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 2012

 

 

AEGON N.V.

 

 

AEGONplein 50

2591 TV THE HAGUE

The Netherlands

 

 

 

 

 


Table of Contents

AEGON’s condensed consolidated interim financial statements Q2 2012, is included as an exhibit 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 8, 2012     By  

/s/ E. Lagendijk

      E. Lagendijk
      Executive Vice President and General Counsel


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LOGO

CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

Q2 2012


Table of Contents

TABLE OF CONTENTS

 

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 2012     Q2 2011     YTD 2012     YTD 2011  

Premium income

     4         4,597        4,501        10,448        10,778   

Investment income

     5         2,200        2,099        4,276        4,210   

Fee and commission income

        469        428        934        888   

Other revenues

        3        2        5        4   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

        7,269        7,030        15,663        15,880   

Income from reinsurance ceded

     6         1,080        477        2,033        907   

Results from financial transactions

     7         (1,944     932        5,621        2,045   

Other income

     8         2        (3     2        34   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total income

        6,407        8,436        23,319        18,866   

Benefits and expenses

     9         5,898        7,759        22,062        17,618   

Impairment charges / (reversals)

     10         52        106        98        170   

Interest charges and related fees

        126        117        258        228   

Other charges

     11         —          (7     18        21   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total charges

        6,076        7,975        22,436        18,037   

Share in net result of associates

        7        12        18        17   
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

        338        473        901        846   

Income tax (expense) / benefit

        (84     (69     (126     (115
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income

        254        404        775        731   
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

           

Equity holders of AEGON N.V.

        254        403        775        730   

Non-controlling interests

        —          1        —          1   
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings and dividend per share (EUR per share)

           

Basic earnings per share 1

        0.08        (0.04     0.33        (0.09

Diluted earnings per share 1

        0.08        (0.04     0.33        (0.09

Dividend per common share 2

        0.10        —          0.10        —     
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share calculation

           

Net income

        254        403        775        730   

Preferred dividend

        (59     (59     (59     (59

Coupons on other equity instruments

        (51     (43     (98     (87

Coupons and premium on convertible core capital securities

        —          (375     —          (750
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings attributable to common shareholders

        144        (74     618        (166

Weighted average number of common shares outstanding

        1,886        1,880        1,883        1,823   

 

1 

After deduction of preferred dividend, coupons on other equity instruments and coupons and premium on core capital securities.

2 

Dividend per common share of EUR 0.10 reflects the 2012 interim dividend. The interim dividend will be paid in cash or stock at the election of the shareholder. The interim dividend will be payable as of September 14, 2012.

 

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

EUR millions

   Q2 2012     Q2 2011     YTD 2012     YTD 2011  

Net income

     254        404        775        731   

Other comprehensive income:

        

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

     1,039        565        1,492        365   

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

     (150     (158     (184     (219

Changes in revaluation reserve real estate held for own use

     3        1        3        —     

Changes in cash flow hedging reserve

     443        84        113        (3

Movement in foreign currency translation and net foreign investment hedging reserve

     769        (295     464        (1,183

Equity movements of associates

     2        1        19        (7

Aggregate tax effect of items recognized in other comprehensive income

     (429     (156     (416     (56

Other

     (7     (7     (5     (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period

     1,670        35        1,486        (1,109

Total comprehensive income

     1,924        439        2,261        (378
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to:

        

Equity holders of AEGON N.V.

     1,925        439        2,262        (378

Non-controlling interests

     (1     —          (1     —     

 

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

EUR millions

   Notes      June 30,
2012
     Dec. 31,
2011
 

ASSETS

        

Intangible assets

     12         3,213         3,285   

Investments

     13         147,065         144,079   

Investments for account of policyholders

     14         151,633         142,529   

Derivatives

     15         20,072         15,504   

Investments in associates

        791         742   

Reinsurance assets

     16         12,661         11,517   

Deferred expenses and rebates

     17         11,879         11,633   

Other assets and receivables

        7,931         8,184   

Cash and cash equivalents

        8,737         8,104   
     

 

 

    

 

 

 

Total assets

        363,982         345,577   

EQUITY AND LIABILITIES

        

Shareholders’ equity

        23,018         21,000   

Other equity instruments

     19         5,002         4,720   
     

 

 

    

 

 

 

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

        28,020         25,720   

Non-controlling interests

        13         14   
     

 

 

    

 

 

 

Group equity

        28,033         25,734   

Trust pass-through securities

        163         159   

Subordinated borrowings

     20         61         18   

Insurance contracts

        108,008         105,175   

Insurance contracts for account of policyholders

        78,037         73,425   

Investment contracts

        19,790         20,847   

Investment contracts for account of policyholders

        75,668         71,433   

Derivatives

     15         16,182         12,728   

Borrowings

     21         11,065         10,141   

Other liabilities

        26,975         25,917   
     

 

 

    

 

 

 

Total liabilities

        335,949         319,843   
     

 

 

    

 

 

 

Total equity and liabilities

        363,982         345,577   
     

 

 

    

 

 

 

 

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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  

Six months ended June 30, 2012

                    

At beginning of year

     9,097         9,403        3,464        (964     —          4,720         25,720        14        25,734   

Net income recognized in the income statement

     —           775        —          —          —          —           775        —          775   

Other comprehensive income:

                    

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

     —           —          1,492        —          —          —           1,492        —          1,492   

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

     —           —          (184     —          —          —           (184     —          (184

Changes in revaluation reserve real estate held for own use

     —           —          3        —          —          —           3        —          3   

Changes in cash flow hedging reserve

     —           —          113        —          —          —           113        —          113   

Movement in foreign currency translation and net foreign investment hedging reserves

     —           —          —          464        —          —           464        —          464   

Equity movements of associates

     —           —          —          19        —          —           19        —          19   

Aggregate tax effect of items recognized in other comprehensive income

     —           —          (398     (18     —          —           (416     —          (416

Transfer from / to other headings

     —           (20     20        —          —          —           —          —          —     

Other

     —           (4     —          —          —          —           (4     (1     (5
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     —           (24     1,046        465        —          —           1,487        (1     1,486   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income/ (loss) for 2012

     —           751        1,046        465        —          —           2,262        (1     2,261   

Treasury shares

     —           2        —          —          —          —           2        —          2   

Dividends paid on common shares

     —           (79     —          —          —          —           (79     —          (79

Preferred dividend

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

Issuance of non-cumulative subordinated loans

     —           —          —          —          —          271         271        —          271   

Coupons on non-cumulative subordinated notes

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

Cost of issuance of non-cumulative subordinated notes (net of tax)

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

Coupons on perpetual securities

     —           (88     —          —          —          —           (88     —          (88

Share options and incentive plans

     —           —          —          —          —          11         11        —          11   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

At end of period

     9,097         9,910        4,510        (499     —          5,002         28,020        13        28,033   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Six months ended June 30, 2011

                    

At beginning of year

     8,184         9,529        958        (1,343     1,500        4,704         23,532        11        23,543   

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 revaluation reserve real estate held for own use

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

Movement in foreign currency translation and net foreign investment hedging reserves

     —           —          —          (1,183     —          —           (1,183     —          (1,183

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        (1,134     —          —           (1,108     (1     (1,109
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income / (loss) for 2011

     —           725        31        (1,134     —          —           (378     —          (378

Shares issued

     913         —          —          —          —          —           913        —          913   

Cost of issuance of shares (net of tax)

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

Preferred dividend

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

Coupons on perpetual securities

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

Repurchase of convertible core capital securities

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

Coupons and premium on convertible core capital securities

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

Share options and incentive plans

     —           —          —          —          —          7         7        —          7   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

At end of period

     9,097         9,344        989        (2,477     —          4,711         21,664        11        21,675   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

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 2012     YTD 2011  

Cash flow from operating activities

     (228     (345

Purchases and disposals of intangible assets

     (15     (7

Purchases and disposals of equipment and other assets

     (28     (25

Purchases, disposals and dividends of subsidiaries and associates

     (5     (7
  

 

 

   

 

 

 

Cash flow from investing activities

     (48     (39

Issuance of share capital

     —          913   

Dividends paid

     (138     (59

Issuances, repurchases and coupons of convertible core capital securities

     —          (2,250

Issuances, repurchases and coupons of perpetuals

     (117     (117

Issuances, repurchases and coupons of non cumulative subordinated notes

     257        —     

Issuances and repayments of borrowings

     1,050        1,149   
  

 

 

   

 

 

 

Cash flow from financing activities

     1,052        (364

Net increase / (decrease) in cash and cash equivalents

     776        (748
  

 

 

   

 

 

 

Net cash and cash equivalents at January 1

     7,826        5,174   

Effects of changes in foreign exchange rates

     52        (46
  

 

 

   

 

 

 

Net cash and cash equivalents at end of period

     8,654        4,380   
  

 

 

   

 

 

 
      June 30,
2012
    June 30,
2011
 

Cash and cash equivalents

     8,737        4,450   

Bank overdrafts

     (83     (70
  

 

 

   

 

 

 

Net cash and cash equivalents

     8,654        4,380   
  

 

 

   

 

 

 

 

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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, 2012, 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). They do not include all of the information required for a full set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and should therefore be read together with the 2011 consolidated financial statements of AEGON N.V. as included in AEGON’s Annual Report for 2011. AEGON’s Annual Report for 2011 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 as at, and for the second quarter ended, June 30, 2012, were approved by the Executive Board on August 8, 2012.

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 2011 consolidated financial statements, which were prepared in accordance with IFRS as issued by the International Accounting Standards Board as adopted by the European Union, except for the following accounting policy for compound instruments:

 

   

Non-cumulative subordinated notes, issued on February 7, 2012, are identified as a compound instrument due to the nature of this financial instrument. For these non-cumulative subordinated notes, issued in US dollars, AEGON has an unconditional right to avoid delivering cash or another financial asset to settle the coupon payments. The redemption of the principal is however not at the discretion of AEGON and therefore AEGON has a contractual obligation to settle the redemption in cash or another financial asset or through the exchange of financial assets and liabilities at potentially unfavorable conditions for AEGON. Compound instruments are separated into liability components and equity components. The liability component for the non-cumulative subordinated notes is equal to the present value of the redemption amount and subsequently carried at amortized cost using the effective interest rate method. The liability component is derecognized when the Group’s obligation under the contract expires, is discharged or is cancelled. The equity component is assigned the residual amount after deducting the liability component from the fair value of the instrument as a whole. The equity component in US dollars is translated into euro using the historical transaction exchange rates.

Incremental external costs that are directly attributable to the issuing or buying back of the non-cumulative subordinated notes are recognized in either equity or income statement proportionately to the equity component and liability component, net of tax.

Coupon payments and other distributions to holders of the non-cumulative subordinated notes are recognized directly in equity, net of tax. A liability for non-cumulative dividends payable is not recognized until the coupon has been declared and approved.

 

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The following standards, interpretations, amendments to standards and interpretations became effective in 2012:

 

   

Amendment to IFRS 1 First time adoption – Severe Hyperinflation and Removal of Fixed Dates for First Time Adopters;

 

   

Amendment to IFRS 7 Disclosures – Transfers of Financial Assets;

 

   

IAS 12 Income Taxes – Recovery of Tax Assets.

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, 2012.

Taxes on income for the first six months of 2012 are accrued using the tax rate that would be applicable to expected total annual earnings.

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

Assets and liabilities are translated at the closing rates on the balance sheet date. Income, expenses and capital transactions (such as dividends) are translated at average exchange rates or at the prevailing rates on the transaction date, if more appropriate. The following exchange rates are applied for the condensed consolidated interim financial statements:

Closing exchange rates

 

                   USD      GBP  

June 30, 2012

     1         EUR         1.2691         0.8091   

December 31, 2011

     1         EUR         1.2982         0.8353   

Weighted average exchange rates

 

                   USD      GBP  

First six months 2012

     1         EUR         1.2962         0.8217   

First six months 2011

     1         EUR         1.4025         0.8670   

 

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3. Segment information

3.1 Income statement

 

EUR millions    Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations    

Segment

Total

    Associates
eliminations
   

Consolidated

 

Three months ended June 30, 2012

                  

Underlying earnings before tax geographically

     339        71        25        64        (56     —          443        (1     442   

Fair value items

     (79     153        (1     (12     40        —          101        —          101   

Realized gains / (losses) on investments

     54        (6     34        3        —          —          85        —          85   

Impairment charges

     (57     (3     —          —          —          2        (58     —          (58

Impairment reversals

     18        —          —          —          —          (2     16        —          16   

Other income / (charges)

     (1     (266     13        —          —          —          (254     —          (254

Run-off businesses

     6        —          —          —          —          —          6        —          6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     280        (51     71        55        (16     —          339        (1     338   

Income tax (expense) / benefit

     (65     23        (22     (18     (3     —          (85     1        (84
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     215        (28     49        37        (19     —          254        —          254   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (47     (21     (16     71        13           

Revenues

                  

Life insurance gross premiums

     1,615        410        1,572        348        —          (16     3,929        (41     3,888   

Accident and health insurance

     456        43        —          42        1        (1     541        —          541   

General insurance

     —          134        —          34        —          —          168        —          168   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     2,071        587        1,572        424        1        (17     4,638        (41     4,597   

Investment income

     930        558        627        89        100        (101     2,203        (3     2,200   

Fee and commission income

     294        80        35        129        —          (69     469        —          469   

Other revenues

     1        —          —          —          2        —          3        —          3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     3,296        1,225        2,234        642        103        (187     7,313        (44     7,269   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     9        —          —          78        100           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         
EUR millions    Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Segment
Total
    Associates
eliminations
   

Consolidated

 

Three months ended June 30, 2011

                  

Underlying earnings before tax geographically

     314        74        10        70        (68     1        401        (4     397   

Fair value items

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

Realized gains / (losses) on investments

     50        142        11        1        —          —          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

     266        204        (18     61        (38     1        476        (3     473   

Income tax (expense) / benefit

     (36     (35     —          (15     14        —          (72     3        (69
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     230        169        (18     46        (24     1        404        —          404   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (39     (10     (17     61        5           

Revenues

                  

Life insurance gross premiums

     1,455        483        1,648        347        —          (14     3,919        (69     3,850   

Accident and health insurance

     410        40        —          38        —          —          488        (1     487   

General insurance

     —          127        —          37        —          —          164        —          164   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     1,865        650        1,648        422        —          (14     4,571        (70     4,501   

Investment income

     879        549        609        80        83        (82     2,118        (19     2,099   

Fee and commission income

     253        79        36        118        —          (58     428        —          428   

Other revenues

     1        —          —          —          1        —          2        —          2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     2,998        1,278        2,293        620        84        (154     7,119        (89     7,030   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     8        —          1        65        80           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

As of the first quarter of 2012, AEGON has revised its financial reporting to reflect changes in its organization. Businesses in Asia, which were previously managed by AEGON Americas, are included in the Asia line of business within the “New Markets” segment. For the full year 2011, the underlying earnings before tax generated by the Asian operations totaling EUR 37 million were previously reported under the “Americas” segment.

 

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Table of Contents
EUR millions    Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Segment
Total
    Associates
eliminations
   

Consolidated

 

Six months ended June 30, 2012

                  

Underlying earnings before tax geographically

     631        150        54        152        (117     (2     868        (4     864   

Fair value items

     (15     195        (3     (5     85        —          257        —          257   

Realized gains / (losses) on investments

     63        28        34        5        —          —          130        —          130   

Impairment charges

     (93     (6     —          (4     (4     2        (105     —          (105

Impairment reversals

     24        —          —          —          —          (2     22        —          22   

Other income / (charges)

     (2     (269     19        (18     (1     —          (271     —          (271

Run-off businesses

     4        —          —          —          —          —          4        —          4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax

     612        98        104        130        (37     (2     905        (4     901   

Income tax (expense) / benefit

     (118     15        (9     (45     27        —          (130     4        (126
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     494        113        95        85        (10     (2     775        —          775   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (93     (33     (32     142        16           

Revenues

                  

Life insurance gross premiums

     3,196        2,182        2,987        756        —          (34     9,087        (134     8,953   

Accident and health insurance

     900        152        —          104        2        (2     1,156        —          1,156   

General insurance

     —          268        —          71        —          —          339        —          339   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     4,096        2,602        2,987        931        2        (36     10,582        (134     10,448   

Investment income

     1,820        1,110        1,189        175        189        (188     4,295        (19     4,276   

Fee and commission income

     579        166        66        257        —          (134     934        —          934   

Other revenues

     1        —          —          1        3        —          5        —          5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     6,496        3,878        4,242        1,364        194        (358     15,816        (153     15,663   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     16        —          1        154        187           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         
EUR millions    Americas     The
Netherlands
    United
Kingdom
    New
Markets
    Holding and
other
activities
    Eliminations     Segment
Total
    Associates
eliminations
   

Consolidated

 

Six months ended June 30, 2011

                  

Underlying earnings before tax geographically

     650        155        22        138        (150     —          815        (8     807   

Fair value items

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

Realized gains / (losses) on investments

     74        177        40        4        —          —          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

     578        250        16        141        (132     —          853        (7     846   

Income tax (expense) / benefit

     (92     (42     20        (46     38        —          (122     7        (115
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     486        208        36        95        (94     —          731        —          731   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment underlying earnings

     (79     (20     (34     125        8           

Revenues

                  

Life insurance gross premiums

     2,977        2,354        3,510        782        —          (25     9,598        (225     9,373   

Accident and health insurance

     823        149        —          97        —          —          1,069        (1     1,068   

General insurance

     —          259        —          78        —          —          337        —          337   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross premiums

     3,800        2,762        3,510        957        —          (25     11,004        (226     10,778   

Investment income

     1,814        1,069        1,208        155        166        (163     4,249        (39     4,210   

Fee and commission income

     527        174        73        236        —          (122     888        —          888   

Other revenues

     1        —          —          1        2        —          4        —          4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     6,142        4,005        4,791        1,349        168        (310     16,145        (265     15,880   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Inter-segment revenues

     14        1        1        135        159           
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

         

 

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Table of Contents

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 AEGON’s associated companies in Spain, India, Brazil and Mexico. AEGON believes that its non-IFRS measure provides meaningful information about the underlying operating results of AEGON’s business including insight into the financial measures that senior management uses in managing the business.

AEGON’s 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 AEGON’s 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 AEGON’s 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 to measure the insurance contract liability) 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, and 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 (FVTPL). 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.

 

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Table of Contents

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.

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 reported 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.

Share in earnings of associates

Earnings from AEGON’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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Table of Contents

3.2 Investments geographically

 

                  

amounts in million EUR (unless otherwise stated)

 

Americas
USD

     United
Kingdom
GBP
    

At June 30, 2012

   Americas      The
Netherlands
     United
Kingdom
     New
Markets
     Holding
& other
activities
     Eliminations     Total
EUR
 
     

Investments

                   
  1,688         39      

Shares

     1,330         411         49         69         6         (2     1,863   
  84,231         8,395      

Debt securities

     66,371         17,888         10,375         4,271         —           —          98,905   
  12,481         6      

Loans

     9,834         19,648         7         692         —           —          30,181   
  15,338         20      

Other financial assets

     12,086         311         25         37         802         —          13,261   
  1,101         —        

Investments in real estate

     867         1,988         —           —           —           —          2,855   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  114,839         8,460      

Investments general account

     90,488         40,246         10,456         5,069         808         (2     147,065   
  —           22,075      

Shares

     —           7,950         27,283         3,575         —           (5     38,803   
  —           9,692      

Debt securities

     —           16,412         11,979         390         —           —          28,781   
  84,548         7,654      

Separate accounts and investment funds

     66,621         —           9,460         1,160         —           —          77,241   
  —           2,845      

Other financial assets

     —           463         3,516         1,710         —           —          5,689   
  —           905      

Investments in real estate

     —           —           1,119         —           —           —          1,119   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  84,548         43,171      

Investments for account of policyholders

     66,621         24,825         53,357         6,835         —           (5     151,633   
  199,387         51,631      

Investments on balance sheet

     157,109         65,071         63,813         11,904         808         (7     298,698   
  125,587         —        

Off balance sheet investments third parties

     98,958         —           —           54,332         —           —          153,290   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  324,974         51,631      

Total revenue generating investments

     256,067         65,071         63,813         66,236         808         (7     451,988   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     

Investments

                   
  95,384         8,399      

Available-for-sale

     75,159         18,369         10,381         4,115         25         —          108,049   
  12,481         6      

Loans

     9,834         19,648         7         692         —           —          30,181   
  —           —        

Held-to-maturity

     —           —           —           172         —           —          172   
  90,421         42,321      

Financial assets at fair value through profit or loss

     71,249         25,066         52,306         6,925         783         (7     156,322   
  1,101         905      

Investments in real estate

     867         1,988         1,119         —           —           —          3,974   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  199,387         51,631      

Total investments on balance sheet

     157,109         65,071         63,813         11,904         808         (7     298,698   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  115         7      

Investments in associates

     91         51         9         635         5         —          791   
  33,867         6,076      

Other assets

     26,686         25,216         7,509         3,915         37,985         (36,818     64,493   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  233,369         57,714      

Consolidated total assets

     183,886         90,338         71,331         16,454         38,798         (36,825     363,982   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
                  

amounts in million EUR (unless otherwise stated)

 

Americas
USD

     United
Kingdom
GBP
    

At December 31, 2011

   Americas      The
Netherlands
     United
Kingdom
     New
Markets
     Holding
& other
activities
     Eliminations     Total
EUR
 
     

Investments

                   
  1,570         45      

Shares

     1,209         505         54         60         11         (2     1,837   
  84,192         8,261      

Debt securities

     64,853         17,640         9,890         4,036         —           —          96,419   
  13,319         7      

Loans

     10,260         18,825         8         643         —           —          29,736   
  16,196         —        

Other financial assets

     12,476         40         —           43         744         —          13,303   
  1,006         —        

Investments in real estate

     775         2,009         —           —           —           —          2,784   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  116,283         8,313      

Investments general account

     89,573         39,019         9,952         4,782         755         (2     144,079   
  —           21,755      

Shares

     —           7,608         26,045         3,459         —           (4     37,108   
  —           10,003      

Debt securities

     —           15,124         11,975         277         —           —          27,376   
  80,137         7,095      

Separate accounts and investment funds

     61,729         —           8,495         1,060         —           —          71,284   
  —           2,940      

Other financial assets

     —           491         3,519         1,619         —           —          5,629   
  —           946      

Investments in real estate

     —           —           1,132         —           —           —          1,132   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  80,137         42,739      

Investments for account of policyholders

     61,729         23,223         51,166         6,415         —           (4     142,529   
  196,420         51,052      

Investments on balance sheet

     151,302         62,242         61,118         11,197         755         (6     286,608   
  119,371         —        

Off balance sheet investments third parties

     91,951         —           —           44,959         —           —          136,910   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  315,791         51,052      

Total revenue generating investments

     243,253         62,242         61,118         56,156         755         (6     423,518   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
     

Investments

                   
  96,145         8,266      

Available-for-sale

     74,060         18,016         9,896         3,861         27         —          105,860   
  13,319         7      

Loans

     10,260         18,825         8         643         —           —          29,736   
  —           —        

Held-to-maturity

     —           —           —           168         —           —          168   
  85,950         41,833      

Financial assets at fair value through profit or loss

     66,207         23,392         50,082         6,525         728         (6     146,928   
  1,006         946      

Investments in real estate

     775         2,009         1,132         —           —           —          3,916   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  196,420         51,052      

Total investments on balance sheet

     151,302         62,242         61,118         11,197         755         (6     286,608   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  100         7      

Investments in associates

     77         52         9         600         4         —          742   
  33,562         5,919      

Other assets

     25,852         19,403         7,086         3,789         35,878         (33,781     58,227   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
  230,082         56,978      

Consolidated total assets

     177,231         81,697         68,213         15,586         36,637         (33,787     345,577   

 

 

    

 

 

       

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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4. Premium income and premium to reinsurers

 

EUR millions

   Q2 2012      Q2 2011      YTD 2012      YTD 2011  

Gross

           

Life

     3,888         3,850         8,953         9,373   

Non-Life

     709         651         1,495         1,405   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,597         4,501         10,448         10,778   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Life

     805         380         1,630         742   

Non-Life

     105         87         205         168   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     910         467         1,835         910   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance premiums increased compared to 2011 mainly as a result of the increased external reinsurance life premiums following the divestment of the life reinsurance business, Transamerica Reinsurance, to SCOR, completed on August 9, 2011. Premiums paid to reinsurers are reported as part of Claims and benefits (note 9).

5. Investment income

 

EUR millions

   Q2 2012      Q2 2011      YTD 2012      YTD 2011  

Interest income

     1,927         1,785         3,739         3,622   

Dividend income

     234         273         459         501   

Rental income

     39         41         78         87   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investment income

     2,200         2,099         4,276         4,210   
  

 

 

    

 

 

    

 

 

    

 

 

 

Investment income related to general account

     1,514         1,432         2,973         2,903   

Investment income for account of policyholders

     686         667         1,303         1,307   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,200         2,099         4,276         4,210   
  

 

 

    

 

 

    

 

 

    

 

 

 

6. 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, completed on August 9, 2011.

7. Results from financial transactions

 

EUR millions

   Q2 2012     Q2 2011     YTD 2012     YTD 2011  

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

     (17     30        246        157   

Realized gains and (losses) on financial investments

     191        277        246        381   

Gains and (losses) on investments in real estate

     (31     (15     (56     (26

Net fair value change of derivatives

     263        (78     393        (601

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

     (2,368     728        4,799        2,138   

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

     (11     5        (19     11   

Net foreign currency gains and (losses)

     5        (1     12        (9

Net fair value change on borrowings and other financial liabilities

     18        (18     (6     (10

Realized gains and (losses) on repurchased debt

     6        4        6        4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (1,944     932        5,621        2,045   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 9).

 

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8. Other income

Other income for the six months ended June 30, 2011 mainly relates to a benefit related to a settlement of legal claims.

9. Benefits and expenses

 

EUR millions

   Q2 2012     Q2 2011     YTD 2012     YTD 2011  

Claims and benefits

     5,056        6,945        20,550        16,013   

Employee expenses

     529        517        1,033        1,054   

Administration expenses

     272        313        534        597   

Deferred expenses

     (370     (371     (737     (758

Amortization charges

     411        355        682        712   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     5,898        7,759        22,062        17,618   
  

 

 

   

 

 

   

 

 

   

 

 

 

Claims and benefits reflects 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. In addition, Claims and benefits includes commissions and expenses, as well as premium paid to reinsurers. Claims and benefits fluctuates 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 7).

In Q2 2012, AEGON increased the technical provisions related to unit-linked insurance policies with EUR 265 million. This addition to the technical provisions is included in Claims and benefits. Refer to note 22 Commitments and contingencies for more details.

10. Impairment charges / (reversals)

 

EUR millions

   Q2 2012     Q2 2011     YTD 2012     YTD 2011  

Impairment charges / (reversals) comprise:

        

Impairment charges on financial assets, excluding receivables 1

     66        121        116        209   

Impairment reversals on financial assets, excluding receivables 1

     (16     (16     (22     (42

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

     2        1        4        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52        106        98        170   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment charges on financial assets, excluding receivables, from:

        

Shares

     —          1        4        3   

Debt securities and money market instruments

     55        115        86        185   

Loans

     11        6        25        15   

Other

     —          (1     1        6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     66        121        116        209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Impairment reversals on financial assets, excluding receivables, from:

        

Debt securities and money market instruments

     (16     (14     (17     (38

Loans

     —          (2     (5     (4
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     (16     (16     (22     (42
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

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

 

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11. Other charges

Other charges for the six months ended June 30, 2012 and 2011, consist mainly of the annual bank tax charge in Hungary.

12. Intangible assets

 

EUR millions

   June 30, 2012      Dec. 31, 2011  

Goodwill

     758         753   

VOBA

     1,997         2,086   

Future servicing rights

     401         397   

Software

     46         36   

Other

     11         13   
  

 

 

    

 

 

 

Total intangible assets

     3,213         3,285   
  

 

 

    

 

 

 

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

13. Investments

 

EUR millions

   June 30, 2012      Dec. 31, 2011  

Available-for-sale (AFS)

     108,049         105,860   

Loans

     30,181         29,736   

Held-to-maturity (HTM)

     172         168   

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

     5,808         5,531   
  

 

 

    

 

 

 

Financial assets, excluding derivatives

     144,210         141,295   

Investments in real estate

     2,855         2,784   
  

 

 

    

 

 

 

Total investments for general account

     147,065         144,079   
  

 

 

    

 

 

 

 

Total financial assets, excluding derivatives               
     AFS      FVTPL      HTM      Loans      Total  

Shares

     900         963         —           —           1,863   

Debt securities

     97,099         1,634         172         —           98,905   

Money market and other short term investments

     8,796         1,159         —           —           9,955   

Mortgages

     —           —           —           26,552         26,552   

Private loans

     —           —           —           1,063         1,063   

Deposits with financial institutions

     —           —           —           190         190   

Policy loans

     —           —           —           2,207         2,207   

Receivables out of share lease agreements

     —           —           —           11         11   

Other

     1,254         2,052         —           158         3,464   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2012

     108,049         5,808         172         30,181         144,210   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     AFS      FVTPL      HTM      Loans      Total  

Shares

     869         968         —           —           1,837   

Debt securities

     94,722         1,529         168         —           96,419   

Money market and other short term investments

     9,382         1,090         —           —           10,472   

Mortgages

     —           —           —           26,012         26,012   

Private loans

     —           —           —           927         927   

Deposits with financial institutions

     —           —           —           452         452   

Policy loans

     —           —           —           2,180         2,180   

Receivables out of share lease agreements

     —           —           —           19         19   

Other

     887         1,944         —           146         2,977   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2011

     105,860         5,531         168         29,736         141,295   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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European peripheral countries exposure

AEGON’s exposure to the central governments of the European peripheral countries of Portugal, Italy, Ireland, Greece and Spain amounts to EUR 1,011 million (December 31, 2011: EUR 1,112 million), of which EUR 769 million is included in the available-for-sale investments. The remainder of the exposure, amounting to EUR 242 million (December 31, 2011: EUR 214 million), relates to AEGON’s proportionate share in the investments of its associate CAM AEGON Holding Financiero (Spain).

The following table provides the amortized cost and fair value of AEGON’s exposure to European peripheral countries.

 

EUR millions

Debt security exposure to:

                                                           June 30, 2012      Dec. 31, 2011  
     Central Government      Banks      RMBS      Corporates and other      Total      Total  
     Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
     Amortized
cost
     Fair
value
 

Portugal

     10         7         26         24         40         32         96         85         172         149         202         157   

Italy

     58         54         184         169         48         46         642         563         932         832         1,095         949   

Ireland

     25         24         1         1         177         134         362         394         565         553         582         584   

Greece

     —           —           —           —           5         3         22         24         27         27         34         32   

Spain

     918         818         410         339         708         609         816         742         2,852         2,507         3,194         2,965   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,011         903         621         533         978         824         1,938         1,808         4,548         4,068         5,107         4,687   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

14. Investments for account of policyholders

 

EUR millions

   June 30, 2012      Dec. 31, 2011  

Shares

     38,803         37,108   

Debt securities

     28,781         27,376   

Money market and short-term investments

     2,212         2,283   

Deposits with financial institutions

     2,980         2,813   

Separate accounts and unconsolidated investment funds

     77,241         71,284   

Other

     497         533   
  

 

 

    

 

 

 

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

     150,514         141,397   

Investment in real estate

     1,119         1,132   
  

 

 

    

 

 

 

Total investments for account of policyholders

     151,633         142,529   
  

 

 

    

 

 

 

15. Derivatives

In the first quarter of 2012, AEGON The Netherlands entered into a derivative to partially hedge its longevity risk. The derivative, with a notional amount of EUR 12 billion, becomes in the money if - over 20 years - realized mortality rates are more than 7.5% lower than pre-defined mortality tables. The derivative is measured at fair value through profit or loss in accordance with IAS 39. The value of the longevity derivative is calculated using an internal model as there is no active market for this type of derivative.

The movements in derivative balances mainly result from changes in market conditions.

16. Reinsurance assets

AEGON USA reinsured approximately EUR 1.2 billion of fixed annuities on a quota share basis resulting in an increase of reinsurance assets in the second quarter of 2012.

 

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17. Deferred expenses and rebates

 

EUR millions

   June 30, 2012      Dec. 31, 2011  

DPAC for insurance contracts and investment contracts with discretionary participation features

     10,676         10,486   

Deferred cost of reinsurance

     606         541   

Deferred transaction costs for investment management services

     417         405   

Unamortized interest rate rebates

     180         201   
  

 

 

    

 

 

 

Total deferred expenses and rebates

     11,879         11,633   
  

 

 

    

 

 

 

18. Share capital

 

EUR millions

   June 30, 2012     Dec. 31, 2011  

Share capital - par value

     314        310   

Share premium

     8,783        8,787   
  

 

 

   

 

 

 

Total share capital

     9,097        9,097   
  

 

 

   

 

 

 

Share capital - par value

    

Balance at January 1

     310        278   

Issuance

     —          32   

Stock dividend

     4        —     
  

 

 

   

 

 

 

Balance

     314        310   
  

 

 

   

 

 

 

Share premium

    

Balance at January 1

     8,787        7,906   

Issuance

     —          881   

Stock dividend

     (4     —     
  

 

 

   

 

 

 

Balance

     8,783        8,787   
  

 

 

   

 

 

 

19. Other equity instruments

On February 7, 2012, AEGON issued USD 525 million in aggregate principal amount of 8.00% non-cumulative subordinated notes, due 2042, in an underwritten public offering in the United States registered with the U.S. Securities and Exchange Commission. The subordinated notes bear interest at a fixed rate of 8.00% and will not be cumulative and are priced at 100% of their principal amount.

The securities are subordinated and rank senior to the junior perpetual capital securities, equally with the perpetual cumulative subordinated bonds junior to all other liabilities. The conditions of the securities contain certain provisions for optional and required cancellation of interest payments. The securities have a stated maturity of 30 years, however AEGON has the right to call the securities for redemption at par for the first time on the coupon date in 2017, or on any coupon payment date thereafter.

The interest rate exposure on substantially all of these securities has been swapped to an EURIBOR based interest rate.

These notes are recognized as a compound instrument due to the nature of this financial instrument. Compound instruments are separated into equity components and liability components. At June 30, 2012 the equity component amount to EUR 271 million, subordinated borrowings amounts to EUR 42 million and a deferred tax liability (included in Other liabilities) amounts to EUR 93 million. Refer to note 20 for the component classified as Subordinated borrowings.

The proceeds from the issuance of the subordinated notes are used for general corporate purposes.

 

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20. Subordinated borrowings

Subordinated borrowings include a liability of EUR 42 million relating to the non-cumulative subordinated notes issued on February 7, 2012. This liability component of the non-cumulative subordinated notes is related to the redemption amount.

For further information on the non-cumulative subordinated notes refer to note 19.

21. Borrowings

 

EUR millions

   June 30, 2012      Dec. 31, 2011  

Debentures and other loans

     10,528         9,199   

Commercial paper

     437         646   

Short term deposits

     17         18   

Bank overdrafts

     83         278   
  

 

 

    

 

 

 

Total borrowings

     11,065         10,141   
  

 

 

    

 

 

 

Debentures and other loans

On May 23, 2012, AEGON USA sold asset backed securities (ABS) to institutional investors amounting to EUR 230 million. These securities consist of three tranches:

 

   

USD 227.5 million of class A-1 notes with a legal final maturity date of April 15, 2023 and priced at 99.652 with a coupon of three month Libor plus 1.30%.

 

   

USD 39.65 million of class A-2 notes with a legal final maturity date of April 15, 2023 and priced at 99.267 with a coupon of three month Libor plus 2.50%.

 

   

USD 24.5 million of class B notes with a legal final maturity date of April 15, 2023 and priced at 90.289 with a coupon of three month Libor plus 3.00%.

The net proceeds were used to finance a part of the existing bank loan portfolio of AEGON USA.

On May 8, 2012, AEGON The Netherlands sold class A residential mortgage backed securities (RMBS) to a broad group of institutional investors amounting to EUR 685 million. These securities consist of two tranches:

 

   

USD 600 million of class A1 notes with an expected weighted average life of 3 years and priced at par with a coupon of three month Libor plus 1.55%.

 

   

EUR 212 million of class A1 notes with an expected weighted average life of 3 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 were used to finance a part of the existing Dutch mortgage portfolio of AEGON The Netherlands.

On April 29, 2012 AEGON redeemed a EUR 1.0 billion senior loan, which matured.

On March 1, 2012, AEGON The Netherlands borrowed EUR 1.5 billion from the European Central Bank, under its Long Term Refinancing Operation (LTRO) program. The borrowing has a 3 year term and bears 1% interest per annum. The borrowing is fully collateralized. The funds will be mainly used to fund the mortgage loan production of AEGON The Netherlands.

Included in Debentures and other loans is EUR 1,025 million relating to borrowings measured at fair value (2011: EUR 1,010 million).

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

 

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22. Commitments and contingencies

In Q2 2012, AEGON decided to bring forward the measures related to the agreement announced on July 13, 2009 and reduce future costs for its customers with unit-linked insurance policies. With these measures, AEGON commits to ‘best of class’ principles of the Dutch Ministry of Finance. Previously, AEGON’s approach was to settle compensation with clients when the policy expires. However, to comply with the Ministry’s principles, AEGON will now settle compensation immediately by making direct additions to policy values before year-end 2012. As a result of this acceleration of previously announced measures, AEGON has recorded a charge of EUR 265 million before tax in the second quarter of 2012 included in Claims and Benefits.

In addition, AEGON will reduce future policy costs beginning in 2013 onward for the large majority of its unit-linked portfolio. This will decrease income before tax over the remaining duration of the policies by approximately EUR 125 million, based on the current present value.

There have been no other material changes in contingent assets and liabilities as reported in the 2011 consolidated financial statements of AEGON.

23. Acquisitions / Divestments

AEGON signed an agreement to dispose of its interest in Prisma Capital Partners LP (“Prisma”) to KKR. Prisma, which is accounted for as an associate, serves as an investment manager for certain of AEGON’s hedge fund investments as well as for other third parties. The transaction is expected to close in the fourth quarter of 2012 and is subject to regulatory approval and other closing commitments. The book value as at June 30, 2012 was nil. AEGON’s share in Prisma earnings amounted to EUR 5 million for the first six months of 2012 (full year 2011: EUR 13 million).

There were no other significant acquisitions or divestments during the first six months of 2012.

24. Events after the balance sheet date

On July 18, AEGON issued EUR 500 million in senior unsecured notes, due July 18, 2017. The notes were issued under AEGON’s USD 6 billion debt issuance program at a price of 99.712%, and will carry a coupon of 3.00%. Net proceeds from this issuance will be used for general corporate purposes and the redemption of short-term debt.

Following the announced merger between Banca Cívica and CaixaBank in Spain, AEGON reached an agreement, on August 3, 2012, with CaixaBank to end the life, health and pension partnership with Banca Cívica and sell its 50% interest in the joint ventures to CaixaBank for a total consideration of EUR 190 million. The transaction is expected to close in the third quarter of 2012 and is subject to regulatory approvals. The sale is expected to result in a book gain of approximately EUR 35 million before tax. AEGON’s share in underlying earnings before tax of the joint venture totaled EUR 9 million for the first six months of 2012 (full year 2011: EUR 16 million).

There were no other events after the balance sheet date with a significant impact on the financial position of the Company as of June 30, 2012.

 

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Management statement

The interim report for the six months ended June 30, 2012 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 8, 2012

A.R. Wynaendts

Chairman of the Executive Board and CEO

J.J. Nooitgedagt

Member of the Executive Board and CFO

 

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Disclaimer

Cautionary note regarding non-GAAP measures

This document includes a 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 its peers.

Local currencies and constant currency exchange rates

This document contains certain information about AEGON’s 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 AEGON’s 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 AEGON. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. AEGON undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:

 

   

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

 

   

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

 

  - The frequency and severity of defaults by issuers in AEGON’s fixed income investment portfolios;

 

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

 

  - The effects of declining creditworthiness of certain private sector securities and the resulting decline in the value of sovereign exposure that AEGON holds;

 

   

Changes in the performance of AEGON’s investment portfolio and decline in ratings of the company’s counterparties;

 

   

Consequences of a potential (partial) break-up of the euro;

 

   

The frequency and severity of insured loss events;

 

   

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

 

   

Reinsurers to whom AEGON has ceded significant underwriting risks may fail to meet their obligations;

 

   

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 such as changes in borrower and counterparty creditworthiness;

 

   

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

 

   

Changes in laws and regulations, particularly those affecting AEGON’s operations, ability to hire and retain key personnel, the products the company sells, and the attractiveness of certain products to its consumers;

 

   

Regulatory changes relating to the insurance industry in the jurisdictions in which AEGON operates;

 

   

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

 

   

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

 

   

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

 

   

Lowering of one or more of insurer financial strength ratings of AEGON’s 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 AEGON is required to maintain;

 

   

Litigation or regulatory action that could require AEGON to pay significant damages or change the way the company does business;

 

   

As AEGON’s operations support complex transactions and are highly dependent on the proper functioning of information technology, a computer system failure or security breach may disrupt the company’s business, damage its reputation and adversely affect its results of operations, financial condition and cash flows;

 

   

Customer responsiveness to both new products and distribution channels;

 

   

Competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for AEGON’s products;

 

   

Changes in accounting regulations and policies may affect AEGON’s reported results and shareholder’s equity;

 

   

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

 

   

Catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt AEGON’s business; and

 

   

AEGON’s 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 NYSE Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report. 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 DATE FIGURES IN 2012 AND 2013

 

Thursday, November 8, 2012    Results third quarter 2012
Friday, February 15, 2013    Results fourth quarter 2012
Wednesday, May 8, 2013    Results first quarter 2013
Thursday, August 8, 2013    Results second quarter 2013
Thursday, November 7, 2013    Results third quarter 2013

PRESS RELEASE AND SUPPLEMENTS

AEGON’s Q2 2012 press release and Q2 2012 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 25,000 people and have nearly 47 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.

 

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