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Securities and Exchange Commission
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d/16
of the Securities Exchange Act of 1934
November 2014
AEGON N.V.
Aegonplein 50
2591 TV THE HAGUE
The Netherlands
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Aegon’s condensed consolidated interim financial statements Q3 2014, dated November 13, 2014, 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: November 13, 2014 | By | /s/ J.H.P.M. van Rossum | ||||
| J.H.P.M. van Rossum | ||||||
| Executive Vice President | ||||||
| Corporate Controller | ||||||
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| 2 | ||||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Notes to the condensed consolidated interim financial statements |
7 | |||
| Unaudited | 1 |
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Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.
| 2 | Unaudited |
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Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.
| Unaudited | 3 |
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Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.
| 4 | Unaudited |
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1 For a breakdown of share capital please refer to note 14.
2 Issued capital and reserves attributable to equity holders of Aegon N.V.
Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.
| Unaudited | 5 |
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| 6 | Unaudited |
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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 over 28,000 people worldwide.
1. Basis of presentation
The condensed consolidated interim financial statements as at, and for the nine months ended, September 30, 2014, 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 2013 consolidated financial statements of Aegon N.V. as included in Aegon’s Annual Report for 2013 and the disclosures provided in note 2.1 and 2.2 of this report which disclose the impact of voluntary changes in accounting policies that were made by Aegon effective January 1, 2014. Aegon’s Annual Report for 2013 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. Certain amounts in prior periods have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income, shareholders’ equity or earnings per share. The condensed consolidated interim financial statements as at, and for the nine months ended, September 30, 2014, were approved by the Executive Board on November 12, 2014.
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 2013 consolidated financial statements, except for the newly applied accounting policies as described in note 2.1 and 2.2.
New IFRS accounting standards effective
The following standards, interpretations, amendments to standards and interpretations became effective in 2014:
| t | IFRS 10 Consolidated Financial Statements – Amendment Investment Entities; |
| t | IAS 36 Impairment of Assets – Recoverable Amounts Disclosures for Non-Financial Assets; and |
| t | IAS 39 Financial instruments: Recognition and Measurement – Amendment Novation of Derivatives and Continuation of Hedge Accounting. |
| Unaudited | 7 |
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None of these new or revised standards and interpretations had a significant effect on the condensed consolidated interim financial statements for the period ended September 30, 2014.
For a complete overview of IFRS standards, published before January 1, 2014, that will be applied in future years, but were not early adopted by the Group, please refer to Aegon’s Annual Report for 2013.
Taxes
Taxes on income for the nine-month period, ended September 30, 2014, are accrued using the tax rate that would be applicable to expected 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 estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2013.
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
|
| |||||||||||
|
September 30, 2014 |
|
1
|
|
|
EUR
|
|
|
1.2633
|
|
|
0.7792
|
| ||||
|
December 31, 2013 |
|
1
|
|
|
EUR
|
|
|
1.3780
|
|
|
0.8320
|
|
Weighted average exchange rates
|
|
USD
|
|
|
GBP
|
| |||||||||||
|
Nine months ended September 30, 2014 |
|
1
|
|
|
EUR
|
|
|
1.3554
|
|
|
0.8120
|
| ||||
|
Nine months ended September 30, 2013 |
|
1
|
|
|
EUR
|
|
|
1.3161
|
|
|
0.8512
|
|
| 8 | Unaudited |
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2.1 Voluntary changes in accounting policies
Aegon adopted voluntary changes in accounting policies, effective January 1, 2014, which are applied retrospectively for all periods presented in this document, both in the main schedules and the associated footnotes. Changes to these policies relate to deferred policy acquisition costs and how Aegon accounts for longevity trends in the Netherlands. In the paragraphs below, details are provided for these changes in accounting policies.
Deferred policy acquisition costs
Aegon adopted a single group-wide accounting policy for deferred policy acquisition costs as of January 1, 2014. Upon initial adoption of IFRS, entities were permitted to continue existing accounting policies for insurance contracts even though such policies were often non-uniform between countries. Through adoption of a uniform, group-wide accounting policy, Aegon eliminates this lack of uniformity for the deferral of policy acquisition costs thereby providing the users of the financial statements with more meaningful information.
IFRS 4 neither prohibits nor requires the deferral of policy acquisition costs, nor does it prescribe what acquisition costs are deferrable. Thus, in developing the new policy, Aegon considered and sought alignment with the proposed description of deferrable policy acquisition costs within the IFRS Insurance Contracts Phase II exposure draft (‘Exposure Draft’). In the absence of detailed guidance in the Exposure Draft, Aegon also considered the recently adopted guidance in US GAAP (ASU 2010-26 ‘Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts’), if not conflicting with IFRS 4 or the Exposure Draft. IFRS currently differs from US GAAP by not limiting the deferral to expenses from successful efforts only and in the detail of how that principle is applied. Under the new accounting policy, deferred policy acquisition costs include costs that are directly attributable to the acquisition or renewal of insurance contracts. The previous accounting policy was based on a broader definition of costs that could be deferred.
Details of the impact of applying this voluntary change to previous periods are provided in the tables presented in note 2.2.
Longevity reserving
As of January 1, 2014, Aegon amended its policy to determine the insurance contract liability of Aegon the Netherlands to account for longevity risk assumed by Aegon. This change will provide more current information about the financial effects of changes in life expectancy of the insured population. It will supply users of the financial statements with more relevant decision making information on the insurance contract liability and will improve transparency on the longevity risks assumed by Aegon.
Mortality tables will be reviewed annually based on the prospective tables taking into account longevity trends. The new methodology will take into account the contractual cash flows related to the longevity risk assumed. Previously the methodology applied by Aegon the Netherlands considered realized mortalities based on retrospective mortality tables.
Details of the impact of applying this voluntary change to previous periods are provided in the tables presented in note 2.2.
| Unaudited | 9 |
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2.2 Impact of voluntary changes in accounting policies
|
Impact of voluntary changes in accounting policies on condensed consolidated income statement
|
||||||||||||||||
|
YTD
2013 |
Change in accounting policy | YTD 2013 (restated) |
||||||||||||||
|
Deferred policy |
Longevity reserving |
|||||||||||||||
| EUR millions | ||||||||||||||||
| Benefits and expenses |
33,849 | 32 | (103) | 33,778 | ||||||||||||
| Income tax (expense) / benefit |
13 | (24) | (21) | (32) | ||||||||||||
| Net effect |
(56) | 82 | ||||||||||||||
| Earnings per share (EUR per share) |
||||||||||||||||
| Basic earnings per common share |
0.23 | - | 0.02 | 0.25 | ||||||||||||
| Basic earnings per common share B |
0.01 | - | - | 0.01 | ||||||||||||
| Diluted earnings per common share |
0.23 | - | 0.02 | 0.25 | ||||||||||||
| Diluted earnings per common share B |
0.01 | - | - | 0.01 | ||||||||||||
| Earnings per common share calculation |
||||||||||||||||
| Net income attributable to equity holders of Aegon N.V. |
673 | (56) | 82 | 699 | ||||||||||||
| Preferred dividend |
(83) | - | - | (83) | ||||||||||||
| Coupons on other equity instruments |
(120) | - | - | (120) | ||||||||||||
| Earnings attributable to common shareholders |
470 | (56) | 82 | 496 | ||||||||||||
| Weighted average number of common shares outstanding (in millions) |
2,017 | - | - | 2,017 | ||||||||||||
| Weighted average number of common shares B outstanding (in millions) |
295 | - | - | 295 | ||||||||||||
|
Impact of voluntary changes in accounting policies on condensed consolidated statement of comprehensive income |
||||||||||||||||
|
YTD
2013 |
Change in accounting policy | YTD 2013 (restated) |
||||||||||||||
|
Deferred policy |
Longevity reserving |
|||||||||||||||
| EUR millions | ||||||||||||||||
| Net income |
674 | (56) | 82 | 700 | ||||||||||||
| Gains / (losses) on revaluation of available-for-sale investments |
(3,461) | (26) | - | (3,487) | ||||||||||||
| Movement in foreign currency translation and net foreign investment hedging reserves |
(510) | 46 | - | (464) | ||||||||||||
| Income tax relating to items that may be reclassified |
1,147 | 9 | - | 1,156 | ||||||||||||
| Net effect other comprehensive income for the period |
29 | - | ||||||||||||||
| Net effect comprehensive income |
(27) | 82 | ||||||||||||||
| Total comprehensive income attributable to: |
||||||||||||||||
| Equity holders of Aegon N.V. |
(2,266) | (27) | 82 | (2,211) | ||||||||||||
| Non-controlling interests |
(5) | - | - | (5) | ||||||||||||
| 10 | Unaudited |
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|
Impact of changes in accounting policies on the consolidated statement of financial position
|
||||||||||||||||||||
| December 31, 2013 1) |
Change in accounting policy | Reclassification 2) |
December 31, |
|||||||||||||||||
|
Deferred policy |
Longevity reserving |
|||||||||||||||||||
| EUR millions | ||||||||||||||||||||
| Assets |
||||||||||||||||||||
| Intangible assets |
2,246 | 26 | - | - | 2,272 | |||||||||||||||
| Investments in joint ventures |
1,427 | (1) | - | - | 1,426 | |||||||||||||||
| Reinsurance assets |
10,345 | (2) | - | - | 10,344 | |||||||||||||||
| Other assets and receivables |
7,429 | 2 | - | 156 | 7,586 | |||||||||||||||
| Deferred expenses |
12,040 | (2,035) | - | - | 10,006 | |||||||||||||||
| Equity and liabilities |
||||||||||||||||||||
| Shareholders’ equity |
19,966 | (1,533) | (832) | - | 17,601 | |||||||||||||||
| Insurance contracts |
100,642 | 54 | 1,073 | - | 101,769 | |||||||||||||||
| Other liabilities |
22,487 | (531) | (241) | 156 | 21,871 | |||||||||||||||
1 As reported in Aegon’s Annual Report dated March 19, 2014.
2 As a result of the voluntary accounting changes the balance of the Dutch tax group as at December 31, 2013 changed from a deferred tax liability to a deferred tax asset.
|
Impact of voluntary changes in accounting policies on consolidated statement of changes in equity
|
||||||||||||||||
| December 31, 2013 1) |
Change in accounting policy |
December 31, |
||||||||||||||
|
Deferred policy |
Longevity reserving |
|||||||||||||||
| EUR millions |
||||||||||||||||
| Share capital |
8,701 | - | - | 8,701 | ||||||||||||
| Retained earnings |
10,750 | (1,557) | (832) | 8,361 | ||||||||||||
| Revaluation reserves |
2,998 | 26 | - | 3,023 | ||||||||||||
| Remeasurement of defined benefit plans |
(706) | - | - | (706) | ||||||||||||
| Other reserves |
(1,777) | (1) | - | (1,778) | ||||||||||||
| Shareholders’ equity |
19,966 | (1,533) | (832) | 17,601 | ||||||||||||
1 As reported in Aegon’s Annual Report dated March 19, 2014.
| Unaudited | 11 |
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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 |
Joint |
Consolidated | |||||||||||||||||||||||||||
| Three months ended September 30, 2014 |
|
|||||||||||||||||||||||||||||||||||
| Underlying earnings before tax geographically |
134 | 127 | 28 | 40 | (37) | - | 291 | 4 | 295 | |||||||||||||||||||||||||||
| Fair value items |
(159) | (101) | - | - | (36) | - | (296) | (7) | (304) | |||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
14 | 52 | 10 | 8 | - | - | 85 | (1) | 84 | |||||||||||||||||||||||||||
| Impairment charges |
(4) | (5) | - | (14) | - | - | (23) | - | (23) | |||||||||||||||||||||||||||
| Impairment reversals |
25 | 3 | - | - | - | - | 28 | - | 28 | |||||||||||||||||||||||||||
| Other income / (charges) |
(27) | (6) | (10) | 14 | (1) | - | (29) | - | (29) | |||||||||||||||||||||||||||
| Run-off businesses |
(31) | - | - | - | - | - | (31) | - | (31) | |||||||||||||||||||||||||||
| Income/ (loss) before tax |
(48) | 70 | 27 | 48 | (74) | - | 23 | (4) | 19 | |||||||||||||||||||||||||||
| Income tax (expense) / benefit |
52 | (26) | (2) | (12) | 17 | - | 29 | 4 | 33 | |||||||||||||||||||||||||||
| Net income/ (loss) |
4 | 44 | 25 | 35 | (57) | - | 52 | - | 52 | |||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(44) | (14) | (15) | 69 | 4 | |||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
1,580 | 1,204 | 1,243 | 443 | - | (18) | 4,452 | (89) | 4,363 | |||||||||||||||||||||||||||
| Accident and health insurance |
485 | 34 | 14 | 37 | 1 | (1) | 570 | (1) | 569 | |||||||||||||||||||||||||||
| General insurance |
- | 107 | - | 52 | - | - | 160 | (16) | 144 | |||||||||||||||||||||||||||
| Total gross premiums |
2,065 | 1,345 | 1,257 | 533 | 2 | (19) | 5,181 | (105) | 5,076 | |||||||||||||||||||||||||||
| Investment income |
823 | 637 | 487 | 61 | 79 | (79) | 2,009 | (11) | 1,998 | |||||||||||||||||||||||||||
| Fee and commission income |
454 | 81 | 11 | 159 | - | (58) | 647 | (28) | 619 | |||||||||||||||||||||||||||
| Other revenues |
1 | - | - | - | 2 | - | 3 | - | 2 | |||||||||||||||||||||||||||
| Total revenues |
3,343 | 2,062 | 1,755 | 753 | 83 | (156) | 7,840 | (145) | 7,695 | |||||||||||||||||||||||||||
| Inter-segment revenues |
3 | - | - | 73 | 80 | |||||||||||||||||||||||||||||||
| EUR millions | Americas | The Netherlands |
United Kingdom |
New Markets | Holding and other activities |
Eliminations | Segment Total |
Joint |
Consolidated | |||||||||||||||||||||||||||
| Three months ended September 30, 2013 |
|
|||||||||||||||||||||||||||||||||||
| Underlying earnings before tax geographically |
367 | 114 | 22 | 72 | (25) | - | 550 | (18) | 532 | |||||||||||||||||||||||||||
| Fair value items |
(489) | 37 | (8) | (12) | 15 | - | (457) | 4 | (453) | |||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
7 | 190 | 9 | (4) | - | - | 202 | 2 | 204 | |||||||||||||||||||||||||||
| Impairment charges |
(44) | (13) | (12) | (4) | - | - | (73) | - | (73) | |||||||||||||||||||||||||||
| Impairment reversals |
27 | - | - | - | - | - | 27 | - | 27 | |||||||||||||||||||||||||||
| Other income / (charges) |
90 | (2) | (1) | (124) | (5) | - | (42) | 7 | (35) | |||||||||||||||||||||||||||
| Run-off businesses |
2 | - | - | - | - | - | 2 | - | 2 | |||||||||||||||||||||||||||
| Income/ (loss) before tax |
(40) | 326 | 10 | (72) | (15) | - | 209 | (5) | 204 | |||||||||||||||||||||||||||
| Income tax (expense) / benefit |
53 | (94) | 55 | 7 | 6 | - | 27 | 5 | 32 | |||||||||||||||||||||||||||
| Net income/ (loss) |
13 | 232 | 65 | (65) | (9) | - | 236 | - | 236 | |||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(42) | (15) | (14) | 65 | 6 | |||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
1,550 | 431 | 1,487 | 304 | - | (18) | 3,754 | (96) | 3,658 | |||||||||||||||||||||||||||
| Accident and health insurance |
455 | 41 | - | 41 | 2 | (2) | 537 | (2) | 535 | |||||||||||||||||||||||||||
| General insurance |
- | 104 | - | 55 | - | - | 159 | (19) | 140 | |||||||||||||||||||||||||||
| Total gross premiums |
2,005 | 576 | 1,487 | 400 | 2 | (20) | 4,450 | (117) | 4,333 | |||||||||||||||||||||||||||
| Investment income |
832 | 587 | 413 | 54 | 84 | (83) | 1,887 | (10) | 1,877 | |||||||||||||||||||||||||||
| Fee and commission income |
314 | 78 | 12 | 150 | - | (59) | 495 | (20) | 475 | |||||||||||||||||||||||||||
| Other revenues |
1 | - | - | 1 | 1 | - | 3 | (1) | 2 | |||||||||||||||||||||||||||
| Total revenues |
3,152 | 1,241 | 1,912 | 605 | 87 | (162) | 6,835 | (148) | 6,687 | |||||||||||||||||||||||||||
| Inter-segment revenues |
5 | 1 | - | 72 | 84 | |||||||||||||||||||||||||||||||
| 12 | Unaudited |
Table of Contents
| EUR millions | Americas | The Netherlands |
United Kingdom |
New Markets | Holding and other activities |
Eliminations | Segment Total |
Joint |
Consolidated | |||||||||||||||||||||||||||
| Nine months ended September 30, 2014 |
|
|||||||||||||||||||||||||||||||||||
| Underlying earnings before tax geographically |
767 | 386 | 86 | 163 | (100) | - | 1,303 | (4) | 1,299 | |||||||||||||||||||||||||||
| Fair value items |
(326) | (268) | (16) | 8 | (73) | - | (675) | (2) | (677) | |||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
74 | 183 | 123 | 12 | - | - | 392 | (2) | 390 | |||||||||||||||||||||||||||
| Impairment charges |
(17) | (14) | - | (38) | - | - | (69) | - | (69) | |||||||||||||||||||||||||||
| Impairment reversals |
56 | 7 | - | - | - | - | 63 | - | 63 | |||||||||||||||||||||||||||
| Other income / (charges) |
(35) | (14) | (12) | 13 | (2) | - | (49) | (1) | (50) | |||||||||||||||||||||||||||
| Run-off businesses |
(18) | - | - | - | - | - | (18) | - | (18) | |||||||||||||||||||||||||||
| Income/ (loss) before tax |
502 | 281 | 181 | 157 | (174) | - | 947 | (9) | 938 | |||||||||||||||||||||||||||
| Income tax (expense) / benefit |
(62) | (62) | (38) | (44) | 46 | - | (160) | 9 | (151) | |||||||||||||||||||||||||||
| Net income/ (loss) |
440 | 219 | 143 | 113 | (128) | - | 787 | - | 787 | |||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(128) | (43) | (43) | 199 | 15 | |||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
4,606 | 3,243 | 3,634 | 1,302 | 1 | (54) | 12,732 | (262) | 12,470 | |||||||||||||||||||||||||||
| Accident and health insurance |
1,356 | 203 | 43 | 128 | 4 | (4) | 1,730 | (10) | 1,720 | |||||||||||||||||||||||||||
| General insurance |
- | 397 | - | 167 | - | - | 564 | (53) | 511 | |||||||||||||||||||||||||||
| Total gross premiums |
5,962 | 3,843 | 3,677 | 1,596 | 5 | (58) | 15,026 | (325) | 14,701 | |||||||||||||||||||||||||||
| Investment income |
2,424 | 1,957 | 1,560 | 175 | 237 | (235) | 6,118 | (32) | 6,086 | |||||||||||||||||||||||||||
| Fee and commission income |
1,095 | 238 | 31 | 449 | - | (171) | 1,642 | (70) | 1,572 | |||||||||||||||||||||||||||
| Other revenues |
1 | - | - | 2 | 4 | - | 7 | (1) | 5 | |||||||||||||||||||||||||||
| Total revenues |
9,482 | 6,038 | 5,268 | 2,221 | 246 | (463) | 22,792 | (428) | 22,364 | |||||||||||||||||||||||||||
| Inter-segment revenues |
11 | - | - | 213 | 239 | |||||||||||||||||||||||||||||||
| EUR millions | Americas | The Netherlands |
United Kingdom |
New Markets | Holding and other activities |
Eliminations | Segment Total |
Joint |
Consolidated | |||||||||||||||||||||||||||
| Nine months ended September 30, 2013 |
|
|||||||||||||||||||||||||||||||||||
| Underlying earnings before tax geographically |
1,015 | 330 | 67 | 181 | (97) | (1) | 1,495 | (42) | 1,453 | |||||||||||||||||||||||||||
| Fair value items |
(877) | (72) | (11) | (23) | (39) | - | (1,022) | 32 | (990) | |||||||||||||||||||||||||||
| Realized gains / (losses) on investments |
82 | 276 | 38 | (1) | - | - | 395 | 1 | 396 | |||||||||||||||||||||||||||
| Impairment charges |
(100) | (35) | (28) | (10) | - | - | (173) | - | (173) | |||||||||||||||||||||||||||
| Impairment reversals |
52 | - | - | - | - | - | 52 | - | 52 | |||||||||||||||||||||||||||
| Other income / (charges) |
84 | (29) | (47) | (22) | (5) | - | (19) | 6 | (13) | |||||||||||||||||||||||||||
| Run-off businesses |
7 | - | - | - | - | - | 7 | - | 7 | |||||||||||||||||||||||||||
| Income/ (loss) before tax |
263 | 470 | 19 | 125 | (141) | (1) | 735 | (3) | 732 | |||||||||||||||||||||||||||
| Income tax (expense) / benefit |
10 | (115) | 56 | (21) | 35 | - | (35) | 3 | (32) | |||||||||||||||||||||||||||
| Net income/ (loss) |
273 | 355 | 75 | 104 | (106) | (1) | 700 | - | 700 | |||||||||||||||||||||||||||
| Inter-segment underlying earnings |
(131) | (43) | (43) | 196 | 21 | |||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||
| Life insurance gross premiums |
4,641 | 3,062 | 5,033 | 1,023 | 1 | (56) | 13,704 | (341) | 13,363 | |||||||||||||||||||||||||||
| Accident and health insurance |
1,351 | 213 | - | 136 | 6 | (6) | 1,700 | (10) | 1,690 | |||||||||||||||||||||||||||
| General insurance |
- | 382 | - | 137 | - | - | 519 | (25) | 494 | |||||||||||||||||||||||||||
| Total gross premiums |
5,992 | 3,657 | 5,033 | 1,296 | 7 | (62) | 15,923 | (376) | 15,547 | |||||||||||||||||||||||||||
| Investment income |
2,528 | 1,684 | 1,595 | 179 | 255 | (255) | 5,986 | (48) | 5,938 | |||||||||||||||||||||||||||
| Fee and commission income |
942 | 241 | 68 | 425 | - | (180) | 1,496 | (54) | 1,442 | |||||||||||||||||||||||||||
| Other revenues |
4 | - | - | 2 | 3 | - | 9 | (3) | 6 | |||||||||||||||||||||||||||
| Total revenues |
9,466 | 5,582 | 6,696 | 1,902 | 265 | (497) | 23,414 | (481) | 22,933 | |||||||||||||||||||||||||||
| Inter-segment revenues |
15 | 1 | 1 | 221 | 259 | |||||||||||||||||||||||||||||||
Non-IFRS measures
For segment reporting purposes the following non-IFRS financial measures are included: underlying earnings before tax, income tax and income before tax. These non-IFRS measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies. Aegon believes that its non-IFRS measures provide 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 the non-IFRS measures presented here. While many other insurers in Aegon’s peer group present substantially similar non-IFRS measures, the non-IFRS measures 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. Readers are cautioned to consider carefully the different ways in which Aegon and its peers present similar information before comparing them.
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Aegon believes the non-IFRS measures shown herein, when read together with Aegon’s reported IFRS financial statements, provide 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 policies 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.
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.
Underlying earnings
Underlying earnings reflect our profit from underlying business operations and exclude 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. Below we describe items that are excluded from underlying earnings.
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.
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.
Realized gains or losses on investments
This line item includes realized gains and losses on available-for-sale investments, mortgage loans and other loan portfolios.
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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.
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 interim financial statements, 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 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.
Share in earnings of joint ventures and associates
Earnings from Aegon’s joint ventures in Spain, China and Japan and Aegon’s associates in India, Brazil and Mexico are reported on an underlying earnings basis.
Actuarial assumption and model updates
Assumptions are reviewed and updated periodically, typically in the third quarter, based on historical experience and observable market data, including market transactions such as acquisitions and reinsurance transactions. Similarly, the models and systems used for determining our liabilities are reviewed periodically and, if deemed necessary, updated based on emerging best practices and available technology.
During the third quarter of 2014, Aegon implemented model and assumption updates resulting in a net EUR 299 million charge to income before tax.
Charges arising from assumption and model updates included in underlying earnings before tax amounted to EUR 221 million.
| t | A charge for actuarial assumption updates in the Americas Life & Protection business amounted to EUR 265 million, and was primarily related to updated mortality assumptions for the older ages. Model updates, including changes to modeled premium persistency, had a negative impact of EUR 29 million. |
| t | Actuarial assumption changes and model updates in the Americas Individual Savings & Retirement business resulted in a gain of EUR 100 million. Updated assumptions in variable annuities related to policyholder behavior on partial withdrawals accounted for the majority of an aggregated EUR 129 million benefit. A EUR 29 million charge was mainly caused by updated assumption for the asset portfolio at fixed annuities. |
Actuarial assumption changes and model updates not included in underlying earnings resulted in a charge of EUR 78 million to income before tax. This was mainly caused by adjusting the modeled hedging costs for the GMWB variable annuity book, improving the hedging models for indexed universal life products and updating the discount rate on reserves in the run-off life reinsurance book.
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3.2 Investments geographically
Amounts included in the tables on investments geographically are presented on an IFRS basis.
| EUR millions (unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
| Americas USD millions |
United Kingdom GBP millions |
September 30, 2014 | Americas | The Netherlands |
United Kingdom |
New Markets |
Holding & other |
Eliminations | Total EUR |
|||||||||||||||||||||||||||
| Investments | ||||||||||||||||||||||||||||||||||||
| 2,062 | 147 | Shares | 1,632 | 259 | 189 | 26 | 75 | (1 | ) | 2,180 | ||||||||||||||||||||||||||
| 80,282 | 9,377 | Debt securities | 63,550 | 22,289 | 12,034 | 3,791 | - | - | 101,664 | |||||||||||||||||||||||||||
| 10,991 | - | Loans | 8,700 | 26,516 | - | 498 | 11 | - | 35,726 | |||||||||||||||||||||||||||
| 11,923 | 348 | Other financial assets | 9,438 | 330 | 446 | 10 | 107 | - | 10,331 | |||||||||||||||||||||||||||
| 972 | - | Investments in real estate | 770 | 796 | - | 2 | - | - | 1,568 | |||||||||||||||||||||||||||
| 106,231 | 9,872 | Investments general account |
84,090 | 50,190 | 12,669 | 4,327 | 193 | (1 | ) | 151,469 | ||||||||||||||||||||||||||
| 1,537 | 12,983 | Shares | 1,216 | 9,254 | 16,662 | 412 | - | (10 | ) | 27,534 | ||||||||||||||||||||||||||
| 6,380 | 9,401 | Debt securities | 5,050 | 18,541 | 12,065 | 269 | - | - | 35,925 | |||||||||||||||||||||||||||
| 101,380 | 22,158 | Unconsolidated investment funds |
80,250 | - | 28,437 | 6,275 | - | - | 114,962 | |||||||||||||||||||||||||||
| 276 | 3,263 | Other financial assets | 219 | 393 | 4,187 | 12 | - | - | 4,811 | |||||||||||||||||||||||||||
| - | 845 | Investments in real estate | - | - | 1,085 | - | - | - | 1,085 | |||||||||||||||||||||||||||
| 109,572 | 48,650 | Investments for account of policyholders |
86,735 | 28,188 | 62,435 | 6,969 | - | (10 | ) | 184,317 | ||||||||||||||||||||||||||
| 215,804 | 58,521 | Investments on balance sheet |
170,825 | 78,378 | 75,104 | 11,296 | 193 | (11 | ) | 335,785 | ||||||||||||||||||||||||||
| 166,188 | 391 | Off balance sheet investments third parties |
131,550 | 927 | 501 | 69,453 | - | - | 202,432 | |||||||||||||||||||||||||||
| 381,991 | 58,912 | Total revenue generating investments |
302,376 | 79,305 | 75,606 | 80,749 | 193 | (11 | ) | 538,217 | ||||||||||||||||||||||||||
| Investments | ||||||||||||||||||||||||||||||||||||
| 88,018 | 9,624 | Available-for-sale | 69,673 | 22,307 | 12,351 | 3,806 | 12 | - | 108,149 | |||||||||||||||||||||||||||
| 10,991 | - | Loans | 8,700 | 26,516 | - | 498 | 11 | - | 35,726 | |||||||||||||||||||||||||||
| 115,822 | 48,052 | Financial assets at fair value through profit or loss |
91,682 | 28,759 | 61,669 | 6,990 | 170 | (11 | ) | 189,258 | ||||||||||||||||||||||||||
| 972 | 845 | Investments in real estate | 770 | 796 | 1,085 | 2 | - | - | 2,652 | |||||||||||||||||||||||||||
| 215,804 | 58,521 | Total investments on balance sheet |
170,825 | 78,378 | 75,104 | 11,296 | 193 | (11 | ) | 335,785 | ||||||||||||||||||||||||||
| 12 | - | Investments in joint ventures |
10 | 789 | - | 609 | 1 | - | 1,408 | |||||||||||||||||||||||||||
| 112 | 18 | Investments in associates | 88 | 19 | 23 | 371 | 1 | - | 502 | |||||||||||||||||||||||||||
| 30,317 | 4,245 | Other assets | 23,999 | 28,236 | 5,448 | 3,288 | 36,262 | (35,612 | ) | 61,621 | ||||||||||||||||||||||||||
| 246,245 | 62,784 | Consolidated total assets |
194,922 | 107,423 | 80,575 | 15,563 | 36,456 | (35,623 | ) | 399,316 | ||||||||||||||||||||||||||
| EUR millions (unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
|
Americas USD millions |
United Kingdom GBP millions |
December 31, 2013 | Americas | The Netherlands |
United Kingdom |
New Markets |
Holding & other activities |
Eliminations | Total EUR |
|||||||||||||||||||||||||||
| Investments | ||||||||||||||||||||||||||||||||||||
| 2,007 | 46 | Shares | 1,456 | 447 | 55 | 45 | 36 | (2 | ) | 2,036 | ||||||||||||||||||||||||||
| 78,719 | 8,719 | Debt securities | 57,125 | 19,095 | 10,479 | 2,812 | - | - | 89,511 | |||||||||||||||||||||||||||
| 11,289 | 1 | Loans | 8,192 | 24,708 | 1 | 508 | - | - | 33,409 | |||||||||||||||||||||||||||
| 11,418 | 173 | Other financial assets | 8,286 | 293 | 208 | 30 | 103 | - | 8,920 | |||||||||||||||||||||||||||
| 993 | - | Investments in real estate | 721 | 810 | - | 1 | - | - | 1,532 | |||||||||||||||||||||||||||
| 104,425 | 8,938 | Investments general account |
75,780 | 45,354 | 10,743 | 3,396 | 139 | (2 | ) | 135,409 | ||||||||||||||||||||||||||
| 1,804 | 12,792 | Shares | 1,309 | 8,450 | 15,375 | 297 | - | (8 | ) | 25,423 | ||||||||||||||||||||||||||
| 6,675 | 9,643 | Debt securities | 4,844 | 16,791 | 11,590 | 307 | - | - | 33,531 | |||||||||||||||||||||||||||
| 94,950 | 21,776 | Unconsolidated investment funds |
68,905 | - | 26,173 | 5,744 | - | - | 100,822 | |||||||||||||||||||||||||||
| 230 | 3,062 | Other financial assets | 167 | 405 | 3,680 | 9 | - | - | 4,261 | |||||||||||||||||||||||||||
| - | 828 | Investments in real estate | - | - | 996 | - | - | - | 996 | |||||||||||||||||||||||||||
| 103,659 | ||||||||||||||||||||||||||||||||||||