4,738   

Total comprehensive income / (loss) for 2010

     -         1,430        4,045        704        -        -        6,179        1         6,180   

Shares issued

     -         -        -        -        -        -        -        -         -   

Repayment convertible core capital securities

     -         -        -        -        (500     -        (500     -         (500

Preferred dividend

     -         (90     -        -        -        -        (90     -         (90

Coupons on perpetual securities

     -         (142     -        -        -        -        (142     -         (142

Coupons and premium on convertible core capital securities

     -         (63     -        -        -        -        (63     -         (63

Share options and incentive plans

     -         -        -        -        -        (6     (6     -         (6

At end of period

     8,184         9,130        2,336        (1,602     1,500        4,703        24,251        11         24,262   

1 For a breakdown of share capital please refer to note 18.

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

 

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CONDENSED CONSOLIDATED CASH FLOW STATEMENT

 

      

EUR millions

     Ytd 2011        Ytd 2010   
   

Cash flow from operating activities

     1,795        3,100   
   

Purchases and disposals of intangible assets

     (11     (14

Purchases and disposals of equipment and other assets

     (39     (76

Purchases, disposals and dividends of subsidiaries and associates

     620        (184

Cash flow from investing activities

     570        (274
   

Issuance and purchase of share capital

     913        -   

Dividends paid

     (59     (90

Issuances, repurchases and coupons of convertible core capital securities

     (2,250     (563

Issuances, repurchases and coupons of perpetuals

     (176     (190

Issuances and repayments on borrowings

     1,241        1,362   

Cash flow from financing activities

     (331     519   
   

Net increase / (decrease) in cash and cash equivalents

     2,034        3,345   

Net cash and cash equivalents at January 1

     5,174        4,013   

Effects of changes in exchange rate

     12        44   

Net cash and cash equivalents at end of period

     7,220        7,402   
       Sept. 30,        Sept. 30,   
       2011        2010   

Cash and cash equivalents

     7,322        7,778   

Bank overdrafts

     (102     (376

Net cash and cash equivalents

     7,220        7,402   

 

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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 third quarter ended, September 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 its 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 November 9, 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 nine 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 September 30, 2011.

AEGON has not early adopted any other standards, interpretations or amendments, which 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.

Assumptions changes

A change in long term economic assumptions related to lower interest rates in the United States had a negative impact on earnings of EUR 169 million reflecting DAC write-off and reserve strenghtening. AEGON has lowered its long term assumption for 10 year US Treasury yields by 50 bps to 4.75% (graded uniformly from current yields over the next five years) and lowered the 90 day rate to 0.2% for the next two years followed by a three year grade to 3%. In addition, AEGON has lowered its assumed return for separate account bond fund returns by 200 bps to 4% over the next five years, followed by a return of 6% thereafter. The bond fund return is a gross assumption from which asset management and policy fees are deducted to determine the policyholder return.

 

 

 

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Exchange rates

The following exchange rates are applied for the condensed consolidated interim financial statements: Income statement items: average rate 1 EUR = USD 1.4056 (2010: USD 1.3154); 1 EUR = GBP 0.8702 (2010: GBP 0.8572). Balance sheet items: closing rate 1 EUR = USD 1.3417 (2010: USD 1.3362); 1 EUR = GBP 0.8613 (2010: GBP 0.8608).

 

 

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3. Segment information

3.1 Income statement

Three months ended September 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 September 30, 2011

                     
       

Underlying earnings before tax geographically

    310        68        9        43        (72     3        361        (1     360   

Fair value items

    (275     25        (8     (16     (14     -        (288     -        (288

Realized gains / (losses) on investments

    40        59        3        -        -        -        102        -        102   

Impairment charges

    (85     (5     (22     (29     -        -        (141     1        (140

Impairment reversals

    9        -        -        -        -        -        9        -        9   

Other income / (charges)

    4        (61     5        (2     -        -        (54     -        (54

Run-off businesses

    (5     -        -        -        -        -        (5     -        (5

Income before tax

    (2     86        (13     (4     (86     3        (16     -        (16

Income tax (expense) / benefit

    72        (23     13        (9     23        -        76        -        76   

Net income

    70        63        -        (13     (63     3        60        -        60   

Inter-segment underlying earnings

    (28     (23     (18     58        11               
       

Revenues

                     

Life insurance gross premiums

    1,523        480        1,474        285        -        -        3,762        (87     3,675   

Accident and health insurance

    442        37        -        15        -        -        494        -        494   

General insurance

    -        99        -        38        -        -        137        -        137   

Total gross premiums

    1,965        616        1,474        338        -        -        4,393        (87     4,306   

Investment income

    878        526        458        64        68        (66     1,928        (14     1,914   

Fee and commission income

    (76     77        35        111        -        (51     96        -        96   

Other revenues

    -        -        -        1        -        -        1        -        1   

Total revenues

    2,767        1,219        1,967        514        68        (117     6,418        (101     6,317   

Inter-segment revenues

    1        -        1        51        64                                   

Three months ended September 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 September 30, 2010

                     
       

Underlying earnings before tax geographically

    355        97        28        55        (82     (1     452        (3     449   

Fair value items

    87        184        2        (9     (60     -        204        -        204   

Realized gains / (losses) on investments

    92        35        -        2        -        -        129        -        129   

Impairment charges

    (102     (4     (3     -        -        -        (109     -        (109

Impairment reversals

    17        -        -        -        -        -        17        -        17   

Other income / (charges)

    (1     -        15        (5     (23     -        (14     -        (14

Run-off businesses

    (7     -        -        -        -        -        (7     -        (7

Income before tax

    441        312        42        43        (165     (1     672        (3     669   

Income tax (expense) / benefit

    39        (75     11        (13     23        -        (15     3        (12

Net income

    480        237        53        30        (142     (1     657        -        657   

Inter-segment underlying earnings

    (38     (3     (17     51        7               
       

Revenues

                     

Life insurance gross premiums

    1,850        400        1,796        294        -        -        4,340        (99     4,241   

Accident and health insurance

    467        34        -        14        -        -        515        -        515   

General insurance

    -        98        -        39        -        -        137        -        137   

Total gross premiums

    2,317        532        1,796        347        -        -        4,992        (99     4,893   

Investment income

    1,072        526        713        60        62        (62     2,371        (19     2,352   

Fee and commission income

    236        83        42        117        -        (51     427        -        427   

Other revenues

    -        -        -        1        1        -        2        -        2   

Total revenues

    3,625        1,141        2,551        525        63        (113     7,792        (118     7,674   

Inter-segment revenues

    -        1        -        52        60                                   

 

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Nine months ended September 30, 2011

EUR millions    Americas     The
Netherlands
    United
Kingdom
   

New

Markets

   

Holding

and

other

activities

    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Nine months ended September 30, 2011

                      
     

Underlying earnings before tax geographically

     982        223        31        159        (222     3        1,176        (9     1,167   

Fair value items

     (339     (33     (9     (19     4        -        (396     -        (396

Realized gains / (losses) on investments

     116        236        43        2        -        -        397        -        397   

Impairment charges

     (237     (11     (62     (35     -        -        (345     2        (343

Impairment reversals

     50        1        -        -        -        -        51        -        51   

Other income / (charges)

     1        (80     -        6        -        -        (73     -        (73

Run-off businesses

     27        -        -        -        -        -        27        -        27   

Income before tax

     600        336        3        113        (218     3        837        (7     830   

Income tax (expense) / benefit

     (30     (65     33        (45     61        -        (46     7        (39

Net income

     570        271        36        68        (157     3        791        -        791   

Inter-segment underlying earnings

     (93     (43     (52     169        19               
     

Revenues

                      

Life insurance gross premiums

     4,589        2,834        4,984        953        -        -        13,360        (312     13,048   

Accident and health insurance

     1,317        186        -        60        -        -        1,563        (1     1,562   

General insurance

     -        358        -        116        -        -        474        -        474   

Total gross premiums

     5,906        3,378        4,984        1,129        -        -        15,397        (313     15,084   

Investment income

     2,728        1,595        1,666        183        200        (195     6,177        (53     6,124   

Fee and commission income

     443        251        108        344        -        (162     984        -        984   

Other revenues

     1        -        -        2        2        -        5        -        5   

Total revenues

     9,078        5,224        6,758        1,658        202        (357     22,563        (366     22,197   

Inter-segment revenues

     4        1        2        162        188                                   

Nine months ended September 30, 2010

EUR millions    Americas     The
Netherlands
    United
Kingdom
   

New

Markets

   

Holding

and

other

activities

    Eliminations     Non-IFRS
Total
    Associates
eliminations
    Total
IFRS based
 

Nine months ended September 30, 2010

                      
     

Underlying earnings before tax geographically

     1,090        298        78        141        (226     -        1,381        (6     1,375   

Fair value items

     (32     343        (9     (10     (101     -        191        -        191   

Realized gains / (losses) on investments

     133        154        6        13        97        -        403        (2     401   

Impairment charges

     (349     (16     (15     (11     -        -        (391     -        (391

Impairment reversals

     64        5        3        -        -        -        72        -        72   

Other income / (charges)

     (106     33        61        (16     (23     -        (51     -        (51

Run-off businesses

     (35     -        -        -        -        -        (35     -        (35

Income before tax

     765        817        124        117        (253     -        1,570        (8     1,562   

Income tax (expense) / benefit

     71        (187     (21     (35     44        -        (128     8        (120

Net income

     836        630        103        82        (209     -        1,442        -        1,442   

Inter-segment underlying earnings

     (114     (31     (49     178        16               
     

Revenues

                      

Life insurance gross premiums

     5,170        2,669        5,751        939        -        -        14,529        (302     14,227   

Accident and health insurance

     1,385        174        -        54        -        -        1,613        (1     1,612   

General insurance

     -        357        -        124        -        -        481        -        481   

Total gross premiums

     6,555        3,200        5,751        1,117        -        -        16,623        (303     16,320   

Investment income

     3,086        1,631        1,869        176        222        (200     6,784        (54     6,730   

Fee and commission income

     720        259        121        344        -        (176     1,268        -        1,268   

Other revenues

     1        -        -        2        1        -        4        (1     3   

Total revenues

     10,362        5,090        7,741        1,639        223        (376     24,679        (358     24,321   

Inter-segment revenues

     -        1        2        177        196                                   

 

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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. Changes to these long-term return assumptions are also included in the fair value items.

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.

 

 

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Realized gains or losses on investments

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

Impairment charges / reversals

Includes impairments and 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 respectively.

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 23.

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 September 30, 2010

               
         

Underlying earnings before tax geographically

  470     (17   (4)   449

Fair value items

  204           204

Realized gains / (losses) on investments

  129           129

Impairment charges

  (109)           (109)

Impairment reversals

  17           17

Other income / (charges)

  (14)           (14)

Run-off businesses

  (28)     17      4   (7)

Income before tax

  669           669

Income tax (expense) / benefit

  (12)               (12)

Net income

  657               657

 

     Reported   Reclassification   Revised

EUR millions

        BOLI/COLI      Reinsurance    

Nine months ended September 30, 2010

               
         

Underlying earnings before tax geographically

  1,477     (42   (60)   1,375

Fair value items

  191           191

Realized gains / (losses) on investments

  401           401

Impairment charges

  (391)           (391)

Impairment reversals

  72           72

Other income / (charges)

  (51)           (51)

Run-off businesses

  (137)     42      60   (35)

Income before tax

  1,562           1,562

Income tax (expense) / benefit

  (120)               (120)

Net income

  1,442               1,442

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 September 30, 2011

 

                                        amounts in million EUR (unless otherwise stated)  

 

 

 

 

Americas

USD

 

  

  

  

 

 
 
 

 

United
Kingdom
GBP

 

  
  
  

  

 

At September 30, 2011

  

 

 

 

Americas

 

  

  

 

 
 

 

The
Netherlands

 

  
  

  

 

 
 

 

United
Kingdom

 

  
  

  

 

 
 

 

New
Markets

 

  
  

  

 

 
 
 

 

Holding &
other
activities

 

  
  
  

  

 

 

 

Eliminations

 

  

 

 

 

 

 

Total

EUR

 

  

  

          Investments                      
  1,486         41       Shares      1,108         578         48         69         10         (2     1,811   
  88,366         8,119       Debt securities      65,861         16,921         9,427         2,589         -         -        94,798   
  13,822         7       Loans      10,302         18,786         8         640         -         -        29,736   
  17,971         -       Other financial assets      13,394         41         -         56         405         -        13,896   
  1,000         -       Investments in real estate      745         2,020         -         -         -         -        2,765   
  122,645         8,167       Investments general account      91,410         38,346         9,483         3,354         415         (2     143,006   
  -         21,660       Shares      -         7,019         25,148         3,306         -         (4     35,469   
  -         13,055       Debt securities      -         15,102         15,157         266         -         -        30,525   
  76,217         6,615      

Separate accounts and investment funds

     56,806         -         7,680         1,054         -         -        65,540   
  -         4,143       Other financial assets      -         625         4,810         1,503         -         -        6,938   
  -         971       Investments in real estate      -         -         1,127         -         -         -        1,127   
  76,217         46,444      

Investments for account of policyholders

     56,806         22,746         53,922         6,129         -         (4     139,599   
     
  198,862         54,611       Investments on balance sheet      148,216         61,092         63,405         9,483         415         (6     282,605   
  116,500         -      

Off balance sheet investments third parties

     86,830         -         -         34,819         -         -        121,649   
  315,362         54,611      

Total revenue generating investments

     235,046         61,092         63,405         44,302         415         (6     404,254   
          Investments                      
  102,054         8,114       Available-for-sale      76,063         17,365         9,421         2,437         24         -        105,310   
  13,822         7       Loans      10,302         18,786         8         640         -         -        29,736   
  -         -       Held-to-maturity      -         -         -         155         -         -        155   
  81,986         45,519      

Financial assets at fair value through profit or loss

     61,106         22,921         52,849         6,251         391         (6     143,512   
  1,000         971       Investments in real estate      745         2,020         1,127         -         -         -        3,892   
  198,862         54,611       Total investments on balance sheet      148,216         61,092         63,405         9,483         415         (6     282,605   
  101         8       Investments in associates      75         55         9         603         5         -        747   
  32,468         6,736       Other assets      24,200         18,072         7,821         1,956         33,804         (31,384     54,469   
  231,431         61,355       Consolidated total assets      172,491         79,219         71,235         12,042         34,224         (31,390     337,821   

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

     Q3 2011         Q3 2010         Ytd 2011         Ytd 2010   
     

Gross

               

Life

     3,675         4,241         13,048         14,227   

Non-Life

     631         652         2,036         2,093   

Total

     4,306         4,893         15,084         16,320   
     

Reinsurance

               

Life

     1,409         394         2,151         1,092   

Non-Life

     104         93         272         262   

Total

     1,513         487         2,423         1,354   

 

Reinsurance premiums increased mainly as a result of the increased external reinsurance premium following the

divestment of the life reinsurance business, Transamerica Reinsurance, to SCOR. Refer to note 23 for more details.

 

 

5. Investment income

 

     
                 

EUR millions

     Q3 2011         Q3 2010         Ytd 2011         Ytd 2010   
     

Interest income

     1,816         2,166         5,438         6,100   

Dividend income

     58         143         559         500   

Rental income

     40         43         127         130   

Total investment income

     1,914         2,352         6,124         6,730   
     

Investment income related to general account

     1,426         1,616         4,329         4,757   

Investment income for account of policyholders

     488         736         1,795         1,973   

Total

     1,914         2,352         6,124         6,730   

 

6. Fee and commission income

The decrease in Fee and commission income originates from a recapture fee paid as part of the divestment of the life reinsurance business of Transamerica Reinsurance, to SCOR. Refer to note 23 for more details on this transaction.

7. Income from reinsurance ceded

The increase in Income from reinsurance ceded is mainly the result of the increased income from external reinsurance following the divestment of the life reinsurance business, Transamerica Reinsurance, to SCOR. Refer to note 23 for more details on this transaction.

 

 

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8. Results from financial transactions

 

     
              

EUR millions

     Q3 2011        Q3 2010        Ytd 2011        Ytd 2010   
     

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

     (131     129        26        149   

Realized gains and losses on financial investments

     200        163        581        498   

Gains and (losses) on investments in real estate

     (10     (4     (36     (51

Net fair value change of derivatives

     1,507        1,226        906        2,583   

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

     (9,672     8,680        (7,534     8,182   

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

     2        16        13        88   

Net foreign currency gains and (losses)

     (2     (21     (11     63   

Net fair value change on borrowings and other financial liabilities

     1        (49     (9     (58

Realized gains and (losses) on repurchased debt

     -        -        4        -   

Total

     (8,105     10,140        (6,060     11,454   

 

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 10).

 

 

9. Other income

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

10. Benefits and expenses

 
     
              

EUR millions

     Q3 2011        Q3 2010        Ytd 2011        Ytd 2010   
     

Claims and Benefits

     (1,977     16,607        14,036        32,525   

Employee expenses

     513        546        1,567        1,613   

Administration expenses

     363        274        960        827   

Deferred expenses

     (347     (415     (1,105     (1,219

Amortization charges

     395        381        1,107        1,087   

Total

     (1,053 )      17,393        16,565        34,833   

 

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 decreased significantly 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 8).

Administration expenses includes total restructuring charges of EUR 88 milllion of which EUR 60 million is related to a restructuring of AEGON The Netherlands announced in the third quarter of 2011.

 

 

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11. Impairment charges / (reversals)

 

     
              
EUR millions    Q3 2011     Q3 2010     Ytd 2011     Ytd 2010  

Impairment charges / (reversals) comprise:

            

Impairment charges on financial assets, excluding receivables 1

     145        128        354        455   

Impairment reversals on financial assets, excluding receivables 1

     (9     (17     (51     (72

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

     1        (3     4        1   

Total

     137        108        307        384   
     

Impairment charges on financial assets, excluding receivables, from:

            

Shares

     5        -        8        4   

Debt securities and money market instruments

     99        100        284        376   

Loans

     41        23        56        70   

Other

     -        5        6        5   

Total

     145        128        354        455   
     

Impairment reversals on financial assets, excluding receivables, from:

            

Debt securities and money market instruments

     (8     (15     (46     (67

Loans

     (1     (2     (5     (5

Total

     (9     (17     (51     (72

1 Impairment charges / (reversals) on financial assets, excluding receivables, are excluded from underlying earnings before tax

for segment reporting (refer to note 3).

12. Other charges

 

Year to date other charges include an annual charge related to a bank tax charged by the Hungarian government of EUR 20 million.

This is partly offset by a reversal of previously incurred charges, resulting in an income in the third quarter of EUR 5 million.

 

 

13. Intangible assets

 

     
         
EUR millions    Sept. 30, 2011      Dec. 31, 2010  
   

Goodwill

     722         652   

VOBA

     2,389         3,221   

Future servicing rights

     409         444   

Software

     32         32   

Other

     12         10   

Total intangible assets

     3,564         4,359   

 

The increase in goodwill is attributable to the acquisition of Caixa Sabadell offset slightly by foreign currency effects. The decrease in value of business acquired (VOBA) is mainly

attributable to regular amortization and the impact of shadow accounting offset slightly by foreign currency effects.

 

 

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14. Investments

 

Sept. 30, 2011 Sept. 30, 2011 Sept. 30, 2011 Sept. 30, 2011 Sept. 30, 2011
                                        
                                        

EUR millions

                        Sept. 30, 2011                    Dec. 31, 2010   
   

Available-for-sale (AFS)

            105,310              107,250   

Loans

            29,736              27,703   

Held-to-maturity (HTM)

            155              139   

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

                        5,040                    5,312   

Financial assets, excluding derivatives

            140,241              140,404   

Investments in real estate

                        2,765                    2,784   

Total investments for general account

                        143,006                    143,188   
   
Total financial assets, excluding derivatives                                      
   
       AFS           FVTPL        HTM           Loans         Total   
   

Shares

     932           879        -           -         1,811   

Debt securities

     93,127           1,516        155           -         94,798   

Money market and other short term investments

     10,383           751        -           -         11,134   

Mortgages

     -           -        -           25,849         25,849   

Private loans

     -           -        -           845         845   

Deposits with financial institutions

     -           -        -           760         760   

Policy loans

     -           -        -           2,113         2,113   

Receivables out of share lease agreements

     -           -        -           20         20   

Other

     868           1,894        -           149         2,911   

September 30, 2011

     105,310           5,040        155           29,736         140,241   
   
       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   

December 31, 2010

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

 

Government bond investments

Included in the available for sale debt securities and money market investments are EUR 1,181 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 on the next page provides the amortized cost and fair value of these exposures.

 

 

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EXPOSURE TO CENTRAL GOVERNMENTS OF EUROPEAN PERIPHERAL COUNTRIES  
             

EUR millions

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

Portugal

     14         9         33         32   

Italy

     74         65         114         112   

Ireland

     30         26         37         32   

Greece

     3         2         58         45   

Spain

     1,060         985         1,008         904   

Total

     1,181         1,087         1,250         1,125   

15. Investments for account of policyholders

 

   

    

  

EUR millions

     Sept. 30, 2011         Dec. 31, 2010   
   

Shares

     35,469         40,810   

Debt securities

     30,525         30,426   

Money market and short-term investments

     2,389         2,597   

Deposits with financial institutions

     3,893         2,630   

Separate accounts and unconsolidated investment funds

     65,540         68,089   

Other

     656         551   

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

     138,472         145,103   

Investment in real estate

     1,127         1,134   

Total investments for account of policyholders

     139,599         146,237   

 

16. Derivatives

There have been no material changes in the composition of the derivative portfolio. The movement in derivative balances mainly result from changes in market conditions.

17. Reinsurance assets

The increase in Reinsurance assets is mainly the result of the increased activity in external reinsurance following the divestment of the life reinsurance business, Transamerica Reinsurance, to SCOR. Refer to note 23 for more details on this transaction.

 

 

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18. Deferred expenses and rebates

 

     
           

EUR millions

     Sept. 30, 2011         Dec. 31, 2010   
   

DPAC for insurance contracts and investment contracts with discretionary participation features

     10,601         11,340   

Deferred transaction costs for investment management services

     394         380   

Unamortized interest rate rebates

     209         228   

Total deferred expenses and rebates

     11,204         11,948   

 

Deferred policy acquisition costs (DPAC) balances decreased, reflecting newly deferred expenses more than offset by

changes in foreign currency exchange rates, disposal of business, the impact of shadow accounting and amortization.

 

 

19. Share capital

 

     
           

EUR millions

     Sept. 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 issued 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 20.

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 on March 1, 2011.

 

 

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20. 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 convertible core capital securities issued to the Dutch State at the height of the financial crisis in 2008.

 

 

21. Borrowings

 

    

 

             
EUR millions    Sept. 30, 2011      Dec. 31, 2010  

 

Debentures and other loans

  

 

 

 

9,077

 

  

  

 

 

 

7,743

 

  

Commercial paper

     614         701   

Short term deposits

     18         17   

Bank overdrafts

     102         57   

Total borrowings

     9,811         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 offset by redemptions and negative impact of foreign currency exchange rates.

Included in Debentures and other loans is EUR 987 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.

 

 

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22. Commitments and contingencies

On July 26, 2011, the Amsterdam Court of Appeal, an intermediate appeals court, ruled with respect to a specific AEGON unit-linked product, the ‘Koersplan’-product.

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 as well as adjusting the amounts charged to Koersplan-customers.

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. AEGON believes that, based on the arguments presented, the Court’s ruling was wrongly decided and, in October 2011, appealed the decision taken by the Amsterdam Court of Appeal to the Supreme Court in the Netherlands. However, if the Supreme Court were to confirm the decision taken by the Amsterdam Court of Appeal and the principles underlying such decision were applied to AEGON’s entire KoersPlan-portfolio (instead of solely to the holders of KoersPlan-products who are plaintiffs in the pending litigation), AEGON currently estimates the financial effect to be approximately EUR 150 million after tax.

The actual amount may vary based on uncertainties related to the application of any decision to individual customers, equity market fluctuations as well as interest rates movements. AEGON expects the Supreme Court to issue a decision during the second half of 2012.

Except for the before mentioned, there have been no material changes in contingent assets and liabilities as reported in the 2010 consolidated financial statements of AEGON.

 

 

23. Acquisitions / Divestments

 

Acquisitions

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.

Divestments

On August 16, 2011, AEGON announced to sell its UK-based Guardian life and pension business for a total cash consideration of GBP 275 million to Cinven, a European private equity group. Guardian, which manages over 300,000 life insurance policies in the United Kingdom, has been closed to acquiring new business since 2001.

The transaction is expected to close in the fourth quarter of 2011 and is subject to regulatory approval. The book value of the Guardian business is expected to be an approximation of the sales price at the transaction date.

 

Underlying earnings before tax for Guardian life and pension totaled GBP 23 million in 2010. Gross written premiums for 2010 was GBP 129 million and net income for 2010 was GBP 26 million for the Guardian life and pension business.

On August 9, 2011, AEGON completed the previously announced divestment of its life reinsurance business, Transamerica Reinsurance, 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.

 

 

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The divestment of Transamerica Reinsurance 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 Transamerica Reinsurance.

The business residing in Transamerica International Reinsurance, Bermuda (TIRe) has been retroceded to SCOR. TIRe continues to provide reserve credit security for redundant reserves to AEGON USA’s ceding companies. AEGON maintains 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 is accounted for primarily as a reinsurance transaction between AEGON and SCOR. Certain fixed assets and certain investment assets are transferred with any related gain (loss) being recognized. As a result, the divestment has no significant impact on shareholders’ equity. Earnings on the business retained as well as amortization of the prepaid cost of reinsurance assets are reflected in the run-off businesses line in AEGON’s segment reporting.

The reinsurance business being retained by AEGON, which comprises primarily 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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Disclaimers

 

 

 

Cautionary note regarding non-GAAP measures

This document includes non-GAAP financial measure: underlying earnings before tax. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 “Segment information” of this report. AEGON believes that this non-GAAP measure, together with the IFRS information, provides a meaningful measure for the investment community to evaluate AEGON’s business relative to the businesses of our peers.

Local currencies and constant currency exchange rates

This document contains certain information about our results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of our primary financial statements.

Forward-looking statements

The statements contained in this 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;

  ¡    

changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general

  ¡    

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 (0) 70 344 32 10

www.aegon.com

Publication date figures in 2012

 

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
 

 

Group Corporate Communications & Investor

Relations

Media relations

 

Telephone    + 31 (0) 70 344 89 56   
E-mail    gcc-ir@aegon.com   

Investor relations

 

Telephone    + 31 (0) 70 344 83 05   
or    877 548 96 68 - toll free, USA only   
E-mail    ir@aegon.com   

AEGON’s Q3 2011 press release and Financial Supplement are available on www.aegon.com.

 

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   Local knowledge. Global power.    Unaudited


Table of Contents

 

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 asset management company, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 26,000 people and have some 40 million customers across the globe.

AEGON uses its strength and expertise to create added value for customers, shareholders, employees 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.

Local knowledge. Global power.