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Securities and Exchange Commission
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 of 15d/16
of the Securities Exchange Act of 1934
May 2016
AEGON N.V.
Aegonplein 50
2591 TV THE HAGUE
The Netherlands
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Aegon’s condensed consolidated interim financial statements Q1 2016, dated May 12, 2016, are included as appendix and incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AEGON N.V. | ||||
|
(Registrant) | ||||
| Date: May 12, 2016 | By | /s/ J.H.P.M. van Rossum | ||
| Executive Vice President and | ||||
| Corporate Controller | ||||
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| Notes to the condensed consolidated interim financial statements |
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Amounts for 2015 have been restated for the voluntary changes in accounting policies for deferred cost of reinsurance and insurance accounting in the UK. Refer to note 2.1 Voluntary changes in accounting policies for details about these changes.
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Amounts for 2015 have been restated for the voluntary changes in accounting policies for deferred cost of reinsurance and insurance accounting in the UK. Refer to note 2.1 Voluntary changes in accounting policies for details about these changes.
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Amounts for 2015 have been restated for the voluntary changes in accounting policies for deferred cost of reinsurance and insurance accounting in the UK. Refer to note 2.1 Voluntary changes in accounting policies for details about these changes.
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| 1 | For a breakdown of share capital please refer to note 15. |
| 2 | Issued capital and reserves attributable to equity holders of Aegon N.V. |
Amounts for 2015 have been restated for the voluntary changes in accounting policies for deferred cost of reinsurance and insurance accounting in the UK. Refer to note 2.1 Voluntary changes in accounting policies for details about these changes.
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Notes to the condensed consolidated interim financial statements
Amounts in EUR millions, unless otherwise stated
Aegon N.V., incorporated and domiciled in the Netherlands, is a public limited liability company organized under Dutch law and recorded in the Commercial Register of The Hague under number 27076669 and with its registered address at Aegonplein 50, 2591 TV, The Hague, the Netherlands. Aegon N.V. serves as the holding company for the Aegon Group and has listings of its common shares in Amsterdam and New York.
Aegon N.V. (or ‘the Company’) and its consolidated subsidiaries (‘Aegon’ or ‘the Group’) have life insurance and pensions operations in over twenty five countries in the Americas, Europe and Asia and are also active in savings and asset management operations, accident and health insurance, general insurance and to a limited extent banking operations. Its headquarters are located in The Hague, the Netherlands. The Group employs close to 30,000 people worldwide.
1. Basis of presentation
The condensed consolidated interim financial statements as at, and for the period ended, March 31, 2016, have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, as adopted by the European Union (hereafter ‘IFRS’). They do 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 2015 consolidated financial statements of Aegon N.V. as included in Aegon’s Annual Report for 2015 and the disclosures provided in note 2.1 of this report which disclose the impact of voluntary changes in accounting policies that were made by Aegon effective January 1, 2016. Aegon’s Annual Report for 2015 is available on its website (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 period ended, March 31, 2016, were approved by the Executive Board on May 11, 2016.
The condensed consolidated interim financial statements are presented in euro (EUR) and all values are rounded to the nearest million unless otherwise stated. The consequence is that the rounded amounts may not add up to the rounded total in all cases.
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 2015 consolidated financial statements, except for the newly applied accounting policies as described in note 2.1.
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New IFRS accounting standards effective
The following standards, interpretations, amendments to standards and interpretations became effective in 2016:
| t | IFRS 10, IFRS 12 and IAS 28 - Investment Entities: Applying the Consolidation Exception; |
| t | IFRS 11 Joint Arrangements - Amendment Accounting for Acquisition of Interests in Joint Operations; |
| t | IFRS 14 Regulatory Deferral Accounts; |
| t | IAS 1 - Amendment Disclosure Initiative; |
| t | IAS 27 Separate Financial Statements - Amendment Equity method in Separate Financial Statements; |
| t | IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization; and |
| t | Annual improvements 2012-2014 Cycle. |
None of these revised standards and interpretations had a significant effect on the condensed consolidated interim financial statements as at and for the period ended March 31, 2016.
For a complete overview of IFRS standards, published before January 1, 2016, that will be applied in future years, and were not early adopted by the Group, please refer to Aegon’s Annual Report for 2015.
Taxes
Taxes on income for the three month period, ended March 31, 2016, are calculated using the tax rate that would be applicable to total annual earnings.
Judgments and critical accounting estimates
Preparing the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions, including the likelihood, timing or amount of future transactions or events, that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates made.
In preparing the condensed consolidated interim financial statements, significant judgments made by management in applying the Group’s accounting policies and the key sources of estimating uncertainty were not significantly different than those that were applied to the consolidated financial statements as at and for the year ended December 31, 2015.
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 | |||||||||||||||
| March 31, 2016 |
1 | EUR | 1.1396 | 0.7928 | ||||||||||||
| December 31, 2015 |
1 | EUR | 1.0863 | 0.7370 |
Weighted average exchange rates
| USD | GBP | |||||||||||||||
| Three months ended March 31, 2016 |
1 | EUR | 1.1023 | 0.7698 | ||||||||||||
| Three months ended March 31, 2015 |
1 | EUR | 1.1272 | 0.7434 |
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2.1 Voluntary changes in accounting policies
On January 13, 2016, Aegon provided an update on its strategic plans at its Analyst & Investor Conference. Following this update Aegon adopted voluntary changes in accounting policies, effective January 1, 2016, which are applied retrospectively for all periods presented. Firstly, Aegon adopted a group-wide accounting policy for reinsurance transactions that are entered into as part of a plan to exit a business. Also, Aegon made two voluntary accounting policy changes that better reflect its business strategy after restructuring in the United Kingdom. The changes in the United Kingdom do not impact other reporting units within Aegon as these are changes specific to Aegon UK. However, these changes do increase alignment with other reporting units within Aegon. Finally Aegon changed its segment reporting.
In the paragraphs below, details are provided for the changes in accounting policies including the impact on shareholders equity and net income. The changes in segment reporting are explained in note 3.
Accounting related to certain reinsurance transactions
Aegon adopted one single group-wide accounting policy for reinsurance transactions that are entered into as part of a plan to exit a business. The previous accounting policy recorded a deferred cost of reinsurance which was subsequently amortized. Under the new accounting policy, when the company enters into a reinsurance contract as part of a plan to exit a business, an immediate gain or loss will be recognized in the income statement.
For purposes of this accounting policy, a business is defined as “designated insurance liabilities to be disposed of through reinsurance transactions”. The insurance liabilities are designated according to their homogenous risk profiles, possible examples include but are not limited to geographical area, product type, distribution channel, policyholder profiles, and policy form or riders.
Insurance accounting for business in United Kingdom
In January 2016, Aegon announced the restructuring of its business and operations in the UK. This involves splitting the Aegon UK business into three components: the annuity business, the traditional pension book and the new digital solutions platform. By extracting the digital solutions platform from the rest of the business, management aims to ensure the focus and separate culture required to successfully build a viable and sustainably growing business over the longer term.
Aegon adopts two voluntary accounting policy changes that better reflect its business strategy after restructuring in the United Kingdom, only affecting Aegon UK. The changes involve the aggregation level at which the liability adequacy test is carried out and the definition of when a substantially modified contract will be derecognized.
Level of aggregation
The previous accounting policy for the level of aggregation for the liability adequacy test in the United Kingdom was on a geographical basis, therefore the total Aegon UK book is considered as one population. After the announced restructuring, Aegon’s business in the United Kingdom has been split into different portfolios that are managed independently from one another. Management is of the opinion that the liability adequacy test should be disaggregated to a portfolio level to reflect this change in strategy. This change in the definition of portfolio for Aegon UK will better align with other reporting units in the Group where insurance contracts are grouped consistent with the Company’s manner of acquiring, servicing and measuring the profitability of its insurance contracts.
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Substantial modification
The previous accounting policy for Aegon’s business in the United Kingdom is to derecognize insurance contracts when legal extinguishment occurs. As the annuity business, the traditional pension book and the new digital solutions platform will be managed separately post-restructuring, Aegon has decided to change its accounting policy for Aegon UK to one that applies criteria from IAS 39 contract modification. Under these criteria a change should be significant enough to be considered an extinguishment of the existing contract and the issuance of a new contract. Aegon considers that this change in accounting policy is preferred as introducing a more sophisticated approach to contract modification is consistent with how the business will be managed post-restructuring. Furthermore, it will provide the user with information that is more relevant and that reliably reflects the economic substance of our transactions with our upgraded policyholders, as required by IFRS 4 and IAS 8, in relation to the nature of contract modifications.
Details of the impact of the adjustments on previous periods are provided in the following tables:
| Impact of voluntary changes in accounting policies on condensed consolidated income statement | ||||||||||||||||||||
| Change in accounting policy | ||||||||||||||||||||
| Notes | Q1 2015 | 1) | |
Deferred cost of reinsurance |
|
|
Insurance accounting in UK |
|
Q1 2015 (restated) | |||||||||||
| EUR millions |
||||||||||||||||||||
| Premium income |
4 | 5,641 | - | 706 | 6,347 | |||||||||||||||
| Benefits and expenses |
7 | 18,392 | (8 | ) | 743 | 19,127 | ||||||||||||||
| Income tax (expense) / benefit |
(101 | ) | (6 | ) | 7 | (100 | ) | |||||||||||||
| Impact on net income |
2 | (29 | ) | |||||||||||||||||
| Earnings per share (EUR per share) |
15 | |||||||||||||||||||
| Basic earnings per common share |
0.13 | - | (0.01 | ) | 0.12 | |||||||||||||||
| Basic earnings per common share B |
- | - | - | - | ||||||||||||||||
| Diluted earnings per common share |
0.13 | - | (0.01 | ) | 0.12 | |||||||||||||||
| Diluted earnings per common share B |
- | - | - | - | ||||||||||||||||
| Earnings per share calculation |
15 | |||||||||||||||||||
| Net income / (loss) attributable to equity holders of Aegon N.V. |
316 | 2 | (29 | ) | 289 | |||||||||||||||
| Coupons on other equity instruments |
(36 | ) | - | - | (36 | ) | ||||||||||||||
| Earnings attributable to common shares and common shares B |
280 | 2 | (29 | ) | 253 | |||||||||||||||
| Weighted average number of common shares outstanding (in million) |
2,095 | - | - | 2,095 | ||||||||||||||||
| Weighted average number of common shares B outstanding (in million) |
581 | - | - | 581 | ||||||||||||||||
| 1 | Note that premium income and expenses have been updated for the adjustments made in Q2 2015. |
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| Impact of voluntary changes in accounting policies on condensed consolidated income statement
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| Change in accounting policy | ||||||||||||||||||||
| Notes | |
FY 2015 (as previously reported) 1) |
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Deferred cost of reinsurance |
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Insurance accounting in |
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FY 2015 (restated) | ||||||||||
| EUR millions |
||||||||||||||||||||
| Premium income |
4 | 20,311 | - | 2,614 | 22,925 | |||||||||||||||
| Benefits and expenses |
7 | 33,325 | (36 | ) | 2,763 | 36,052 | ||||||||||||||
| Impairment charges / (reversals) |
8 | (22 | ) | - | 1,274 | 1,251 | ||||||||||||||
| Income tax (expense) / benefit |
(134 | ) | (26 | ) | 270 | 111 | ||||||||||||||
| Impact on net income |
10 | (1,153 | ) | |||||||||||||||||
| Earnings per share (EUR per share) |
15 | |||||||||||||||||||
| Basic earnings per common share |
0.23 | - | (0.54 | ) | (0.31 | ) | ||||||||||||||
| Basic earnings per common share B |
0.01 | - | (0.01 | ) | (0.01 | ) | ||||||||||||||
| Diluted earnings per common share |
0.23 | - | (0.54 | ) | (0.31 | ) | ||||||||||||||
| Diluted earnings per common share B |
0.01 | - | (0.01 | ) | (0.01 | ) | ||||||||||||||
| Earnings per share calculation |
15 | |||||||||||||||||||
| Net income / (loss) attributable to equity holders of Aegon N.V. |
619 | 10 | (1,153 | ) | (524 | ) | ||||||||||||||
| Coupons on other equity instruments |
(139 | ) | - | - | (139 | ) | ||||||||||||||
| Earnings attributable to common shares and common shares B |
479 | 10 | (1,153 | ) | (663 | ) | ||||||||||||||
| Weighted average number of common shares outstanding (in million) |
2,101 | - | - | 2,101 | ||||||||||||||||
| Weighted average number of common shares B outstanding (in million) |
584 | - | - | 584 | ||||||||||||||||
| 1 | As reported in Aegon’s 2015 Annual Report dated March 25, 2016. |
| Impact of voluntary changes in accounting policies on condensed consolidated statement
of comprehensive income |
||||||||||||||||
| Change in accounting policy | ||||||||||||||||
| |
Q1 2015 (as previously reported) |
|
|
Deferred cost of reinsurance |
|
|
Insurance accounting in UK |
|
Q1 2015 (restated) | |||||||
| EUR millions |
||||||||||||||||
| Net income |
316 | 2 | (29 | ) | 289 | |||||||||||
| Items that may be reclassified subsequently to profit or loss: |
||||||||||||||||
| Movement in foreign currency translation and net foreign investment hedging reserves |
1,733 | (14 | ) | (1 | ) | 1,718 | ||||||||||
| Impact on comprehensive income |
(11 | ) | (30 | ) | ||||||||||||
| Total comprehensive income / (loss) attributable to: |
||||||||||||||||
| Equity holders of Aegon N.V. |
3,161 | (11 | ) | (30 | ) | 3,119 | ||||||||||
| Non-controlling interests |
- | - | - | - | ||||||||||||
| Impact of voluntary changes in accounting policies on condensed consolidated statement
of comprehensive income |
||||||||||||||||
| Change in accounting policy | ||||||||||||||||
| |
FY 2015 (as previously reported) 1) |
|
|
Deferred cost of reinsurance |
|
|
Insurance accounting in UK |
|
FY 2015 (restated) | |||||||
| EUR millions |
||||||||||||||||
| Net income |
619 | 10 | (1,153 | ) | (523 | ) | ||||||||||
| Items that may be reclassified subsequently to profit or loss: |
||||||||||||||||
| Movement in foreign currency translation and net foreign investment hedging reserves |
1,414 | (12 | ) | 18 | 1,419 | |||||||||||
| Impact on comprehensive income |
(2 | ) | (1,135 | ) | ||||||||||||
| Total comprehensive income / (loss) attributable to: |
||||||||||||||||
| Equity holders of Aegon N.V. |
234 | (2 | ) | (1,135 | ) | (903 | ) | |||||||||
| Non-controlling interests |
- | - | - | - | ||||||||||||
| 1 | As reported in Aegon’s 2015 Annual Report dated March 25, 2016. |
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| Impact of changes in accounting policies on the condensed consolidated statement of financial position | ||||||||||||||||||||
| Change in accounting policy | ||||||||||||||||||||
| Notes |
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December 31, 2015 (as previously reported) 1) |
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Deferred cost of reinsurance |
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Insurance accounting in UK |
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December 31, 2015 (restated) |
| ||||||||
| EUR millions |
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| Assets |
||||||||||||||||||||
| Intangible assets |
9 | 2,110 | - | (210 | ) | 1,901 | ||||||||||||||
| Deferred expenses |
14 | 12,547 | (358 | ) | (1,192 | ) | 10,997 | |||||||||||||
| Equity and liabilities |
||||||||||||||||||||
| Shareholders’ equity |
23,931 | (112 | ) | (1,135 | ) | 22,684 | ||||||||||||||
| Insurance contracts |
123,042 | - | - | 123,042 | ||||||||||||||||
| Investment contracts |
17,718 | - | - | 17,718 | ||||||||||||||||
| Other liabilities |
21,940 | (247 | ) | (266 | ) | 21,427 | ||||||||||||||
| 1 | As reported in Aegon’s 2015 Annual Report dated March 25, 2016. |
| Impact of voluntary changes in accounting policies on condensed consolidated statement of changes in equity | ||||||||||||||||
| Change in accounting policy | ||||||||||||||||
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December 31, 2015 (as previously reported) 1) |
|
|
Deferred cost of reinsurance |
|
|
Insurance accounting in UK |
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December 31, 2015 (restated) |
| |||||
| EUR millions |
||||||||||||||||
| Share capital |
8,387 | - | - | 8,387 | ||||||||||||
| Retained earnings |
9,319 | (91 | ) | (1,153 | ) | 8,075 | ||||||||||
| Revaluation reserves |
6,471 | - | - | 6,471 | ||||||||||||
| Remeasurement of defined benefit plans |
(1,532 | ) | - | - | (1,532 | ) | ||||||||||
| Other reserves |
1,286 | (21 | ) | 18 | 1,283 | |||||||||||
| Shareholders’ equity |
23,931 | (112 | ) | (1,135 | ) | 22,684 | ||||||||||
| 1 | As reported in Aegon’s 2015 Annual Report dated March 25, 2016. |
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3. Segment information
Based on the amended strategic plans as announced on January 13, 2016, Aegon has reconsidered its segment reporting. Aegon’s current segment reporting was established in 2010 considering the requirements outlined in IFRS 8 – Operating Segments. IFRS 8 requires operating segments to be defined in line with how the ‘chief operating decision maker’ (CODM, i.e. Aegon’s Executive Board) manages the business. Currently, Aegon has the following reportable segments: Americas, The Netherlands, United Kingdom, New Markets and Holdings and other activities. New Markets was established to aggregate Aegon’s emerging businesses and global / European initiatives which is a combination of the following operating segments: Central & Eastern Europe, Asia, Spain & Portugal, Asset Management and Variable Annuities Europe (VA Europe). Under IFRS 8 these operating segments were aggregated as one reportable segment due to their respective size.
Given that Aegon changed its managerial view to geographical areas and underlying businesses have developed since 2010, internal management reports have been changed as of 2016 accordingly. Alignment of segment reporting with those changes and developments have been put in place in 2016 reflecting Aegon’s announcements related to its strategic plan. This means that the operating segments as described above have been presented on this basis and introduces separate presentation of the asset management business. The following will be reported from 2016 onwards:
| t | Americas: one operating segment which covers business units in the United States, Brazil and Mexico, including any of the units’ activities located outside these countries; |
| t | Europe: which covers the following operating segments: the Netherlands, United Kingdom (including VA Europe), Central & Eastern Europe, Spain and Portugal; |
| t | Asia: one operating segment which covers businesses operating in Hong Kong, China, Japan, India and Indonesia including any of the units’ activities located outside these countries; |
| t | Asset Management: one operating segment which covers business activities from Aegon Asset Management; |
| t | Holding and other activities: one operating segment which includes financing, employee and other administrative expenses of holding companies. |
For Europe, the underlying businesses (the Netherlands, United Kingdom including VA Europe, Central & Eastern Europe and Spain and Portugal) are separate operating segments which under IFRS 8 cannot be aggregated, therefore further details will be provided for these operating segments.
The change in segment reporting does not have an impact on the financial position, results of operations or cash flows of Aegon.
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The following table shows the segments as previously reported excluding voluntary changes in accounting policies (as presented in note 2.1):
| EUR millions | Americas | The Netherlands |
United Kingdom |
New Markets |
Holding and other activities |
Eliminations | Segment Total |
Joint ventures and associates eliminations |
Consolidated | |||||||||||||||||||||||||||
| Three months ended March 31, 2015 |
||||||||||||||||||||||||||||||||||||
| Underlying earnings before tax geographically |
290 | 131 | 38 | 51 | (40 | ) | (2 | ) | 469 | 3 | 472 | |||||||||||||||||||||||||
| Fair value items |
(90 | ) | 151 | (22 | ) | (4 | ) | (193 | ) | - | (159 | ) | (8 | ) | (167 | ) | ||||||||||||||||||||
| Realized gains / (losses) on investments |
(29 | ) | 140 | 2 | 5 | - | - | 119 | (2 | ) | 116 | |||||||||||||||||||||||||
| Impairment charges |
(7 | ) | (7 | ) | - | (2 | ) | - | - | (16 | ) | - | (16 | ) | ||||||||||||||||||||||
| Impairment reversals |
3 | 2 | - | - | - | - | 5 | - | 5 | |||||||||||||||||||||||||||
| Other income / (charges) |
- | (22 | ) | 21 | - | - | - | (1 | ) | - | (1 | ) | ||||||||||||||||||||||||
| Run-off businesses |
8 | - | - | - | - | - | 8 | - | 8 | |||||||||||||||||||||||||||
| Income/ (loss) before tax |
175 | 396 | 39 | 50 | (233 | ) | (2 | ) | 425 | (8 | ) | 418 | ||||||||||||||||||||||||
| Income tax (expense) / benefit |
(30 | ) | (92 | ) | (21 | ) | (22 | ) | 57 | - | (109 | ) | 8 | (101 | ) | |||||||||||||||||||||
| Net income/ (loss) |
145 | 304 | 18 | 28 | (176 | ) | (2 | ) | 316 | - | 316 | |||||||||||||||||||||||||
| Inter-segment underlying earnings |
(53 | ) | (13 | ) | (16 | ) | 80 | 3 | ||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
1,693 | 1,046 | 1,371 | 757 | - | (24 | ) | 4,842 | (119 | ) | 4,723 | |||||||||||||||||||||||||
| Accident and health insurance |
552 | 129 | 13 | 60 | 1 | (1 | ) | 754 | (11 | ) | 743 | |||||||||||||||||||||||||
| General insurance |
- | 131 | - | 63 | - | - | 194 | (19 | ) | 175 | ||||||||||||||||||||||||||
| Total gross premiums |
2,244 | 1,306 | 1,383 | 879 | 1 | (26 | ) | 5,789 | (149 | ) | 5,641 | |||||||||||||||||||||||||
| Investment income |
908 | 590 | 544 | 117 | 94 | (95 | ) | 2,158 | (61 | ) | 2,098 | |||||||||||||||||||||||||
| Fee and commission income |
406 | 85 | 12 | 196 | - | (68 | ) | 630 | (48 | ) | 582 | |||||||||||||||||||||||||
| Other revenues |
1 | - | - | 1 | 1 | - | 3 | (1 | ) | 2 | ||||||||||||||||||||||||||
| Total revenues |
3,559 | 1,981 | 1,939 | 1,193 | 97 | (188 | ) | 8,580 | (258 | ) | 8,322 | |||||||||||||||||||||||||
| Inter-segment revenues |
6 | - | - | 86 | 96 | |||||||||||||||||||||||||||||||
The following table shows the new segments excluding voluntary changes in accounting policies:
| EUR millions | Americas | The Netherlands |
United Kingdom |
Central & Eastern Europe |
Spain & Portugal |
Europe | Asia | Asset Management |
Holding and other activities |
Eliminations | Segment total |
Joint ventures and associates eliminations |
Consolidated | |||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2015 |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Underlying earnings before tax |
290 | 131 | 39 | 5 | 3 | 178 | (3 | ) | 45 | (40 | ) | (2 | ) | 469 | 3 | 472 | ||||||||||||||||||||||||||||||||||||
| Fair value items |
(90 | ) | 151 | (33 | ) | - | - | 118 | 6 | - | (193 | ) | - | (159 | ) | (8 | ) | (167 | ) | |||||||||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
(29 | ) | 140 | 2 | - | - | 142 | 4 | 1 | - | - | 119 | (2 | ) | 116 | |||||||||||||||||||||||||||||||||||||
| Impairment charges |
(7 | ) | (7 | ) | - | (2 | ) | - | (9 | ) | - | - | - | - | (16 | ) | - | (16 | ) | |||||||||||||||||||||||||||||||||
| Impairment reversals |
3 | 2 | - | - | - | 2 | - | - | - | - | 5 | - | 5 | |||||||||||||||||||||||||||||||||||||||
| Other income / (charges) |
- | (22 | ) | 21 | - | - | (1 | ) | - | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||||||||||||||||||
| Run-off businesses |
8 | - | - | - | - | - | - | - | - | - | 8 | - | 8 | |||||||||||||||||||||||||||||||||||||||
| Income / (loss) before tax |
175 | 396 | 29 | 4 | 3 | 431 | 7 | 46 | (233 | ) | (2 | ) | 425 | (8 | ) | 418 | ||||||||||||||||||||||||||||||||||||
| Income tax (expense) / benefit |
(30 | ) | (92 | ) | (20 | ) | (4 | ) | (2 | ) | (118 | ) | (4 | ) | (14 | ) | 57 | - | (109 | ) | 8 | (101 | ) | |||||||||||||||||||||||||||||
| Net income / (loss) |
145 | 304 | 9 | - | 1 | 313 | 4 | 32 | (176 | ) | (2 | ) | 316 | - | 316 | |||||||||||||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(53 | ) | (13 | ) | (15 | ) | (4 | ) | - | (32 | ) | 18 | 65 | 3 | ||||||||||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
1,693 | 1,046 | 1,420 | 146 | 49 | 2,661 | 512 | - | - | (24 | ) | 4,842 | (119 | ) | 4,723 | |||||||||||||||||||||||||||||||||||||
| Accident and health insurance |
552 | 129 | 13 | - | 25 | 168 | 34 | - | 1 | (1 | ) | 754 | (11 | ) | 743 | |||||||||||||||||||||||||||||||||||||
| General insurance |
- | 131 | - | 44 | 19 | 194 | - | - | - | - | 194 | (19 | ) | 175 | ||||||||||||||||||||||||||||||||||||||
| Total gross premiums |
2,244 | 1,306 | 1,433 | 190 | 94 | 3,023 | 546 | - | 1 | (26 | ) | 5,789 | (149 | ) | 5,641 | |||||||||||||||||||||||||||||||||||||
| Investment income |
908 | 590 | 545 | 12 | 11 | 1,158 | 92 | 1 | 96 | (96 | ) | 2,158 | (61 | ) | 2,098 | |||||||||||||||||||||||||||||||||||||
| Fee and commission income |
406 | 85 | 25 | 11 | 3 | 124 | 20 | 149 | - | (70 | ) | 630 | (48 | ) | 582 | |||||||||||||||||||||||||||||||||||||
| Other revenues |
1 | - | - | - | 1 | 1 | - | - | 1 | - | 3 | (1 | ) | 2 | ||||||||||||||||||||||||||||||||||||||
| Total revenues |
3,559 | 1,981 | 2,003 | 213 | 108 | 4,305 | 658 | 151 | 98 | (191 | ) | 8,580 | (258 | ) | 8,322 | |||||||||||||||||||||||||||||||||||||
| Inter-segment revenues |
6 | - | - | - | - | - | 24 | 64 | 97 | |||||||||||||||||||||||||||||||||||||||||||
The following table shows the impact of the voluntary changes in accounting policies (as presented in note 2.1) on the new segments:
| EUR millions | Americas | The Netherlands |
United Kingdom |
Central & Eastern Europe |
Spain & Portugal |
Europe | Asia | Asset Management |
Holding and other activities |
Eliminations | Segment total |
Joint ventures and associates eliminations |
Consolidated | |||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2015 |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Underlying earnings before tax |
- | - | (37 | ) | - | - | (37 | ) | - | - | - | - | (37 | ) | - | (37 | ) | |||||||||||||||||||||||||||||||||||
| Fair value items |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Impairment charges |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Impairment reversals |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Other income / (charges) |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Run-off businesses |
8 | - | - | - | - | - | - | - | - | - | 8 | - | 8 | |||||||||||||||||||||||||||||||||||||||
| Income / (loss) before tax |
8 | - | (37 | ) | - | - | (37 | ) | - | - | - | - | (29 | ) | - | (29 | ) | |||||||||||||||||||||||||||||||||||
| Income tax (expense) / benefit |
(6 | ) | - | 7 | - | - | 7 | - | - | - | - | 2 | - | 2 | ||||||||||||||||||||||||||||||||||||||
| Net income / (loss) |
2 | - | (29 | ) | - | - | (29 | ) | - | - | - | - | (27 | ) | - | (27 | ) | |||||||||||||||||||||||||||||||||||
| Inter-segment underlying earnings |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
- | - | 706 | - | - | 706 | - | - | - | - | 706 | - | 706 | |||||||||||||||||||||||||||||||||||||||
| Accident and health insurance |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| General insurance |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Total gross premiums |
- | - | 706 | - | - | 706 | - | - | - | - | 706 | - | 706 | |||||||||||||||||||||||||||||||||||||||
| Investment income |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Fee and commission income |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Other revenues |
- | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Total revenues |
- | - | 706 | - | - | 706 | - | - | - | - | 706 | - | 706 | |||||||||||||||||||||||||||||||||||||||
| Inter-segment revenues |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
|
|
Unaudited |
Table of Contents
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|
15
|
The following table shows the new segment figures taken into account the voluntary changes in accounting policies (as presented in note 2.1):
| EUR millions | Americas | The Netherlands |
United Kingdom |
Central & Eastern Europe |
Spain & Portugal |
Europe | Asia | Asset Management |
Holding and other activities |
Eliminations | Segment total |
Joint ventures and associates eliminations |
Consolidated | |||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2015 |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Underlying earnings before tax |
290 | 131 | 2 | 5 | 3 | 141 | (3 | ) | 45 | (40 | ) | (2 | ) | 432 | 3 | 435 | ||||||||||||||||||||||||||||||||||||
| Fair value items |
(90 | ) | 151 | (33 | ) | - | - | 118 | 6 | - | (193 | ) | - | (159 | ) | (8 | ) | (167 | ) | |||||||||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
(29 | ) | 140 | 2 | - | - | 142 | 4 | 1 | - | - | 119 | (2 | ) | 116 | |||||||||||||||||||||||||||||||||||||
| Impairment charges |
(7 | ) | (7 | ) | - | (2 | ) | - | (9 | ) | - | - | - | - | (16 | ) | - | (16 | ) | |||||||||||||||||||||||||||||||||
| Impairment reversals |
3 | 2 | - | - | - | 2 | - | - | - | - | 5 | - | 5 | |||||||||||||||||||||||||||||||||||||||
| Other income / (charges) |
- | (22 | ) | 21 | - | - | (1 | ) | - | - | - | - | (1 | ) | - | (1 | ) | |||||||||||||||||||||||||||||||||||
| Run-off businesses |
16 | - | - | - | - | - | - | - | - | - | 16 | - | 16 | |||||||||||||||||||||||||||||||||||||||
| Income / (loss) before tax |
183 | 396 | (8 | ) | 4 | 3 | 394 | 7 | 46 | (233 | ) | (2 | ) | 396 | (8 | ) | 389 | |||||||||||||||||||||||||||||||||||
| Income tax (expense) / benefit |
(36 | ) | (92 | ) | (12 | ) | (4 | ) | (2 | ) | (110 | ) | (4 | ) | (14 | ) | 57 | - | (107 | ) | 8 | (100 | ) | |||||||||||||||||||||||||||||
| Net income / (loss) |
147 | 304 | (20 | ) | - | 1 | 284 | 4 | 32 | (176 | ) | (2 | ) | 289 | - | 289 | ||||||||||||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(53 | ) | (13 | ) | (15 | ) | (4 | ) | - | (32 | ) | 18 | 65 | 3 | ||||||||||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
1,693 | 1,046 | 2,126 | 146 | 49 | 3,367 | 512 | - | - | (24 | ) | 5,547 | (119 | ) | 5,429 | |||||||||||||||||||||||||||||||||||||
| Accident and health insurance |
552 | 129 | 13 | - | 25 | 168 | 34 | - | 1 | (1 | ) | 754 | (11 | ) | 743 | |||||||||||||||||||||||||||||||||||||
| General insurance |
- | 131 | - | 44 | 19 | 194 | - | - | - | - | 194 | (19 | ) | 175 | ||||||||||||||||||||||||||||||||||||||
| Total gross premiums |
2,244 | 1,306 | 2,139 | 190 | 94 | 3,729 | 546 | - | 1 | (26 | ) | 6,495 | (149 | ) | 6,347 | |||||||||||||||||||||||||||||||||||||
| Investment income |
908 | 590 | 545 | 12 | 11 | 1,158 | 92 | 1 | 96 | (96 | ) | 2,158 | (61 | ) | 2,098 | |||||||||||||||||||||||||||||||||||||
| Fee and commission income |
406 | 85 | 25 | 11 | 3 | 124 | 20 | 149 | - | (70 | ) | 630 | (48 | ) | 582 | |||||||||||||||||||||||||||||||||||||
| Other revenues |
1 | - | - | - | 1 | 1 | - | - | 1 | - | 3 | (1 | ) | 2 | ||||||||||||||||||||||||||||||||||||||
| Total revenues |
3,559 | 1,981 | 2,709 | 213 | 108 | 5,011 | 658 | 151 | 98 | (191 | ) | 9,286 | (258 | ) | 9,028 | |||||||||||||||||||||||||||||||||||||
| Inter-segment revenues |
6 | - | - | - | - | - | 24 | 64 | 97 | |||||||||||||||||||||||||||||||||||||||||||
Aegon’s segment information is prepared by consolidating on a proportionate basis Aegon’s joint ventures and associated companies.
Performance Measure
A performance measure of reporting segments utilized by the Company is underlying earnings before tax. Underlying earnings before tax reflects Aegon’s profit from underlying business operations and excludes components that relate to accounting mismatches that are dependent on market volatility or relate to events that are considered outside the normal course of business.
Aegon believes that its performance measure, underlying earnings before tax, provides meaningful information about the underlying results of Aegon’s business, including insight into the financial measures that Aegon’s senior management uses in managing the business. Among other things, Aegon’s senior management is compensated based in part on Aegon’s results against targets using underlying earnings before tax. While many other insurers in Aegon’s peer group present substantially similar performance measures, the performance measures presented in this document may nevertheless differ from the performance measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards.
The reconciliation from underlying earnings before tax to income before tax, being the most comparable IFRS measure, is presented in the tables in this note.
The items that are excluded from underlying earnings before tax as described further below are: fair value items, realized gain or losses on investments, impairment charges/reversals, other income or charges, run-off businesses and share in earnings of joint ventures and associates.
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 before tax. Changes to these long-term return assumptions are also included in the fair value items.
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Unaudited |
|
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|
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|
Condensed Consolidated Interim Financial Statements Q1 2016
|
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.
Certain assets held by Aegon 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 before tax 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 and the total return annuities and guarantees on variable annuities. 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 before tax 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 VA Europe (included in United Kingdom) are excluded from underlying earnings before tax, and the long-term expected return for these guarantees is set at zero. In addition fair value items include market related results on our loyalty bonus reserves in the United Kingdom. The value of these reserves are directly related to policyholder investments which value is directly impacted by movements in equity and bond markets.
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 before tax and reported under fair value items.
Realized gains or losses on investments
Includes realized gains and losses on available-for-sale investments, mortgage loans and other loan portfolios.
Impairment charges/reversals
Impairment charges include impairments on available-for-sale debt securities, shares including the effect of deferred policyholder acquisition costs, mortgage loans and other loan portfolios at amortized cost, joint ventures and associates. Impairment reversals include reversals on available-for-sale debt securities.
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. The impact of model updates used to support calculations of our liabilities for insurance and investment contracts sold to policyholders and related assets are reported under this caption as well.
Other charges may 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 interim financial statements, these charges are included in operating expenses.
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|
Unaudited |
Table of Contents
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17
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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 results related to 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 the sale of the 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 before tax.
Share in earnings of joint ventures and associates
Earnings from Aegon’s joint ventures in the Netherlands, Mexico, Spain, Portugal, China and Japan and Aegon’s associates in India, Brazil, the Netherlands, United Kingdom, Mexico and France are reported on an underlying earnings before tax basis.
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Unaudited |
|
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|
3.1 Income statement
| EUR millions | Americas | The Netherlands |
United Kingdom |
Central & Eastern Europe |
Spain & Portugal |
Europe | Asia | Asset Management |
Holding and other activities |
Eliminations | Segment total |
Joint ventures and associates eliminations |
Consolidated | |||||||||||||||||||||||||||||||||||||||
| Three months ended March 31, 2016 |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| Underlying earnings before tax |
283 | 128 | 23 | 15 | 3 | 169 | - | 45 | (37 | ) | 1 | 462 | 6 | 468 | ||||||||||||||||||||||||||||||||||||||
| Fair value items |
(220 | ) | (105 | ) | 34 | - | - | (71 | ) | 3 | - | (70 | ) | - | (358 | ) | (13 | ) | (370 | ) | ||||||||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
33 | 18 | 1 | - | (1 | ) | 17 | 4 | - | - | - | 54 | (1 | ) | 53 | |||||||||||||||||||||||||||||||||||||
| Impairment charges |
(34 | ) | (5 | ) | - | 2 | - | (3 | ) | (1 | ) | - | (4 | ) | - | (42 | ) | - | (42 | ) | ||||||||||||||||||||||||||||||||
| Impairment reversals |
2 | 4 | - | - | - | 4 | - | - | - | - | 6 | - | 6 | |||||||||||||||||||||||||||||||||||||||
| Other income / (charges) |
(6 | ) | - | 1 | - | - | 1 | - | - | - | - | (6 | ) | - | (6 | ) | ||||||||||||||||||||||||||||||||||||
| Run-off businesses |
28 | - | - | - | - | - | - | - | - | - | 28 | - | 28 | |||||||||||||||||||||||||||||||||||||||
| Income / (loss) before tax |
87 | 40 | 58 | 16 | 2 | 116 | 6 | 45 | (110 | ) | 1 | |||||||||||||||||||||||||||||||||||||||||