1Q 2020 Update
Net income of EUR 1,270 million, reflecting fair value
gains
● Underlying earnings before tax were EUR 366 million reflecting
adverse mortality and impacts from lower interest rates in the
Americas, and limited COVID-19 related non-life claims in the
Netherlands
● Net income of EUR 1,270 million reflects fair value gains of
EUR 1,372 million, driven by a reduction in the valuation of the
liabilities in the Netherlands, reflecting wider credit spreads.
This was partly offset by fair value losses in the US from unhedged
risks on variable annuities and underperformance of investments.
Hedge programs across the group were highly effective for the
targeted risks
● Other charges of EUR 162 million mainly related to a provision
for a class action settlement, restructuring charges, and IFRS 9 /
17 project costs, partly offset by a gain on sale of Aegon’s stake
in joint ventures in Japan
● Return on equity of 7.0% in the first quarter of 2020; very
unlikely to reach annual 10% return on equity target, given the
extraordinary circumstances due to the COVID-19 pandemic
Gross deposits of EUR 52 billion; net outflows of EUR 1
billion
● Gross deposits were EUR 52 billion; net outflows of EUR 1
billion caused by Variable Annuities and Mutual Funds in the
Americas, partly offset by third-party inflows at Asset
Management
● New life sales were EUR 206 million; sales in the US were
under competitive pressure and impacted by the phasing out of
certain whole life products, while sales in China benefitted from
the e-commerce sales model
● Accident & health insurance new premium production was EUR
76 million and property & casualty new premium production was
EUR 36 million
Solid capital and Holding excess cash position
● Solvency II ratio increased to 208%, as the negative impact of
market movements in the US was more than offset by normalized
capital generation and the benefit of a higher EIOPA volatility
adjustment in the Netherlands
● The capital positions in each of Aegon’s three main units
remained above the bottom end of their respective target ranges
● Normalized capital generation after holding expenses was EUR
311 million
● Holding excess cash increased to EUR 1.4 billion, driven by a
EUR 100 million remittance from the Netherlands and EUR 153 million
proceeds from the sale of Aegon’s stake in joint ventures in
Japan
Statement of Matt Rider, CFO
“Given the extraordinary circumstances due to the COVID-19
pandemic, we provide a condensed update of our results today. In
the first quarter of 2020, underlying earnings in Europe, Asia and
Asset Management held up well. However, earnings in the United
States were negatively affected by the drop in interest rates as a
result of the COVID-19 crisis, and unfavorable mortality
experience, which was largely unrelated to COVID-19. This resulted
in underlying earnings before tax of 366 million euros for the
Group. Net income of 1.3 billion euros benefited from effective
hedge programs and the favorable impact of credit spread movements
on the valuation of our liabilities.
We are acutely aware of the disruption that the COVID-19
pandemic has caused for our customers, employees and the
communities in which we operate. Our priority is to protect the
health, safety and security of our employees, and fulfill our
responsibilities towards all our stakeholders. I am pleased to say
that our resilience, experience and business continuity plans have
enabled us to serve our customers at a high level. Our purpose, to
help them achieve a lifetime of financial security, remains the
same.
The uncertainty around how the pandemic will play out and the
continued economic impact it will have, make it difficult to
provide a full assessment of COVID-19 related impacts on our
medium-term targets, while it is very unlikely that we will reach
our annual 10% return on equity target in 2020.
I am pleased that we have maintained a strong balance sheet and
liquidity position at the Group and in our main units in these
extraordinary times. We are taking management actions to protect
the economic value of the balance sheet and our capital position,
and are looking at opportunities to increase our cost efficiency.
Our aim is to position the company well as we emerge from the
COVID-19 crisis to ensure the best possible outcome for all our
stakeholders.”
Financial overview
EUR millions 9 Notes 1Q 2020
Underlying earnings
before tax
1
Americas
142
The Netherlands
154
United Kingdom
44
International
44
Asset Management
38
Holding and other
(56)
Underlying earnings before tax
366
Fair value items
1,372
Realized gains / (losses) on investments
14
Net impairments
(59)
Other income / (charges)
(162)
Run-off businesses
(3)
Income before tax
1,529
Income tax
(258)
Net income / (loss)
1,270
Net income / (loss) attributable to: Owners of Aegon
N.V.
1,270
Non-controlling interests
0
Net underlying earnings
316
Shareholders' equity
23,767
Shareholders' equity excluding revaluation reserves
18,525
Gross Financial Leverage ratio
26.6%
Return on equity
4
7.0%
Commissions and expenses
1,749
of which operating expenses
5
991
Gross deposits (on and off balance)
6
Americas
12,402
The Netherlands
3,728
United Kingdom
2,994
International
87
Asset Management
32,706
Total gross deposits
51,917
Net deposits (on and off balance)
6
Americas
(1,555)
The Netherlands
119
United Kingdom
(217)
International
38
Asset Management
613
Total net deposits excluding run-off businesses
(1,001)
Run-off businesses
41
Total net deposits / (outflows)
(960)
New life sales
2, 6
Life single premiums
350
Life recurring premiums annualized
171
Total recurring plus 1/10 single
206
New life sales
2,6
Americas
88
The Netherlands
26
United Kingdom
12
International
79
Total recurring plus 1/10 single
206
New premium production accident and health insurance
76
New premium production property & casualty insurance
36
Market consistent value of new business
3
Americas
35
The Netherlands
(1)
United Kingdom
42
International
24
Total market consistent value of new business
100
Financial highlights
Underlying earnings before tax
Aegon’s underlying earnings before tax were EUR 366 million in
the first quarter of 2020. This reflects adverse mortality
experience and impacts from lower interest rates in the Americas.
Underlying earnings in the Netherlands, United Kingdom,
International and Asset Management included limited unfavorable
impacts from the COVID-19 pandemic in the first quarter of this
year.
Underlying earnings from the Americas were EUR 142 million.
Earnings were impacted by EUR 62 million adverse mortality
experience and EUR 37 million unfavorable intangible adjustments as
a consequence of lower interest rates. Adverse mortality resulted
from an increase in large claims at older ages in universal life
and traditional life concentrated in March, with only a small
portion driven by COVID-19 related claims. Long-Term Care
benefitted from increased claims terminations due to higher
mortality. This was partly offset by adverse claims experience in
Medicare supplement insurance, which is partly seasonal. Earnings
from Retirement Plans were under pressure from lower fees caused by
lower average asset balances, and adverse impact from market
volatility. Earnings from variable annuities were impacted by
higher benefit reserves, as account values became less than
guaranteed values on part of the portfolio due to adverse market
conditions in March, while net fee income held up well as a result
of higher average asset balances. Furthermore, expenses in the US
were elevated due to EUR 14 million one-off expenses, contractor
related expenses, and technology spend to support strategic
initiatives.
Underlying earnings before tax from Aegon’s operations in the
Netherlands were EUR 154 million. Life earnings were negatively
impacted by a change in the treatment of longevity and mortality
results in underlying results, as well as higher reinsurance costs
following the longevity reinsurance transaction in December 2019.
Furthermore, there were EUR 9 million non-life claims from travel
insurance and disability insurance due to the COVID-19 crisis.
Banking earnings were supported by growing interest income,
reflecting balance sheet growth. Earnings benefitted from lower
pension costs as employees began accruing pension benefits in a
defined contribution plan instead of the now closed defined benefit
plan.
In the United Kingdom, underlying earnings before tax were EUR
44 million. Fee income was strong in the first two months of the
quarter and also benefitted from the hedge program to partially
protect fee income against declining equity markets. Furthermore,
expenses reflect the benefit from cost synergies from the Cofunds
integration.
Underlying earnings before tax at International were EUR 44
million and benefitted from portfolio growth in several countries
and a favorable claims ratio in Spain. These were largely offset by
unfavorable intangible adjustments in the High Net Worth businesses
due to lower interest rates.
Underlying earnings before tax from Aegon Asset Management were
EUR 38 million, reflecting performance fees in Aegon’s Chinese
asset management joint venture Aegon Industrial Fund Management
Company (AIFMC), driven by strong performance of the New Horizons
multi-asset fund in the beginning of the quarter.
The earnings from the Holding were a loss of EUR 56 million.
Net income
Net income was EUR 1,270 million and, next to underlying results
before tax, reflects fair value gains of EUR 1,372 million, which
were only partly offset by Other charges of EUR 162 million and net
impairments of EUR 59 million.
Fair value items
The gain from fair value items amounted to EUR 1,372 million for
first quarter of 2020 as fair value losses in the Americas were
more than offset by fair value gains in the Netherlands and the
United Kingdom.
Fair value gains in the Netherlands were EUR 1,931 million as
the Liability Adequacy Test (LAT) deficit reduced significantly in
the first quarter of 2020. This was driven by an increase in the
illiquidity premium, which decreased the fair value of IFRS
insurance liabilities. The increase in the illiquidity premium
reflects widening credit spreads as a consequence of the COVID-19
pandemic. The negative impact of lower risk-free interest rates on
the LAT was more than offset by fair value gains on hedges and the
guarantee provision.
In the United Kingdom, fair value gains of EUR 145 million were
driven by gains on hedges to protect both the solvency position and
fee income.
Fair value gains in the Netherlands and United Kingdom were
partly offset by fair value losses of EUR 660 million in the
Americas. This amount reflects losses on unhedged risks, impacting
fair value items with an accounting match related to variable
annuities and fair value items without an accounting match related
to indexed universal life products. The hedge programs were highly
effective for the targeted risks. Fair value losses also included
the underperformance of alternative assets, and negative fair value
changes on credit derivatives written on corporate and sovereign
bonds, caused by spread widening.
Realized gains on investments
Realized gains on investments amounted to EUR 14 million,
reflecting realized gains in the Americas from normal trading
activity.
Net impairments
Net impairments amounted to a loss of EUR 59 million. This was
primarily caused by EUR 32 million net impairments in the US
related to bankruptcies in the energy sector, and EUR 20 million
impairments in the Netherlands related to an associate company of
Aegon.
Other charges
Other charges of EUR 162 million were caused by a EUR 52 million
provision for a settlement of class action litigation related to
monthly deduction rate adjustments on certain universal life
policies in the US; EUR 49 million restructuring expenses, mainly
in the US and the UK; EUR 39 million model conversion charges and
an interest rate related adjustment in the US; EUR 31 million IFRS
9 / 17 project costs; EUR 27 million policyholder taxes in the UK,
which are fully offset in the Income tax line; and a EUR 14 million
impairment of intangibles in the UK related to the Cofunds
acquisition in 2016 due to expected lower future cash flows
reflecting the current market circumstances. This was partly offset
by a EUR 53 million gain on the sale of Aegon’s stake in joint
ventures in Japan.
Run-off businesses
The result from run-off businesses was a loss of EUR 3
million.
Income tax
Income tax amounted to a charge of EUR 258 million, while income
before tax was EUR 1,529 million, resulting in an effective tax
rate on income before tax of 16.9% in the first quarter of 2020.
The effective tax rate reflects a beneficial tax rate impact
following a substantial change in the deferred tax position in the
Netherlands.
Return on equity
Return on equity was 7.0% in the first quarter of 2020.
Operating expenses
Operating expenses were EUR 991 million and included EUR 49
million restructuring expenses and EUR 30 million IFRS 9 / 17
project costs. Elevated expenses in the US included EUR 14 million
one-off expenses, increased contractor related expenses and
technology spend to support strategic initiatives. These were
partly offset by cost synergies in the United Kingdom and the
benefit from lower pension costs in the Netherlands, as employees
began accruing pension benefits in a defined contribution plan
instead of the now closed defined benefit plan.
Sales
Gross deposits were EUR 52 billion in the first quarter of 2020,
mainly from Asset Management and the Americas. The EUR 32.7 billion
gross deposits at Asset Management were driven by AIFMC, which
recorded significant inflows in both new and existing funds. Gross
deposits in the Americas were EUR 12.4 billion, mainly from
Retirement Plans, Mutual Funds and Variable Annuities. In the
Netherlands, gross deposits were EUR 3.7 billion, reflecting bank
deposits at Knab and pension deposits at Aegon Cappital. Gross
deposits of EUR 3.0 billion in the United Kingdom were driven by
retail and workplace inflows on the platform.
Residential mortgage sales in the Netherlands were strong at EUR
2.5 billion.
Net outflows amounted to EUR 1.0 billion for the first quarter
of 2020, caused by the Americas and the United Kingdom. The net
outflows of EUR 1.6 billion in the Americas were caused by outflows
in Variable Annuities, reflecting the maturity of the block, and
Mutual Funds, due to higher market volatility. The United Kingdom
saw limited outflows of EUR 0.2 billion, caused by the Existing
Business. Asset Management recorded net third-party inflows of EUR
0.6 billion, driven by AIFMC, following successful new fund
launches and inflows in equity products. There were net inflows of
EUR 0.1 billion in the Netherlands, reflecting net inflows at Aegon
Cappital.
New life sales were EUR 206 million in the first quarter of
2020. In the Americas, sales were EUR 88 million, mainly from
indexed universal life (IUL) and traditional life sales. In
traditional life sales, term pricing actions late in 2019 have been
well received, while sales were negatively impacted by the phasing
out of certain whole life products. IUL sales have held up well
despite challenging market conditions and increased competition.
Sales at International were EUR 79 million, reflecting continued
strong sales by Aegon’s insurance joint venture in China as a
result of strong sales through the platform of a large e-commerce
partner and strong performance from the agency channel with a new
whole life product. Sales at the High Net Worth business were under
pressure due to the COVID-19 crisis. In the Netherlands, sales were
EUR 26 million and reflect strong single premium pension
production, partly offset by individual life single premium
production as Aegon exited that market in March. Protection
products in the United Kingdom continued to perform well with EUR
12 million new sales.
New accident & health premium production was EUR 76 million,
reflecting favorable voluntary benefit and long-term care sales in
the US, as well as strong disability sales in the Netherlands. New
property & casualty production was EUR 36 million, reflecting
good sales performance in Spain and Hungary.
Market consistent value of new business
Market consistent value of new business (MCVNB) was EUR 100
million. In the Americas, MCVNB amounted to EUR 35 million, driven
by Life Insurance, Accident & Health insurance and Retirement
Plans, which was largely offset by negative margins on Variable
Annuities, reflecting the significant decline in interest rates.
MCVNB in the United Kingdom was EUR 42 million, driven by increased
volumes of high margin workplace and group pension products.
International recorded MCVNB of EUR 24 million, reflecting lower
interest rates, partly compensated by strong sales volumes in
China. In the Netherlands, MCVNB was EUR (1) million due to
negative margins in disability insurance.
Shareholders’ equity
Shareholders’ equity increased by EUR 1.3 billion in the first
quarter of 2020 to EUR 23.8 billion on March 31, 2020, driven by
EUR 1.3 billion net income, a EUR 0.5 billion gain from the
remeasurements of defined benefits plans as a result of credit
spread widening, and a EUR 0.1 billion increase in the foreign
currency translation reserve. This was partly offset by a EUR 0.6
billion decrease in revaluation reserves due to credit spread
widening. Shareholders’ equity excluding revaluation reserves
increased by EUR 1.8 billion to EUR 18.5 billion at the end of the
first quarter of 2020 or EUR 8.99 per share.
Gross financial leverage ratio
The gross financial leverage ratio improved by 200 basis points
to 26.6% in the first quarter of 2020, which is at the lower end of
Aegon’s 26% – 30% target range. The improvement was the result of
the increase of shareholders’ equity excluding revaluation
reserves.
Holding excess cash
Aegon’s holding excess cash position increased from EUR 1,192
million to EUR 1,379 million during the first quarter of this year,
which is well within the target range of EUR 1.0 billion to EUR 1.5
billion. The increase was driven by EUR 116 million remittances
from subsidiaries, of which EUR 100 million from the Netherlands,
and EUR 153 million proceeds from the sale of Aegon’s stake in
joint ventures in Japan. This was partly offset by EUR 21 million
capital injections in subsidiaries to support the execution of
business plans and EUR 63 million holding funding and operating
expenses.
Capital generation
Capital generation after holding expenses amounted to EUR 845
million in the first quarter of 2020 This included a positive
impact from market movements of EUR 343 million and favorable
one-time items of EUR 192 million. As a consequence, normalized
capital generation amounted to EUR 311 million. Normalized capital
generation in the United States was under pressure from unfavorable
mortality experience, while the Netherlands benefitted from high
capital generation in the Service Business related to mortgage
transactions.
Solvency II ratio
Aegon’s Group Solvency II ratio increased from 201% to 208%
during the first quarter of 2020, and remained above the target
zone of 150% – 200%. The ratio increased primarily due to
normalized capital generation and, on balance, the positive impact
from market movements. The significant negative overall impacts
from lower equity markets and lower interest rates, primarily in
the US, were more than offset by the significant positive impact of
the increased EIOPA volatility adjustment on the Solvency II ratio
of the Netherlands.
The estimated RBC ratio in the United States decreased to 376%
on March 31, 2020, compared with 470% on December 31, 2019, and
remained above the bottom-end of the target range of 350%. The
severe disruption experienced in the first quarter of 2020, as a
result of the COVID-19 pandemic, led to significant negative market
impacts. Falling interest rates and equity markets were the primary
drivers. Furthermore, widening credit spreads had a negative impact
on unhedged credit risk, and there were limited adverse impacts
from defaults and rating migration. The impact of these adverse
market movements was amplified by the partial lack of a tax offset
as their severity led to inadmissibility of certain deferred tax
assets. There was also an adverse impact from the announced
settlement in the litigation case on monthly deduction rate
adjustments on certain universal life insurance policies. These
negative impacts more than offset the positive impact from
normalized capital generation.
The estimated Solvency II ratio in the Netherlands increased to
249% on March 31, 2020, from 171% on December 31, 2019. This was
mainly driven by the significant increase of the EIOPA volatility
adjustment during the quarter. Other positive impacts from markets
included the effect of lower interest rates due to an overhedged
position on a Solvency II basis, and widening of credit spreads on
the own employee pension scheme. Furthermore, equity markets had,
on balance, a positive impact as the adverse effect of lower
equities on own funds was more than offset by the symmetric
adjustment in the Solvency II framework, lowering the required
capital under the Standard Formula for illiquid investments due to
declining markets. The main negative market impacts were from
widening mortgage, corporate, and sovereign credit spreads, which
lowered asset values. The negative impact of lowering the ultimate
forward rate by 15 basis points was offset by the positive impact
from a one-time tax item. Normalized capital generation had a
positive impact and largely offset the EUR 100 million remittance
to the Group in the first quarter.
The estimated Solvency II ratio in the United Kingdom increased
to 160% on March 31, 2020, from 157% on December 31, 2019, and
remained above the bottom-end of the target range of 145%. The
increase was driven by normalized capital generation. Hedge
programs to protect the Solvency II ratio against adverse market
movements were effective. Market variance was a small positive
overall on the Solvency II ratio as the negative impacts from lower
interest rates and equity markets were more than offset by the
positive impact of widening credit spreads on the own employee
pension scheme.
The Core Tier-1 ratio of Aegon Bank declined slightly over the
quarter to 19.7%. The negative impact from spread widening on the
debt security portfolio and increases in expected credit loss on
unsecured loans to consumers and small businesses was largely
offset by aligning the risk-weighting of the basis adjustment to
the overall mortgage portfolio. For more details on the capital
position of Aegon Bank, we refer to Aegon Bank’s 2019 annual
report.
Aegon N.V. Holding excess cash EUR millions 1Q
2020
Beginning of period
1,192
Remittances
116
Divestments
153
Gross remittances
270
Capital injections / Acqusitions
(21)
Holding expenses and capital return
(63)
End of period
1,379
Aegon N.V. Capital ratios Mar. 31, Dec.
31, Notes
2020
2019
Aegon Group (EUR) Eligible Own Funds
18,414
18,470
Consolidated Group SCR
8,858
9,173
Solvency II ratio 1
7, 8
208%
201%
United States (USD) Available capital
8,285
10,422
Required capital
2,203
2,215
RBC ratio
376%
470%
The Netherlands (EUR) Own funds
8,461
5,962
SCR
3,397
3,486
Solvency II ratio
249%
171%
United Kingdom (GBP) Own funds
2,365
2,442
SCR
1,481
1,558
Solvency II ratio
160%
157%
Core Tier-1 ratio Aegon Bank
19.7%
19.8%
1 Please note that Aegon Bank is excluded from the Solvency
II ratio of Aegon NL.
Currencies 1Q 2020 income statement
items: average rate 1 EUR = USD 1.1026 (4Q 2019: USD 1.1072). 1Q
2020 income statement items: average rate 1 EUR = GPB 0.8612 (4Q
2019: GBP 0.8599). Balance sheet items: closing rate 1Q - 1 EUR =
USD 1.0973 (USD 1.1225). Balance sheet items: closing rate 1Q - 1
EUR = GBP 0.8849 (GBP 0.8473).
Full version press release
Use this link for the full version of the press release
Additional information
Presentation The conference call presentation is
available on aegon.com as of 7.30 a.m. CET.
Conference call including Q&A 9:00 a.m. CET
Audio webcast on aegon.com
Dial-in numbers NL : +31 (0)20 703 8211 UK : +44 (0)330
336 9125 US : +1 720 543 0206
Passcode: 7690604
Two hours after the conference call, a replay will be available
on aegon.com.
Publication dates 2020 results First half year 2020 – August 13, 2020
Second half year 2020 – February
11, 2021
About Aegon
Aegon’s roots go back 175 years – to the first half of the
nineteenth century. Since then, Aegon has grown into an
international company, with businesses in more than 20 countries in
the Americas, Europe and Asia. Today, Aegon is one of the world’s
leading financial services organizations, providing life insurance,
pensions and asset management. Aegon’s purpose is to help people
achieve a lifetime of financial security. More information on
aegon.com/about.
Notes:
1)
For segment reporting purposes underlying earnings before
tax, net underlying earnings, commissions and expenses, operating
expenses, income tax (including joint ventures (jv's) and
associated companies), income before tax (including jv's and
associated companies) and market consistent value of new business
are calculated by consolidating on a proportionate basis the
revenues and expenses of Aegon’s joint ventures and Aegon’s
associates. Aegon believes that these 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 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.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 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.
Aegon segment reporting is based on the businesses as presented in
internal reports that are regularly reviewed by the Executive Board
which is regarded as the chief operating decision maker. The
following table provides the reconciliation from the non-IFRS-EU
measures underlying earnings before tax, income tax and income
before tax to the most comparable IFRS-EU measure.
Segment information
1Q 2020 EUR millions Segment total Joint
ventures and associates eliminations Consolidated
Net
Underlying earnings
316
22
338
Tax on underlying earnings
(50)
15
(36)
Underlying earnings before tax
366
8
374
Fair value items
1,372
(20)
1,352
Realized gains / (losses) on investments
14
(4)
10
Impairment charges
(66)
-
(66)
Impairment reversals
7
-
7
Other income / (charges)
(162)
1
(161)
Run-off businesses
(3)
-
(3)
Income / (loss) before tax
1,529
(15)
1,514
Income tax from certain proportionately consolidated joint ventures
and associates included in income before tax
15
(15)
-
Income tax (expense) / benefit
(258)
15
(243)
Of which income tax from certain proportionately consolidated joint
ventures and associates included in income before tax
(15)
15
-
Net income / (loss)
1,270
-
1,270
2)
New life sales is defined as new recurring premiums plus
1/10 of single premiums.
3)
The present value, at point of sale, of all cashflows for
new business written during the reporting period, calculated using
approximate point of sale economics assumptions. Market consistent
value of new business is calculated using a risk neutral approach,
ignoring the investment returns expected to be earned in the future
in excess of risk free rates (swap curves), with the exception of
an allowance for liquidity premium. The Swap curve is extrapolated
beyond the last liquid point to an ultimate forward rate. The
market consistent value of new business is calculated on a post tax
basis, after allowing for the time value financial options and
guarantees, a market value margin for non-hedgeable non-financial
risks and the costs of non-hedgeable stranded capital.
4)
Return on equity is a ratio calculated by dividing the net
underlying earnings after cost of leverage, by the average
shareholders' equity excluding the revaluation reserve.
5)
Reconciliation of operating expenses, used for segment
reporting, to Aegon's IFRS based operating expenses. First quarter
2020 Employee expenses
521
Administrative expenses
404
Operating expenses for IFRS reporting
925
Operating expenses related to jv's and associates
66
Operating expenses in earnings release
991
6)
New life sales, gross deposits and net deposits data include
results from Aegon’s joint ventures and Aegon’s associates
consolidated on a proportionate basis.
7)
The calculation of the Solvency II capital surplus and ratio
are based on Solvency II requirements. For insurance entities in
Solvency II equivalent regimes (United States, Bermuda and Brazil)
local regulatory solvency measurements are used. Specifically,
required capital for the regulated entities in the US is calculated
as one and a half times (150%) the upper end of the Company Action
Level range (200% of Authorized Control Level) as applied by the
National Association of Insurance Commissioners in the US, while
the own funds is calculated by applying a haircut to available
capital under the local regulatory solvency measurement of one time
(100%) the upper end of the Company Action Level range. For
entities in financial sectors other than the insurance sector, the
solvency requirements of the appropriate regulatory framework are
taken into account in the group ratio. The group ratio does not
include Aegon Bank N.V. As the UK With-Profit funds is ring fenced,
no surplus is taken into account regarding the UK With-Profit funds
for Aegon UK and Group numbers.
8)
The solvency II capital ratio reflects Aegon’s
interpretation of Solvency II requirements and are not final until
filed with the regulators. The solvency II capital calculation is
subject to supervisory review on an ongoing basis.
9)
The results in this release are unaudited.
Cautionary note regarding non-IFRS-EU measures
This document includes the following non-IFRS-EU financial
measures: underlying earnings before tax, income tax, income before
tax, market consistent value of new business and return on equity.
These non-IFRS-EU measures are calculated by consolidating on a
proportionate basis Aegon’s joint ventures and associated
companies. The reconciliation of these measures, except for market
consistent value of new business and return on equity, to the most
comparable IFRS-EU measure is provided in the notes to this press
release. Market consistent value of new business is not based on
IFRS-EU, which are used to report Aegon’s primary financial
statements and should not be viewed as a substitute for IFRS-EU
financial measures. Aegon may define and calculate market
consistent value of new business differently than other companies.
Return on equity is a ratio using a non-IFRS-EU measure and is
calculated by dividing the net underlying earnings after cost of
leverage by the average shareholders’ equity adjusted for the
revaluation reserve. Aegon believes that these non-IFRS-EU
measures, together with the IFRS-EU information, provide meaningful
supplemental information about the underlying operating results of
Aegon’s business including insight into the financial measures that
senior management uses in managing the business.
Local currencies and constant currency exchange rates
This document contains certain information about Aegon’s
results, financial condition and revenue generating investments
presented in USD for the Americas and TLB, and in 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 Aegon
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, could, 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 and/or governmental 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 public sector securities and the
resulting decline in the value of government exposure that Aegon
holds;
- Changes in the performance of Aegon’s investment portfolio and
decline in ratings of Aegon’s counterparties;
- Lowering of one or more of Aegon’s debt ratings issued by
recognized rating organizations and the adverse impact such action
may have on Aegon’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 written premium, policy retention,
profitability and liquidity of its insurance subsidiaries;
- The effect of the European Union’s Solvency II requirements and
other regulations in other jurisdictions affecting the capital
Aegon is required to maintain;
- 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;
- Catastrophic events, either manmade or by nature, including by
way of example acts of God, acts of terrorism, acts of war and
pandemics, could result in material losses and significantly
interrupt Aegon’s business;
- The frequency and severity of insured loss events;
- Changes affecting longevity, mortality, morbidity, persistence
and other factors that may impact the profitability of Aegon’s
insurance products;
- Aegon’s projected results are highly sensitive to complex
mathematical models of financial markets, mortality, longevity, and
other dynamic systems subject to shocks and unpredictable
volatility. Should assumptions to these models later prove
incorrect, or should errors in those models escape the controls in
place to detect them, future performance will vary from projected
results;
- Reinsurers to whom Aegon has ceded significant underwriting
risks may fail to meet their obligations;
- Changes in customer behavior and public opinion in general
related to, among other things, the type of products Aegon sells,
including legal, regulatory or commercial necessity to meet
changing customer expectations;
- Customer responsiveness to both new products and distribution
channels;
- As Aegon’s operations support complex transactions and are
highly dependent on the proper functioning of information
technology, operational risks such as system disruptions or
failures, security or data privacy breaches, cyberattacks,
human error, failure to safeguard personally identifiable
information, changes in operational practices or inadequate
controls including with respect to third parties with which we do
business may disrupt Aegon’s business, damage its reputation and
adversely affect its results of operations, financial condition and
cash flows;
- 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;
- Aegon’s failure to achieve anticipated levels of earnings or
operational efficiencies as well as other cost saving and excess
cash and leverage ratio management initiatives;
- Changes in the policies of central banks and/or
governments;
- Litigation or regulatory action that could require Aegon to pay
significant damages or change the way Aegon does business;
- Competitive, legal, regulatory, or tax changes that affect
profitability, the distribution cost of or demand for Aegon’s
products;
- Consequences of an actual or potential break-up of the European
monetary union in whole or in part, or the exit of the United
Kingdom from the European Union and potential consequences if other
European Union countries leave the European Union;
- Changes in laws and regulations, particularly those affecting
Aegon’s operations’ ability to hire and retain key personnel,
taxation of Aegon companies, the products Aegon sells, and the
attractiveness of certain products to its consumers;
- Regulatory changes relating to the pensions, investment, and
insurance industries in the jurisdictions in which Aegon
operates;
- Standard setting initiatives of supranational standard setting
bodies such as the Financial Stability Board and the International
Association of Insurance Supervisors or changes to such standards
that may have an impact on regional (such as EU), national or US
federal or state level financial regulation or the application
thereof to Aegon, including the designation of Aegon by the
Financial Stability Board as a Global Systemically Important
Insurer (G-SII); and
- Changes in accounting regulations and policies or a change by
Aegon in applying such regulations and policies, voluntarily or
otherwise, which may affect Aegon’s reported results, shareholders’
equity or regulatory capital adequacy levels.
This document contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
of the EU Market Abuse Regulation (596/2014). Further details of
potential risks and uncertainties affecting Aegon are described in
its filings with the Netherlands Authority for the Financial
Markets 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, Aegon 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 Aegon’s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005991/en/
Media relations Dick Schiethart +31 (0) 70 344 8821
gcc@aegon.com
Investor relations Jan Willem Weidema +31 (0) 70 344 8028
ir@aegon.com
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