Press release
The Hague, May 10, 2006
AEGON reports first quarter 2006 results including value of new business
* NET INCOME DOWN 7%, WHILE OPERATING EARNINGS UP 92%
- Investment performance remained strong, but decrease in fair value of
derivatives led to lower gains.
- Lower non-operating income reflects gain on sale of Spanish general
insurance business last year.
- Operating earnings up significantly, reflecting the effect of favorable
financial markets on the valuation of certain assets and liabilities.
* NEW LIFE SALES1) UP 12% LED BY RECORD QUARTER IN THE UK
- New life sales in the UK up 51% driven by increases in all major lines of
business.
- AEGON Poland achieves second consecutive record sales quarter.
- New life sales in the Americas decreased, but profitability improved.
* VALUE OF NEW BUSINESS AMOUNTED TO EUR 163 MILLION
- Value of new business for the first quarter of 2006 increased 18% compared
to pro forma first quarter 2005 value of new business2).
- The internal rate of return on new business for the first quarter amounted
to 14.7%, compared to 12.4% for the full year 2005.
- AEGON's developing markets continued to contribute strongly to value of new
business.
* STRENGTHENED BROAD-BASED DISTRIBUTION
- Increased wholesaling capacity and introduction of an enhanced withdrawal
benefit rider drove 16% increase in variable annuity sales.
- Bank partnerships in Spain obtained final approval, strengthening AEGON's
distribution capabilities.
1 New life sales refers to standardized new premium production and is defined
as new recurring premium + 1/10 of single premium
2 Pro forma first quarter 2005 value of new business is equal to one-fourth of
the full year 2005 value of new business
EARNINGS SUMMARY Q1 2006 Q1 2005 % Constant
currency
Amounts in EUR millions, exchange
except per share date rates %
Operating earnings before tax 827 430 92 82
Net gains/losses on investments and (26) 297 - -
impairment charges before tax
Other non-operating income/(charges) and 44 207 (79) (79)
share in profit/(loss) of associates
Income before tax 845 934 (10) (13)
Net income 630 677 (7) (11)
- per share 0.38 0.43 (12) (15)
Note: This press release includes non-GAAP financial measures: operating earnings
before tax and value of new business. The reconcilliation of operating earnings
before to the most comparable GAAP measure and an explanation for its use is
provided on page 28. Value of new business is not based in IFRS, which are used to
report AEGON's quarterly statements and should not be viewed as a substitute for IFRS
financial measures. On page 23 and 24, a further breakdown is given and reference
is made to the assumptions included in the Embedded Value disclosure document.
AEGON believes the value of new business, together with GAAP information, provides
a meaningful measure for the investment community to evaluate AEGON's business
relative to the business of our peers.
Chairman's Overview
"AEGON's results for the first quarter of 2006 included a notable increase in
the value of new business, providing further indication that our focus on
growing our core lines of business profitably in our major and developing
markets makes sense," said AEGON Chairman Donald J. Shepard.
"The diversification of AEGON's business, both in terms of products and
geographical spread, resulted in a solid performance in our year-over-year
results for the Group. The 12% growth in standardized new life sales, combined
with a 18% increase in the value of new business compared to one-fourth of
full year 2005, give us continued confidence in the long-term growth potential
of our business."
Mr. Shepard further emphasized that AEGON's disclosure of value of new
business results on a quarterly basis, beginning with the current first
quarter of 2006, constitutes an important supplemental measurement of AEGON's
business development.
Commenting on other highlights of the quarter, Mr. Shepard remarked:
"Distribution again fueled AEGON's solid performance. In the Americas, the 16%
increase in variable annuity sales was a result of strong sales across all of
our distribution channels, supported by enhanced wholesaling capacity in the
US. In the UK, we produced a 51% increase in new life sales over the same
period last year, while AEGON's IFA platform, Positive Solutions, achieved
another record quarter with higher productivity of the sales force. New
individual life sales sold through intermediaries in the Netherlands improved.
"The internal rate of return of 7.9% on products sold in the Netherlands
remains below our hurdle rate, largely due to margin pressure in
mortgage-related business and a change in interest rates. Standardized new
life production in the Americas declined 11% from the year-ago quarter, with
the majority of the decrease reflecting lower sales of BOLI/COLI business. In
addition, there is some decrease in production from the Transamerica agency
channel as there is dislocation occurring in the industry in the older age
market. The internal rate of return in the Americas rose 100 basis points in
the first quarter of this year to 12.3%.
"In Spain, we further strengthened our position in the important bank channel
which continues to be the primary means for selling life insurance and
pensions. The regulatory authorities have recently given final approval to
AEGON's joint ventures with Caja Navarra and Caja de Badajoz. With the
completion of these agreements, AEGON's products will be sold in approximately
1500 bank branches throughout Spain.
"We made good progress during the quarter in AEGON's pension businesses
internationally. Going forward, we will look to capture further growth in this
expanding market, given demographics and our established expertise.
"Overall, AEGON experienced a good quarter with promising sales growth across
our company while at the same time making progress in expanding sales and
distribution within our developing markets. The strong increase in the value
of new business for the AEGON Group further demonstrates our ongoing
commitment to writing profitable business to ensure long-term value for all of
our stakeholders."
EARNINGS OVERVIEW
amounts in millions
EUR
First quarter
2006 2005 %
By product segment
Traditional life 156 125 25
Life for account of policyholders 320 60 N.M.
Fixed annuities 106 55 93
Variable annuities 82 30 173
Institutional guaranteed products 80 64 25
Fee - off balance sheet products 14 20 (30)
Reinsurance 55 29 90
Accident and health insurance 79 87 (9)
General insurance 11 17 (35)
Banking activities 4 7 (43)
Interest charges and other (80) (64) 25
Operating earnings before tax 827 430 92
Gains/(losses) on investments (32) 307 N.M.
Impairment charges 6 (10) N.M.
Other non operating 38 204 (81)
income/(charges)
Share in profit/(loss) of 6 3 100
associates
Income before tax 845 934 (10)
Income tax (215) (256) (16)
Minority interest 0 (1) N.M.
Net income 1 630 677 (7)
Net income in USD 758 888 (15)
Income before tax geographically
Americas 562 469 20
The Netherlands 226 246 (8)
United Kingdom 95 62 53
Other countries 27 211 (87)
Holding and other activities (49) (50) (2)
Eliminations (16) (4) N.M.
Income before tax 845 934 (10)
Amounts per common share of EUR 0.12
Net income in EUR 2 0.38 0.43 (12)
Net income fully diluted in EUR 2 0.38 0.43 (12)
Net income in USD 0.46 0.56 (18)
Net income fully diluted in USD 0.46 0.56 (18)
At At
March 31 Dec. 31
2006 2005
Shareholders' equity in EUR 3 10.67 10.89 (2)
Shareholders' equity in USD 3 12.91 12.85 0
1 Net income refers to net income attributable to equity
holders of AEGON N.V.
2 After deduction of preferred dividend and
coupons on perpetuals.
3 Shareholders' equity per share is calculated after deduction of the preferred
share capital of EUR 2.1 billion (at Dec. 31, 2005:
EUR 2.1 billion) and considering the number of outstanding treasury shares. The
number of common shares used in the calculation of
shareholders' equity per share is 1,568 million (at Dec. 31,
2005: 1,576 million).
FIRST QUARTER 2006 GROUP HIGHLIGHTS
Value of new business
The value of new business for the first quarter of 2006 amounted to EUR 163
million. This is an increase of 18% compared to EUR 138 million for one-fourth
of the full year 2005 value of new business. The internal rate of return on
new business amounted to 14.7% compared to 12.4% for the full year 2005. The
developing markets, outside the three major country units, accounted for 24%
of total first quarter value of new business.
Sales
During the first quarter of 2006, new life sales increased 12% to EUR 686
million. New life sales in the Americas decreased 11%. The majority of the
decrease reflects lower sales of BOLI/COLI business, where sales tend to occur
in large amounts but not on a regular or predictable basis. In addition, there
is some decrease in production from the Transamerica agency channel as there
is dislocation occurring in the industry in the older age market. New life
sales in the Netherlands increased 1%, reflecting growth in individual life
sales, while group pension sales were lower. In the United Kingdom, new life
sales increased 51% for the quarter, as a result of strong growth across all
lines of business. In Taiwan, new life sales decreased 53% compared to the
strong first quarter of last year, but increased 64% compared to the fourth
quarter of 2005. AEGON Poland had its second consecutive record sales quarter,
with new life sales increasing 19% compared to the fourth quarter of 2005,
when the Poland business became part of the AEGON Group.
Sales of annuity and institutional guaranteed products in the Americas
increased 32% compared to the first quarter of 2005. Total pension sales in
the US increased 16% to USD 2,766 million. Variable annuity sales increased
16%, as a result of the introduction of an enhanced withdrawal benefit rider,
increased wholesaling capacity and strong pension sales. As anticipated, sales
of fixed annuities were lower and reflect AEGON's pricing discipline and the
challenging interest rate environment. Deposits in institutional guaranteed
products increased 45% primarily due to medium term note funding agreements
issued by the new Ireland platform when asset spreads widened during the
quarter. Off balance sheet production decreased 8%, reflecting strong
performance from the asset management operations in the UK and the pension
business in the US, more than offset by lower institutional asset management
sales in the US and fewer mandates in the Netherlands than in the comparable
period.
Operating earnings before tax
Operating earnings before tax in the first quarter of 2006 increased 92% to
EUR 827 million (and increased 82% at constant currency exchange rates), with
increases in all three major country units. Operating earnings in the Americas
were positively affected by business growth and the favorable financial
markets environment, offset somewhat by lower spreads and higher mortality.
The increase in operating earnings in the Netherlands mainly reflects the
positive effect of a release of guarantee provisions for unit-linked business
as a result of rising interest rates. In the United Kingdom, the increase in
operating earnings before tax mainly reflects business growth and the positive
effect of higher equity and bond markets. The decrease of operating earnings
before tax in Other countries primarily reflects lower results in Taiwan and
higher start-up losses due to investments in growth in China, Slovakia and the
Czech Republic.
Net income
Net income decreased 7% to EUR 630 million (and decreased 11% at constant
currency exchange rates) in the first quarter of 2006. Higher operating
earnings were more than offset by lower net gains/losses on investments (see
paragraph below) and lower other non-operating income. Lower other
non-operating income reflects the gain on the sale of the Spanish general
insurance business last year. The effective tax rate decreased to 25% from 27%
in the first quarter of 2005, reflecting higher tax exempt income and tax
credits. Net income per share decreased 12% to EUR 0.38, reflecting lower net
income and a higher average number of ordinary shares outstanding.
Non-operating income
Net gains/losses on investments (before tax) and impairment charges together
amounted to a loss of EUR 26 million compared to a gain of EUR 297 million in
the first quarter of 2005. Investment performance remained strong and the
decline primarily reflects a negative fair value change in derivatives used
for asset and liability management in the Netherlands and normal trading
activity in the US in a higher interest rate environment. Together, other
non-operating income/(charges) and share in profit/(loss) of associates
amounted to EUR 44 million, mainly reflecting the book gain on the sale of
Scottish Equitable International Luxembourg and the charges to AEGON UK
policyholders related to taxes payable for the account of policyholders.
Commissions and expenses
Commissions and expenses increased 19% to EUR 1,589 million and increased 12%
at constant currency exchange rates. This is mostly the result of a change in
business mix, growth in the business, higher DPAC amortization and higher
expenses related to stock appreciation rights plans due to the rising AEGON
stock price during the quarter. The economic exposure of the share based
payment programs is hedged by means of treasury shares, which are valued at
cost.
Revenue generating investments
Total revenue generating investments amounted to EUR 359 billion at March 31,
2006, compared to EUR 358 billion at December 31, 2005.
Shareholders' equity
Shareholders' equity at March 31, 2006 amounted to EUR 18.8 billion, a
decrease of 2% compared to December 31, 2005. The increase from net income was
more than offset by foreign currency translation effects and a decrease in
revaluation reserves, reflecting higher interest rates.
REPORT OF THE COUNTRY UNITS
AMERICAS
amounts in millions
USD EUR
First quarter First quarter
2006 2005 % 2006 2005 %
Income by product segment
156 143 9 Traditional life 130 109 19
26 30 (13) Life for account of policyholders 22 23 (4)
128 72 78 Fixed annuities 106 55 93
99 39 154 Variable annuities 82 30 173
96 84 14 Institutional guaranteed products 80 64 25
13 13 0 Fee - off balance sheet products 11 10 10
66 38 74 Reinsurance 55 29 90
88 104 (15) Accident and health insurance 73 79 (8)
672 523 28 Operating earnings before tax 559 399 40
7 74 (91) Gains/(losses) on investments 6 56 (89)
(3) 18 N.M. Impairment charges (3) 14 N.M.
676 615 10 Income before tax 562 469 20
(191) (191) 0 Income tax (159) (146) 9
485 424 14 Net income 403 323 25
Revenues
165 219 (25) Life general account single premiums 137 167 (18)
1,419 1,348 5 Life general account recurring premiums 1,180 1,028 15
125 314 (60) Life policyholders account single premiums 104 239 (56)
308 291 6 Life policyholders account recurring 256 222 15
premiums
2,017 2,172 (7) Total life insurance gross premiums 1,677 1,656 1
617 608 1 Accident and health insurance 513 464 11
2,634 2,780 (5) Total gross premiums 2,190 2,120 3
1,759 1,667 6 Investment income 1,463 1,271 15
289 267 8 Fee and commission income 240 204 18
4,682 4,714 (1) Total revenues 3,893 3,595 8
440 472 (7) Income from reinsurance ceded 366 360 2
263 67 N.M. Fair value and foreign exchange gains 219 51 N.M.
2,508 104 N.M. Total gains on investments 2,085 79 N.M.
7,893 5,357 47 Total income 6,563 4,085 61
1,198 1,033 16 Commissions and expenses 996 788 26
Standardized new premium production
insurance
251 492 (49) Life single premiums 209 375 (44)
247 257 (4) Life recurring premiums annualized 205 196 5
272 306 (11) Life total recurring plus 1/10 single 226 234 (3)
Gross deposits
480 501 (4) Fixed annuities 399 382 4
4,609 3,177 45 Institutional guaranteed products 3,833 2,423 58
1,774 1,528 16 Variable annuities 1,475 1,165 27
6,863 5,206 32 Total production on balance sheet 5,707 3,970 44
Off balance sheet production
1,550 1,584 (2) Synthetic GICs 1,289 1,208 7
Mutual funds/ Collective Trusts and
2,769 3,559 (22) other managed assets 2,302 2,714 (15)
4,319 5,143 (16) Total production off balance sheet 3,591 3,922 (8)
THE AMERICAS (the AEGON USA companies and AEGON Canada)
* Value of new business amounted to USD 100 million, an increase of 18%
compared to one-fourth of the full year 2005 value of new business.
* The internal rate of return on new business improved 100 basis points to
12.3%.
* Operating earnings before tax increased 28% to USD 672 million.
* Variable annuity sales increased 16% as "5 for Life With Growth" was
favorably received.
* Total revenue generating investments amounted to USD 271 billion at March
31, 2006 an increase of 2% compared to year-end 2005.
Results
Operating earnings before tax increased 28% to USD 672 million. The increase
in earnings was led by growth in the Reinsurance and Variable Annuity lines of
business, coupled with favorable returns on hedge funds, limited partnership
and convertible bond investments, all of which are carried at fair value.
Net income, which includes net gains/losses on investments and impairment
charges, increased 14% to USD 485 million. Net gains on investments amounted
to USD 7 million compared to USD 74 million in the first quarter of 2005 and
reflect normal trading activity in the US in a higher interest rate
environment. Impairments in the first quarter of this year resulted in a net
charge of USD 3 million compared to a net recovery of USD 18 million in the
first quarter of 2005. The effective tax rate of 28% compares to an effective
tax rate of 31% in the first quarter of 2005.
Value of New Business
Value of new business amounted to USD 100 million for the first quarter of
2006 compared to USD 85 million for one-fourth of the full year 2005 value of
new business. First quarter 2006 internal rate of return was 12.3%, up 100
basis points from 11.3% in the full year 2005. The increase in value of new
business and IRR is due to higher sales in more profitable lines of business
during the first quarter of 2006. Please refer to pages 24 and 25 for more
detailed information on value of new business.
Traditional life / Life for account of policyholders
Standardized new life production for retail and BOLI/COLI products decreased
15% to USD 197 million compared to the first quarter of 2005. The majority of
the decrease reflects lower sales of BOLI/COLI business, where sales tend to
occur in large amounts but not on a regular or predictable basis. In addition,
there is some decrease in production from the Transamerica agency channel as
there is dislocation occurring in the industry in the older age market.
Operating earnings before tax for traditional life increased 9% to USD 156
million compared to the same period last year, despite somewhat unfavorable
mortality claims in the quarter. The valuation of certain financial assets
carried at fair value contributed USD 24 million to operating earnings before
tax in the first quarter of 2006 compared to USD 5 million in the first
quarter last year.
Operating earnings before tax from life for account of policyholders decreased
USD 4 million to USD 26 million compared to the first quarter of 2005.
Fixed annuities
Fixed annuity new deposits of USD 480 million decreased 4% compared to the
first quarter of 2005. Retail fixed annuity new deposits declined 11%
reflecting increased competition with short-term bank products due to the flat
yield curve. However, new deposits in the pension channel increased 18% to USD
131 million. Fixed annuity account balances of USD 51.7 billion were USD 1.2
billion lower than year-end as new deposits were more than offset by higher
withdrawals. The total decrement rate on the retail annuity segment continues
to be within expectations and increased to 17% for the first quarter of 2006
compared to 16% in the fourth quarter of 2005.
Fixed annuity operating earnings before tax increased 78% to USD 128 million
compared to the same period last year. This increase reflects a positive
impact from total return annuities and fair value movements of certain
financial assets, offset by modestly lower account balances. Fair value
movements of certain financial assets contributed USD 38 million to operating
earnings before tax, compared to USD 5 million in the first quarter of 2005.
The contribution to operating earnings before tax from total return annuities
amounted to a negative USD 6 million compared to a negative USD 43 million in
the same period last year.
Product spreads on the largest segment of the fixed annuity book were 245
basis points on an IFRS pre-tax operating basis compared to 244 basis points
in the fourth quarter of 2005. Product spreads in the first quarter include 41
basis points from the impact of valuation of certain financial assets carried
at fair value compared to 33 basis points in the fourth quarter. On a
normalized basis, the expected contribution to product spreads from the
valuation of these assets is 15 basis points.
Institutional guaranteed products
Institutional guaranteed product sales amounted to USD 4.6 billion, an
increase of 45% compared to the first quarter of 2005. The higher sales were
primarily due to medium term note funding agreements issued by the new Ireland
platform when asset spreads widened during the quarter. The balance of
institutional guaranteed spread products increased to USD 35.2 billion
compared to USD 32.9 billion at year-end 2005.
Institutional guaranteed products operating earnings before tax increased 14%
to USD 96 million compared to the same period last year. The increase reflects
the higher contribution from the valuation of certain financial assets carried
at fair value, which amounted to USD 40 million in the first quarter of 2006,
compared to USD 7 million in the first quarter of 2005. This was partially
offset by the impact of decreased product spreads resulting from the rise in
short term interest rates.
Variable annuities
Variable annuity new deposits of USD 1.8 billion increased 16% compared to the
first quarter of 2005, with significant increases in both the retail (18%) and
pension (14%) segments. A new retail product, "5 for Life with Growth", was
introduced in the first quarter and has been received favorably. Variable
annuity balances of USD 50.3 billion increased 5% compared to year-end 2005.
Variable annuity operating earnings before tax of USD 99 million increased USD
60 million over the first quarter of 2005. This includes the impact of the
valuation of Canadian segregated funds, which contributed USD 41 million to
operating earnings before tax in the first quarter of 2006, compared to USD 5
million in the same period last year. The remaining increase of USD 24 million
is primarily related to growth of the business from favorable equity markets
and continued favorable persistency.
Fee - off balance sheet products
Off-balance sheet production was USD 4.3 billion, a 16% decrease compared to
the first quarter of 2005. Institutional asset management sales decreased USD
1.3 billion compared to an extraordinarily strong first quarter of 2005.
Retail mutual fund sales of USD 0.7 billion increased 47% compared to first
quarter of 2005. Synthetic GIC sales of USD 1.6 billion in the first quarter
of 2006 were level compared to the same period last year. Off-balance sheet
assets have increased 2% compared to year-end 2005 and now total USD 82.7
billion.
Operating earnings before tax from fee - off balance sheet products of USD 13
million were level compared to the same period in 2005.
Reinsurance
Reinsurance new life production of USD 75 million increased USD 2 million or
3% over the same period in 2005. The 2005 results included the completion of
several in-force transactions. Excluding production of in-force transactions
in 2005, life production increased USD 15 million due to continued strong
international and domestic sales.
Reinsurance operating earnings before tax increased 74% to USD 66 million
compared to the same period last year. The increase in earnings primarily
reflects continued growth in this business and favorable mortality during the
first quarter of 2006. In addition, earnings from the total return annuity
product amounted to USD 15 million compared to USD 11 million in the first
quarter of 2005.
Accident and health business
Accident and health premium revenue of USD 617 million increased 1% compared
to the same period last year due to increased sales through sponsored programs
along with premium rate increases on certain health products.
Accident and health operating earnings before tax decreased 15% to USD 88
million compared to the same period last year, and primarily reflects reserve
strengthening on certain discontinued blocks.
Commissions and expenses
Commissions and operating expenses of USD 1,198 million increased 16% compared
to the first quarter of 2005. Operating expenses of USD 483 million were up
13% compared to the same period last year. This increase includes the impact
of a one-time expense accrual release of USD 13 million in the first quarter
of 2005 and higher expenses related to stock appreciation rights plans of USD
12 million due to the rising AEGON stock price during the quarter.
Normalized return expectations for fair-valued assets in operating earnings
AEGON provides normalized return expectations for certain financial assets
that are managed on a total return basis with no offsetting changes to the
fair value of liabilities. Normalized annual earnings on these assets, as
described in more detail below, are based on long-term expected returns in
financial markets, but should not be used as an explicit forecast for the year
as actual results can and will deviate from these expectations. These levels
of normalized annualized earnings will be revisited and updated at the end of
2006.
These assets include certain hedge funds, real estate limited partnerships and
convertible bonds, with assets totaling approximately USD 3.2 billion as of
March 31, 2006. Operating earnings for the first quarter of 2006 include USD
130 million (USD 156 million before DPAC offsets) related to these asset
classes, including fair valuation of assets of USD 118 million and cash income
of USD 12 million. Based on current holdings and asset class returns
consistent with long term historical experience, the long-term expected return
on an annual basis is 8-10%, including fair valuation and cash income, before
tax and DPAC offsets. The impact of the fair valuation of assets is notable in
the traditional life, fixed annuity and institutional guaranteed products
lines of business.
THE NETHERLANDS
amounts in millions
EUR
First quarter
2006 2005 %
Income by product segment
Traditional life 23 11 109
Life for account of 242 (9) N.M.
policyholders
Fee - off balance sheet 8 9 (11)
products
Accident and health insurance 5 8 (38)
General insurance 4 10 (60)
Banking activities 4 7 (43)
Operating earnings before tax 286 36 N.M.
Gains/(losses) on investments (70) 234 N.M.
Impairment charges 9 (24) N.M.
Share in profit/(loss) of 1 0 N.M.
associates
Income before tax 226 246 (8)
Income tax (28) (70) (60)
Net income 198 176 13
Revenues
Life general account single 195 134 46
premiums
Life general account recurring 270 290 (7)
premiums
Life policyholders account 328 276 19
single premiums
Life policyholders account 639 724 (12)
recurring premiums
Total life insurance gross 1,432 1,424 1
premiums
Accident and health insurance 85 95 (11)
General insurance 139 143 (3)
Total gross premiums 1,656 1,662 (0)
Investment income 466 507 (8)
Fee and commission income 87 80 9
Total revenues 2,209 2,249 (2)
Income from reinsurance ceded 2 (2) N.M.
Fair value and foreign exchange 283 5 N.M.
gains
Total gains on investments 43 449 (90)
Total income 2,537 2,701 (6)
Commissions and expenses 285 300 (5)
Standardized new premium
production
insurance
Life single premiums 399 395 1
Life recurring premiums 38 37 3
annualized
Life total recurring plus 1/10 78 77 1
single
Non-life premiums 26 15 73
Gross deposits
Saving deposits 708 859 (18)
Total production on balance 708 859 (18)
sheet
Off balance sheet production
Mutual funds and other managed 125 478 (74)
assets
Total production off balance 125 478 (74)
sheet
AEGON THE NETHERLANDS
* Value of new business for the first quarter of 2006 amounted to EUR 9
million, compared to EUR 10 million for one-fourth of the full year 2005.
* The internal rate of return on new business amounted to 7.9%.
* New life sales increased by 1% to EUR 78 million, representing the best
quarter in the last two years.
* Operating earnings before tax amounted to EUR 286 million, compared to EUR
36 million in the first quarter of 2005.
* Total revenue generating investments amounted to EUR 63.5 billion at March
31, 2006, an increase of 1% compared to year-end 2005 levels.
Results
Operating earnings before tax amounted to EUR 286 million in the first quarter
of 2006, compared to EUR 36 million in the first quarter of 2005. The increase
in operating earnings in the Netherlands includes the positive effect of a EUR
205 million release of guarantee provisions for unit-linked business, whereas
EUR 5 million was added to these provisions in the first quarter of 2005. The
release of guarantee provisions reflects the effect of the increase in
interest rates on the risk-neutral market valuation of these guarantees. The
comparable period also included EUR 35 million in provisions for improvements
of "Spaarkas" products. Technical results life and non-life decreased EUR 13
million due to higher mortality and higher claims in non-life. Certain
financial assets that are carried at fair value with no offsetting changes in
the fair value of liabilities contributed EUR 25 million to operating earnings
before tax, compared to EUR 8 million in the first quarter of 2005.
Derivatives carried at fair value with no offsetting changes in the fair value
of liabilities contributed a negative EUR 4 million to operating earnings,
compared to a negative of EUR 23 million in the comparable period.
Net income, which includes net gains/losses on investments, impairment charges
and the share in profit of associates, increased 13% to EUR 198 million. Net
gains/losses on investments (before tax) amounted to a negative EUR 70 million
compared to a positive EUR 234 million in the first quarter of 2005. The gains
and losses on investments (before tax) include a negative EUR 211 million from
the decrease in market value of derivatives used for asset and liability
management purposes.
Value of new business
The value of new business for the first quarter of 2006 amounted to EUR 9
million, compared to EUR 10 million for one-fourth of the full year 2005 value
of new business. The internal rate of return (IRR) amounted to 7.9% compared
to 9.2% for the full year 2005. The lower IRR and slight decrease in value of
new business mainly reflect lower margins on mortgage-linked products and a
change in interest rates. Please refer to pages 23 and 24 for more detailed
information on value of new business.
Traditional life / Life for account of policyholders
New life sales increased 1% to EUR 78 million. The comparable period included
EUR 2 million in sales of Moneymaxx Germany, which was divested in 2005. The
comparable quarter last year included a number of large group pension cases,
which did not recur to the same extent in the first quarter of 2006. This
reflects the nature of the group business, where production tends to fluctuate
from period to period due to the timing and size of contracts. The pipeline of
new group pension products is promising, particularly for the second half of
the year. Individual life sales through the intermediary channel showed a
significant improvement. The number of intermediaries selling AEGON's products
has increased, and an increased number of existing intermediaries are offering
a broader selection of AEGON products.
Operating earnings before tax for traditional life amounted to EUR 23 million,
compared to EUR 11 million in the same period in 2005. The increase mainly
reflects a higher contribution from assets carried at fair value with no
offsetting changes in the fair value of liabilities.
Operating earnings before tax from life for account of policyholders amounted
to EUR 242 million, compared to a loss of EUR 9 million in the first quarter
of 2005. This reflects the release of provisions for guarantees and the
absence in the first quarter of 2006 of provisions for "Spaarkas" products,
partially offset by higher expenses and decreased technical results.
Fee - off balance sheet products
Off balance sheet product sales amounted to EUR 125 million compared to EUR
478 million in the first quarter of 2005. The comparable period included a
number of large mandates.
Operating earnings before tax from fee business amounted to EUR 8 million,
compared to EUR 9 million in the first quarter of 2005. Performance of TKP
Pensions and AEGON Asset Management improved. Operating earnings from Meeùs
were lower as investments were made in improving the quality of the
organization to generate growth.
Non-life insurance
Accident and health premiums decreased 11% to EUR 85 million as a consequence
of high lapse rates in the sickness benefits market due to new legislation.
The successful product introduction related to the new disability system in
the Netherlands as outlined in the WIA law, is expected to fully compensate
the loss of premiums. Sales of the new WIA product developed favorably and
represented half of all new non-life production in the first quarter of 2006.
Accident and health operating earnings before tax were EUR 5 million compared
to EUR 8 million in the first quarter of 2005, reflecting higher expenses
related to investments made for the introduction of WIA.
General insurance premiums decreased 3% to EUR 139 million. General insurance
operating earnings before tax amounted to EUR 4 million compared to EUR 10
million in the comparable period, mainly due to higher claims.
Banking activities
At the end of the first quarter of 2006, 825 Levensloop contracts were signed
with employers, representing well over 500,000 employees. Currently there are
13,500 Levensloop accounts opened. In 2006, employees have until July to
decide to open an account and save for this year. New Levensloop deposits,
largely recurring, amounted to EUR 12 million in the first quarter. The
pipeline of new contracts represents 800 large and middle-sized companies with
another 500,000 employees.
Operating earnings before tax from banking activities amounted to EUR 4
million, compared to EUR 7 million in the first quarter of 2005. The decrease
reflects primarily a maturing block of lease products partly offset by higher
interest spreads.
Commissions and expenses
Commissions and expenses decreased 5% to EUR 285 million in the first quarter
of 2006. Operating expenses amounted to EUR 192 million, 4% lower than in the
first quarter of 2005. This is primarily due to the absence of provisions for
"Spaarkas" products and other one-time effects. Excluding these effects,
operating expenses were up by approximately 6%, due to the costs of additional
external staffing and professional services.
Normalized return expectations for fair-valued assets in operating earnings
AEGON provides normalized return expectations for certain financial assets
that are managed on a total return basis with no offsetting changes to the
fair value of liabilities. Normalized annual earnings on these assets, as
described in more detail below, are based on long-term expected returns in
financial markets, but should not be used as an explicit forecast for the year
as actual results can and will deviate from these expectations. These levels
of normalized annualized earnings will be revisited and updated at the end of
2006.
These assets include an investment in a private equity fund and totaled EUR
235 million as of March 31, 2006. Operating earnings for the first quarter of
2006 include EUR 25 million related to these asset classes. Based on current
holdings and asset class returns consistent with long term historical
experience, the long-term expected return on an annual basis is 8% before tax.
The impact of the fair valuation of assets is notable in the traditional life
and life for account of policyholders lines of business.
UNITED KINGDOM
amounts in millions
GBP EUR
First quarter First quarter
2006 2005 % 2006 2005 %
Income by product segment
2 1 100 Traditional life 3 2 50
37 31 19 Life for account of policyholders 54 44 23
(2) 1 N.M. Fee - off balance sheet products (3) 1 N.M.
37 33 12 Operating earnings before tax 54 47 15
(2) 2 N.M. Gains/(losses) on investments (2) 3 N.M.
30 8 N.M. Other non-operating income/(charges) 1 43 12 N.M.
65 43 51 Income before tax 95 62 53
(19) (8) 138 Income tax attributable to policyholder (28) (12) 133
return
46 35 31 Income before income tax on shareholders 67 50 34
return
(7) (10) (30) Income tax on shareholders return (10) (14) (29)
39 25 56 Net income 57 36 58
Revenues
150 44 N.M. Life general account single premiums 218 63 N.M.
50 44 14 Life general account recurring premiums 73 63 16
614 396 55 Life policyholders account single premiums 895 571 57
320 299 7 Life policyholders account recurring 467 432 8
premiums
1,134 783 45 Total gross premiums 1,653 1,129 46
413 396 4 Investment income 602 571 5
41 33 24 Fee and commission income 59 48 23
1,588 1,212 31 Total revenues 2,314 1,748 32
21 98 (79) Income from reinsurance ceded 30 142 (79)
6 1 N.M. Fair value and foreign exchange gains 9 1 N.M.
1,515 195 N.M. Total gains on investments 2,209 281 N.M.
11 0 N.M. Other income 16 0 N.M.
3,141 1,506 109 Total income 4,578 2,172 111
135 108 25 Commissions and expenses 197 156 26
Standardized new premium production
insurance 2
1,067 626 70 Life single premiums 1,556 903 72
110 81 36 Life recurring premiums annualized 161 118 36
217 144 51 Life total recurring plus 1/10 single 316 209 51
Off balance sheet production
303 80 N.M. Mutual funds and other managed assets 441 116 N.M.
303 80 N.M. Total production off balance sheet 441 116 N.M.
1 Included in other non-operating income/(charges) are charges made to
policyholders in respect of income tax.
There is an equal and opposite tax charge which is reported in the line Income
tax attributable to policyholder return.
2 Includes production on investment contracts without a discretionary participation
feature of which the proceeds are
not recognized as revenues but are directly added to our investment contract
liabilities.
AEGON UNITED KINGDOM
* Value of new business amounted to GBP 22 million, an increase of 29%
compared to one-fourth of the full year 2005 value of new business.
* The internal rate of return on new business remained relatively stable at
10.8%.
* New life sales increased 51% to GBP 217 million, as AEGON UK records its
highest quarterly sales performance ever.
* Operating earnings before tax increased 12% to GBP 37 million, or 33% when
excluding the effect of an incentive plan charge of GBP 7 million, related to
the accelerated acquisition of the remaining 40% of Positive Solutions.
* Total revenue generating investments increased 2% to GBP 46.1 billion
compared to year-end 2005 levels.
Results
Operating earnings before tax amounted to GBP 37 million compared to GBP 33
million in the first quarter of 2005. The increase mainly reflects business
growth and the positive effect of higher equity and bond markets, partly
offset by a GBP 7 million charge for the incentive plan for registered
individuals and staff related to the accelerated acquisition of the remaining
40% of Positive Solutions. Excluding the effect of the incentive plan charge,
operating earnings before tax increased 33%.
Net income, which includes net gains/losses on investments and impairment
charges, increased 56% to GBP 39 million. Other non-operating income includes
a gain of GBP 11 million related to the sale of the Luxembourg-based
subsidiary Scottish Equitable International to La Mondiale Participations. In
the consolidated earnings for the Group, 35% of this gain has been eliminated
to reflect AEGON's 35% share in La Mondiale Participations.
The effective shareholder tax rate decreased from 29% to 15%. This reflects
the tax-free disposal gain on the Luxembourg subsidiary and a change in the
sources of profits.
Value of new business
The value of new business for the first quarter of 2006 increased 29% to GBP
22 million compared to GBP 17 million for one-fourth of the full year 2005
value of new business. The IRR on new business remained relatively stable at
10.8%, compared to 11.0% for the full year 2005. The increase in value of new
business reflects higher production and a more profitable mix of business.
Please refer to pages 23 and 24 for more detailed information on value of new
business.
Traditional life / Life for account of policyholders
New life sales in the first quarter of 2006 increased 51%. This is compared to
the relatively weak sales in the first quarter of 2005, which was affected by
certain pricing and commission changes. The increase compared to the
corresponding first quarter represents a strong increase across all lines of
business. Compared to the very strong fourth quarter of 2005, new life sales
in the first quarter of 2006 increased 11% and represent the highest quarterly
sales result ever.
Operating earnings before tax for traditional life amounted to GBP 2 million
compared to GBP 1 million in the first quarter of 2005. Operating earnings
before tax from life for account of policyholders was GBP 37 million, a 19%
increase. This increase mainly reflects business growth and the impact of the
higher equity and bond markets on fund related charges.
Fee - off balance sheet products
In asset management, the retail business in particular performed well, with
the majority of sales coming from Bond funds, emphasizing the strength of
AEGON's fixed income offering. Total off balance sheet production amounted to
GBP 303 million compared to GBP 80 million in the first quarter of 2005.
In the owned distribution businesses, Positive Solutions had another strong
quarter generating its highest-ever quarterly income. The number of registered
individuals (RIs) reached 1,400 at the end of the first quarter, an increase
of around 100 RIs compared to the end of 2005, while average productivity
remains high.
Operating earnings before tax from the fee business segment amounted to a
negative GBP 2 million, compared to a positive contribution of GBP 1 million
in the first quarter of 2005. The lower result was due to the charge of GBP 7
million for the incentive plan related to Positive Solutions.
Commissions and expenses
Commissions and expenses increased 25% to GBP 135 million including the GBP 7
million incentive cost related to Positive Solutions. Other factors affecting
commissions and expenses include growth in the distribution businesses,
leading to an increase of GBP 5 million in paid-out commissions, and growth in
the individual protection business. Operating expenses increased by 12% to GBP
91 million, reflecting investment and growth in our businesses, including
protection and annuities.
OTHER COUNTRIES
amounts in millions
EUR
First quarter
2006 2005 %
Income by product segment
Traditional life 0 3 N.M.
Life for account of 2 2 0
policyholders
Fee - off balance sheet (2) 0 N.M.
products
Accident and health insurance 1 0 N.M.
General insurance 7 7 0
Operating earnings before tax 8 12 (33)
Gains/(losses) on investments 14 4 N.M.
Other non-operating 0 192 N.M.
income/(charges)
Share in profit/(loss) of 5 3 67
associates
Income before tax 27 211 (87)
Income tax (7) (34) (79)
Net income 20 177 (89)
Revenues
Life general account single 8 5 60
premiums
Life general account recurring 173 144 20
premiums
Life policyholders account 97 8 N.M.
single premiums
Life policyholders account 54 30 80
recurring premiums
Total life insurance gross 332 187 78
premiums
Accident and health insurance 27 26 4
General insurance 34 34 0
Total gross premiums 393 247 59
Investment income 42 35 20
Fee and commission income 8 6 33
Other revenues 1 0 N.M.
Total revenues 444 288 54
Income from reinsurance ceded 2 1 100
Fair value and foreign exchange 6 1 N.M.
gains
Total gains on investments 63 16 N.M.
Other income 0 192 N.M.
Total income 515 498 3
Commissions and expenses 84 60 40
Standardized new premium production
insurance
Life single premiums 107 13 N.M.
Life recurring premiums 55 91 (40)
annualized
Life total recurring plus 1/10 66 92 (28)
single
Gross deposits
Variable annuities 1 1 0
Total production on balance 1 1 0
sheet
Off balance sheet production
Mutual funds and other managed 114 110 4
assets
Total production off balance 114 110 4
sheet
OTHER COUNTRIES
* Value of new business amounted to EUR 39 million, an increase of 11%
compared to EUR 35 million for one quarter of the full year 2005.
* New life sales in the first quarter of 2006 decreased 28% to EUR 66 million.
* Operating earnings before tax amounted to EUR 8 million, compared to EUR 12
million in the first quarter of 2005.
* Total revenue generating investments increased 8% to EUR 5.8 billion
compared to year-end 2005 levels.
Results
Operating earnings before tax in Other countries amounted to EUR 8 million
compared to EUR 12 million in the first quarter of 2005. The decrease
primarily reflects lower results in Taiwan and higher start-up losses due to
investments in growth in China, Slovakia and the Czech Republic.
Net income, which includes net gains/losses on investments, amounted to EUR 20
million compared to EUR 177 million in the first quarter of 2005. The
comparable period included a book gain on the sale of the Spanish non-life
insurance activities for EUR 192 million before tax. AEGON's share in the
profit (and loss) of associates (after tax) amounted to EUR 5 million,
compared to EUR 3 million in the first quarter 2005.
Value of new business
The value of new business coming from Other countries for the first quarter of
2006 amounted to EUR 39 million, compared to EUR 35 million for one quarter of
the full year 2005 value of new business. Other countries accounted for 24% of
total value of new business for the group. Asia accounted for 48% of value of
new business coming from Other countries, with the remainder evenly split
between Central and Eastern Europe (CEE) and Other European Countries. The
internal rate of return (IRR) amounted to 20.5% for Asia, against 10.6% for
the full year 2005. The improvement is driven by Taiwan, mainly due to
re-pricing. For CEE, the IRR of 37.5% compares to 33.4% for the full year
2005. This reflects an improvement in Hungary due to expense and commission
efficiency and updated mortality assumptions. Finally, the IRR for Other
European Countries amounted to 18.5%. This compares to 17.5% for the full year
2005 and reflects an improvement at the Caja de Ahorros del Mediterráneo (CAM)
partnership in Spain.
Please refer to pages 23 and 24 for more detailed information on value of new
business.
Traditional life / Life for account of policyholders
New life sales in Taiwan in the first quarter of 2006 decreased 53% to NTD 1.6
billion (EUR 42 million), reflecting the high levels of sales through the
broker channel in the comparable period. Compared to the fourth quarter of
2005, new life sales improved by 64%, mainly due to increased sales of
traditional life and unit-linked products, with unit-linked products
accounting for 36% of total new life sales. Total gross premiums increased 28%
to NTD 6.0 billion (EUR 156 million) in the first quarter of 2006, mainly due
to growth in recurring premiums of traditional life business.
In Hungary, new life sales declined 14% to HUF 961 billion (EUR 4 million).
During the quarter, various products have been repositioned in order to
increase sales through the independent network.
AEGON Poland had its second consecutive record sales quarter, with new life
sales amounting to PLN 49 million (EUR 13 million). Compared to the fourth
quarter of 2005, when the Poland business became part of the AEGON Group, new
life sales increased 19%.
In Spain, new life sales increased 35% to EUR 5 million, reflecting growth in
recurring premium sales. New premium production has been adversely affected by
proposed changes in tax law, delaying the closing of several agreements on
group policies.
The partnership with CAM saw a decrease of 27% in new life sales to EUR 46
million (100% basis), although sales increased by 10% compared to the fourth
quarter of 2005 and remained in line with the business plan. Premium income
for the partnership with CAM amounted to EUR 141 million. The partnership with
CAM is not consolidated in AEGON's accounts. AEGON includes its share in the
results of the partnership in the line share in profit / (loss) of associates.
Total traditional life insurance operating earnings before tax from Other
countries amounted to nil, compared to EUR 3 million in the first quarter of
2005. This reflects lower results in Taiwan, mainly due to adverse claims
experience and lower surrender results caused by a higher persistency rate, as
well as a gradual decline of the old traditional life portfolio in Hungary.
Operating earnings from life for account of policyholders remained stable and
amounted to EUR 2 million.
Fee - off balance sheet products
In Hungary, off balance sheet product sales amounted to HUF 25 billion (EUR 98
million). Sales in the pension fund business continued to grow, with the
number of new members increasing by 55% to well over 14,000. Total pension
fund membership amounted to 595,000 members at the end of March, 2006, an
increase of 7%. Off balance sheet investments grew by 9% to HUF 307 billion
(EUR 1,156 million) compared to the year-end 2005 level.
In Slovakia, the pension fund business continued to report strong growth. In
the first quarter, 26,593 new pension fund members were registered, bringing
the total to 81,790.
Total fee - off balance sheet operating earnings before tax from Other
countries amounted to a negative EUR 2 million, against nil for the first
quarter of 2005, reflecting higher start-up costs of the Slovakian pension
business.
Non-life insurance
In Hungary, non-life premium income increased by 5% to HUF 8.8 billion (EUR 35
million) mainly as a result of increased household insurance sales. Non-life
premiums in Spain, which only include health business, increased 3% to EUR 27
million.
Accident and health insurance operating earnings before tax in Other countries
amounted to EUR 1 million compared to nil in the first quarter of 2005, while
general insurance operating earnings before tax remained level at EUR 7
million.
Commissions and expenses
Commissions and expenses increased 40% to EUR 84 million mainly due to lower
deferral of expenses in Taiwan following a change in business mix. Operating
expenses increased 13% to EUR 34 million, mainly due to the inclusion of AEGON
Poland.
Associates
AEGON's share in the profit of associates amounted to EUR 5 million (after
tax), compared to EUR 3 million in the first quarter of 2005. This line
represents the income on the partnership with CAM (49.99% interest). It also
includes the income on the 35% stake in La Mondiale Participations.
CONDENSED CONSOLIDATED BALANCE SHEETS
amounts in millions
At At At
March 31 March 31 Dec. 31
2005 2006 2005
EUR EUR EUR %
Investments general account 133,191 144,612 146,075 (1)
Investments for account of policyholders 111,072 129,616 127,547 2
Investments in associates 481 486 542 (10)
Other assets and receiveables 35,045 37,954 37,051 2
Total assets 279,789 312,668 311,215 0
Shareholders'equity 15,735 18,839 19,276 (2)
Other equity instruments 2,869 3,381 3,379 0
Minority interest 17 18 15 20
Group equity 18,621 22,238 22,670 (2)
Trust pass-through securities 397 425 437 (3)
Subordinated borrowings 264 279 284 (2)
Senior debt related to insurance activities 2,875 2,092 2,059 2
Total capital base 22,157 25,034 25,450 (2)
Insurance contracts general account 86,510 93,530 95,690 (2)
Insurance contracts for account of policyholders 62,380 71,456 70,280 2
Investment contracts general account 35,069 39,667 38,842 2
Investment contracts for account of policyholders 49,639 59,666 58,724 2
Other liabilites 24,034 23,315 22,229 5
Total equity and liabilities 279,789 312,668 311,215 0
SHAREHOLDERS' EQUITY ROLL FORWARD At At At
March 31 March 31 Dec. 31
2005 2006 2005
EUR EUR EUR
Shareholders' equity January 1 14,875 19,276 14,875
Net income 677 630 2,732
Dividend paid 0 0 (272)
Movements in foreign currency translation reserve 502 (373) 1,515
Repurchased and sold own shares 12 (102) 76
Movements in revaluation reserves (322) (514) 152
Coupons on perpetuals (net of tax) (29) (32) (132)
Other changes 1 20 (46) 330
Shareholders' equity 15,735 18,839 19,276
end of period
1 Includes EUR 275 million in 2005 from an agreement between the Dutch
tax authorities and AEGON NV on a number of
items related to AEGON NV's corporate income tax filings
for the years 1996-2005.
ADDITIONAL BALANCE SHEET INFORMATION
At At At At At At
March 31 Dec. 31 March 31 March 31 March 31 Dec. 31
2006 2005 2005 2005 2006 2005
USD USD % USD EUR EUR EUR %
Assets
13,288 12,728 4 Deferred policy acquisition 11,975 9,237 10,978 10,789 2
costs
Equity
2,555 2,490 3 Preferred shares 2,735 2,110 2,111 2,111 0
2,153 2,705 (20) Revaluation reserves 2,358 1,819 1,779 2,293 (22)
Liabilities
51,746 52,907 (2) Fixed annuities 54,735 42,221 42,751 44,848 (5)
35,185 32,938 7 Institutional guaranteed 31,479 24,282 29,069 27,921 4
products
50,251 48,015 5 Variable annuities 43,781 33,771 41,516 40,701 2
6,188 5,954 4 Savings accounts 7,156 5,520 5,112 5,047 1
Number of employees 27,213 27,199 27,159 0
REPORT OF THE HOLDING COMPANY
Capital and funding
Shareholders' equity at March 31, 2006 amounted to EUR 18.8 billion, a
decrease of EUR 0.4 billion or 2% compared to December 31, 2005. The positive
impact of EUR 0.6 billion from net income was more than offset by negative
foreign currency translation effects of EUR 0.4 million, and a decrease in
revaluation reserves of EUR 0.5 billion, reflecting higher interest rates.
At March 31, 2006 shareholders' equity represented 75% of the total capital
base, comfortably within target levels. Group equity, which includes other
equity instruments (such as perpetual capital securities) and minority
interests, represented 89% of total capital. The capital leverage to total
capital ratio of 11% was stable compared to year-end 2005.
Interest charges and other
Interest charges and other increased 25% to EUR 80 million in the first
quarter 2006. Interest charges and other, excluding the impact of
eliminations, increased by approximately EUR 9 million compared to the first
quarter of 2005. This primarily reflects the impact of a strengthening of the
US Dollar against the Euro.
Subsequent events
On April 24, AEGON received all necessary regulatory approvals for the
acquisition of a 50% stake in Caja Navarra's life insurance and pensions
subsidiary, Seguros Navarra S.A. As announced on November 22, 2005, the
partners have created a joint venture, which combines Caja Navarra's
significant customer reach through its banking network and AEGON's expertise
in life insurance and pensions.
On April 28, 2006 AEGON and Caja de Badajoz received the final authorization
to establish a 50-50 life insurance joint venture, Caja Badajoz Vida, to sell
life insurance, accident and pension products through the branch network of
Caja de Badajoz.
On May 9, 2006, AEGON announced that the stock fraction for the 2005 final
dividend has been determined at 1/63. The stock fraction is based on the
average share price for the AEGON share on Euronext Amsterdam N.V. for the
five trading days from May 3 up to and including May 9, 2006. The final
dividend will be payable as from May 16, 2006.
VALUE OF NEW BUSINESS
Starting with the first quarter of 2006, AEGON is providing value of new
business information on a quarterly basis. Value of new business represents
the present value of the future distributable earnings on the block of
business sold in the latest reporting period. Value of new business is
calculated using beginning of year economic assumptions and assumptions
outside of management control, and end of period operating assumptions.
AEGON's management believes that this information, in conjunction with other
publicly disclosed financial information, can provide valuable additional
information for investors and shareholders.
Value of new business should not be viewed as a substitute for AEGON's primary
financial statements. The methodology AEGON uses to calculate value of new
business is consistent with European Embedded Value Principles and described
in more detail in the 2005 Embedded Value disclosure document that is
available on AEGON's website: www.aegon.com.
VALUE OF NEW BUSINESS VNB VNB
(amounts in EUR millions) 2006 Q1 YTD ¼ of full %
year 2005
Gross value of new business 325 281 16
Tax (105) (90) 16
Cost of capital (58) (53) 9
Value of new business 163 138 18
VALUE OF NEW BUSINESS AND IRR
(amounts in EUR 2006 2005 2006 2005
millions, after-tax)
Q1 YTD ¼ of full Q1 YTD full year
year
VNB VNB IRR IRR
% %
Americas 83 68 12.3 11.3
The Netherlands 9 10 7.9 9.2
United 31 24 10.8 11.0
Kingdom
Asia 19 21 20.5 10.6
China1 0 0 13.2 15.3
Taiwan 18 21 20.5 10.6
Central and Eastern 10 7 37.5 33.4
Europe
Czech Republic 0 0 24.4 26.5
Hungary 6 5 50.5 39.9
Poland 3 1 24.5 25.8
Slovakia 1 1 11.3 11.7
Other European Countries 10 8 18.5 17.5
France2 2 1 10.4 9.1
Spain3 8 6 20.7 19.1
Total 163 138 14.7 12.4
1 AEGON CNOOC joint venture (50%).
2 La Mondiale Partnership (35%).
3 AEGON Spain and CAM partnership in Spain.
Modeled new business Premium business Deposit business VNB VNB
APE4 and deposits (TL, LAP, Reins, (FA, VA, IGP, Fee)
A&H)
(amounts in EUR APE APE Deposits Deposits
millions)
2006 2005 2006 2005 2006 2005
Q1 YTD ¼ of full Q1 YTD ¼ of full Q1 YTD ¼ of full %
year year year
Americas 354 355 5,720 5,646 83 68 22
The Netherlands 91 58 1 6 9 10 (9)
United Kingdom 306 246 0 0 31 24 29
Asia 43 79 0 0 19 21 (11)
China1 2 1 0 0 0 0 49
Taiwan 42 78 0 0 18 21 (11)
Central and Eastern 24 7 5 6 10 7 54
Europe
Czech Republic 0 0 0 0 0 0 4
Hungary 3 4 5 4 6 5 22
Poland 19 3 0 0 3 1 N.M.
Slovakia 1 0 0 3 1 1 6
Other European Countries 54 44 0 0 10 8 32
France2 29 23 0 0 2 1 82
Spain3 25 21 0 0 8 6 23
Total 873 788 5,726 5,658 163 138 18
1 AEGON CNOOC joint venture (50%)
2 La Mondiale Partnership (35%)
3 AEGON Spain and CAM partnership in Spain
4 APE = recurring premium + 1/10 single premium
VNB/PVNBP SUMMARY Premium business Deposit business
(amounts in EUR (TL, LAP, Reins, A&H) (FA, VA, IGP, Fee)
millions)
2006 - Q1 YTD VNB PVNBP4 VNB/ VNB/ APE VNB PVNBP VNB/ VNB/ Total Total
PVNBP PVNBP Deposits VNB IRR
% % % % %
Americas 39 1,891 2.1 11.1 44 6,494 0.7 0.8 83 12.3
The Netherlands 9 743 1.2 9.6 0 3 5.9 15.5 9 7.9
United Kingdom 31 1,990 1.6 10.3 0 0 0.0 0.0 31 10.8
Asia 19 286 6.5 42.6 0 0 0.0 0.0 19 20.5
China1 0 11 1.1 8.0 0 0 0.0 0.0 0 13.2
Taiwan 18 275 6.7 43.9 0 0 0.0 0.0 18 20.5
Central and 7 132 5.2 28.6 4 152 2.4 71.0 10 37.5
Eastern Europe
Czech Republic 0 3 5.0 25.8 0 0 0.0 0.0 0 24.4
Hungary 3 23 12.4 82.6 3 57 5.1 61.7 6 50.5
Poland 3 102 3.3 17.4 0 0 0.0 0.0 3 24.5
Slovakia 0 4 11.6 70.7 1 95 0.7 195.7 1 11.3
Other European 10 493 2.0 18.5 0 0 0.0 0.0 10 18.5
Countries
France2 2 337 0.6 7.2 0 0 0.0 0.0 2 10.4
Spain3 8 157 5.0 32.0 0 0 0.0 0.0 8 20.7
Total 115 5,535 2.1 13.1 48 6,648 0.7 0.8 163 14.7
1 AEGON CNOOC joint venture (50%)
2 La Mondiale Partnership (35%)
3 AEGON Spain and CAM partnership in Spain
4 Present Value New Business Premium
CONDENSED CONSOLIDATED INCOME STATEMENT
amounts in millions
EUR
First quarter
2006 2005 %
Total revenues 8,885 7,918 12
Income from reinsurance ceded 400 501 (20)
Fair value and foreign exchange gains 553 56 N.M.
Total gains on investments 4,417 824 N.M.
Other income 10 192 (95)
Total income 14,265 9,491 50
Benefits and expenses 1 12,834 7,632 68
Fair value and foreign exchange losses 50 137 (64)
Total losses on investments and 432 691 (37)
impairment charges
Interest charges and related fees 110 100 10
Total charges 13,426 8,560 57
Share in profit/(loss) of associates 6 3 100
Income before tax 845 934 (10)
Income tax (215) (256) (16)
Minority interest 0 (1) N.M.
Net income 630 677 (7)
1 Includes Commissions and expenses for EUR 1,589 million (2005: EUR 1,340 million)
NET INCOME PER SHARE (EPS) CALCULATION
amounts in millions
(except per share data)
EUR
3M 2006 3M 2005 %
Net income 630 677 (7)
Preferred dividend - - N.M.
Coupons on perpetuals (32) (29) (10)
Net income attributable to ordinary 598 648 (8)
shareholders
Weighted average number of ordinary shares 1,575 1,523 3
outstanding
Net income per share year-to-date 0.38 0.43 (12)
Explanatory Notes
The published figures are unaudited
Traditional life includes income on traditional and fixed universal life products
Life for account of policy holders includes income on variable universal life, unitised
pension (UK), other unit-linked products with investments for account of policyholders
and with profit fund in the UK.
Variable annutities includes segregated funds.
Institutional gauranteed products includes income on GICs and funding agreements.
Fee business includes income on reinsurance business assumed from direct writers.
Reinsurance includes income on reinsurance business assumed from direct writers.
Other is currently used to report any items which cannot be directly allocated to a
specific line of business
Currencies
Income statement items: average rate 1 EUR = USD 1.2026 (2005: USD 1.3114).
Income statement items: average rate 1 EUR = GBP 0.6860 (2005: GBP 0.6932).
Balance sheet items: closing rate 1 EUR = USD 1.2104 (2005: USD 1.2964; year-end 2005: USD 1.1797)
Balance sheet items: closing rate 1 EUR = GBP 0.6964 (2005: GBP 0.6885; year-end 2005: GBP 0.6853)
REVENUES AND PRODUCTION
amounts in millions
EUR
First quarter
2006 2005 %
Revenues
Life general account single 558 369 51
premiums
Life general account recurring 1,696 1,525 11
premiums
Life policyholders account 1,424 1,094 30
single premiums
Life policyholders account 1,416 1,408 1
recurring premiums
Total life insurance gross 5,094 4,396 16
premiums
Accident and health insurance 625 585 7
General insurance 173 177 (2)
Total gross premiums 5,892 5,158 14
Investment income 2,594 2,395 8
Fee and commission income 394 338 17
Other revenues 5 27 (81)
Total revenues 8,885 7,918 12
Income from reinsurance ceded 400 501 (20)
Fair value and foreign exchange 553 56 N.M.
gains
Total gains on investments 4,417 824 N.M.
Other income 10 192 (95)
Total income 14,265 9,491 50
Total revenues by product segment
Life insurance 7,899 6,944 14
Accident and health insurance 718 678 6
General insurance 187 191 (2)
Banking activities 56 67 (16)
Other activities 25 38 (34)
Total revenues 8,885 7,918 12
Standardized new premium production insurance
Life single premiums 2,271 1,686 35
Life recurring premiums 459 442 4
annualized
Life total recurring plus 1/10 686 611 12
single
Gross deposits
Fixed annuities 399 382 4
Institutional guaranteed 3,833 2,423 58
products
Variable annuities 1,476 1,166 27
Total 5,708 3,971 44
Savings deposits 708 859 (18)
Total production on balance sheet 6,416 4,830 33
Net deposits
Fixed annuities (1,346) (910) (48)
Institutional guaranteed 1,495 131 N.M.
products
Variable annuities 146 199 (27)
Total 295 (580) N.M.
Savings deposits (35) (133) 74
Total net deposits 260 (713) N.M.
Off balance sheet production
Synthetic GICs 1,289 1,208 7
Mutual funds/Collective Trusts
and other managed assets 2,982 3,418 (13)
Total production off balance 4,271 4,626 (8)
sheet
INVESTMENTS GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated)
Holdings,
United other
AmericasKingdom The United Other activities & Total
USD GBP At March 31, 2006 Americas Netherlands Kingdom countries eliminations EUR
Investments
2,515 45 Shares 2,078 5,969 64 74 (25) 8,160
102,893 2,438 Bonds 85,008 15,422 3,502 3,198 23 107,153
16,763 0 Loans 13,849 7,160 0 155 72 21,236
6,701 0 Other financial assets 5,536 29 0 75 0 5,640
482 0 Investments in real estate 398 1,670 0 1 0 2,069
204 0 Real estate held for own use 169 135 0 34 16 354
129,558 2,483 Investments general account 107,038 30,385 3,566 3,537 86 144,612
0 21,981 Shares 0 9,818 31,563 131 (42) 41,470
0 14,773 Bonds 0 8,931 21,214 132 0 30,277
58,729 695 Separate accounts and 48,520 0 998 827 0 50,345
investment funds
0 2,976 Other financial assets 0 1,674 4,273 16 0 5,963
0 991 Investments in real estate 0 0 1,423 0 0 1,423
0 96 Real estate for own use 0 0 138 0 0 138
58,729 41,512 Investments for account of 48,520 20,423 59,609 1,106 (42) 129,616
policyholders
188,287 43,995 Investments on balance sheet 155,558 50,808 63,175 4,643 44 274,228
82,732 2,073 Off balance sheet investments 68,351 12,729 2,977 1,187 0 85,244
third parties
271,019 46,068 Total revenue generating 223,909 63,537 66,152 5,830 44 359,472
investments
Investments
102,475 2,442 Available-for-sale 84,662 19,283 3,507 2,060 19 109,531
16,763 0 Loans 13,849 7,160 0 155 72 21,236
0 0 Held-to-maturity 0 0 0 1,260 0 1,260
68,363 40,466 Financial assets at fair 56,480 22,560 58,107 1,133 (63) 138,217
value through profit or loss
482 991 Investments in real estate 398 1,670 1,423 1 0 3,492
204 96 Real estate held for own use 169 135 138 34 16 492
188,287 43,995 Total investments on balance 155,558 50,808 63,175 4,643 44 274,228
sheet
ASSETS AND CAPITAL GEOGRAPHICALLY
amounts in million EUR
(unless otherwise stated)
United
Americas Kingdom The United Other Total
USD GBP Americas Netherlands Kingdom countries EUR
At March 31, 2006
216,858 48,228 Assets business units 179,162 56,800 69,253 5,842 311,057
Other assets 1,611
Total assets on balance sheet 312,668
19,037 2,196 Capital in units 15,728 5,283 3,153 1,088 25,252
Total capital base 25,034
Other net liabilities 218
Total 25,252
At March 31, 2005
207,634 41,574 Assets business units 160,162 52,342 60,384 4,281 277,169
Other assets 2,620
Total assets on balance sheet 279,789
18,161 2,004 Capital in units 14,009 4,195 2,911 1,200 22,315
Total capital base 22,157
Other net liabilities 158
Total 22,315
At December 31, 2005
210,458 47,319 Assets business units 178,400 55,474 69,049 5,720 308,643
Other assets 2,572
Total assets on balance sheet 311,215
19,149 2,124 Capital in units 16,232 5,011 3,100 1,155 25,498
Total capital base 25,450
Other net liabilities 48
Total 25,498
Cautionary note regarding Regulation G (non-GAAP financial measure)
This press release includes a non-GAAP financial measure: operating earnings
before tax. The reconciliation of this measure to the most comparable GAAP
measure is shown below in accordance with Regulation G. AEGON believes the
non-GAAP measure shown herein, together with the GAAP information, provides a
meaningful measure for the investing public to evaluate AEGON's business
relative to the businesses of our peers.
RECONCILIATION OPERATING EARNINGS TO INCOME BEFORE TAX
amounts in Millions
EUR
First quarter
2006 2005 %
Operating earnings before tax 827 430 92
Gains on investments (30) 308 N.M.
Other income 10 192 (95)
Losses on investments (2) (1) (100)
Impairment charges 6 (10) N.M.
Policyholder tax 28 12 133
Share in profit/(loss) of associates 6 3 100
Income before tax 845 934 (10)
DISCLAIMERS
Local currencies and constant currency exchange rates
This press release contains certain information about our results and
financial condition in USD for the Americas, GBP for the United Kingdom, HUF
for Hungary and NTD for Taiwan because those businesses operate and are
managed primarily in those currencies. Certain comparative information
presented on a constant currency basis eliminates the effects of changes in
currency exchange rates. None of this information is a substitute for or
superior to financial information about us presented in euro, which is the
currency of our primary financial statements.
Forward looking statements
The statements contained in this press release that are not historical facts
are forward-looking statements as defined in the U.S. Private Securities
Litigation Reform Act of 1995. Words such as believe', estimate', intend',
may', expect', anticipate', predict', project', counting on', plan',
continue', want', forecast', should', would', is confident' and will'
and similar expressions as they relate to us are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are
difficult to predict. We undertake no obligation to publicly update or revise
any forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates.
All forward-looking statements are subject to various risks and uncertainties
that could cause actual results to differ materially from expectations,
including, but not limited to, the following:
* Changes in general economic conditions, particularly in the United States,
the Netherlands and the United Kingdom;
* Changes in the performance of financial markets, including emerging markets,
including:
- The frequency and severity of defaults by issuers in our fixed income
investment portfolios; and
- The effects of corporate bankruptcies and/or accounting restatements on the
financial markets and the resulting decline in value of equity and debt
securities we hold;
* The frequency and severity of insured loss events;
* Changes affecting mortality, morbidity and other factors that may affect the
profitability of our insurance products;
* Changes affecting interest rate levels and continuing low interest rate
levels and rapidly changing interest rate levels;
* Changes affecting currency exchange rates, including the EUR/USD and EUR/GBP
exchange rates;
* Increasing levels of competition in the United States, the Netherlands, the
United Kingdom and emerging markets;
* Changes in laws and regulations, particularly those affecting our
operations, the products we sell and the attractiveness of certain products to
our consumers;
* Regulatory changes relating to the insurance industry in the jurisdictions
in which we operate;
* Acts of God, acts of terrorism, acts of war and pandemics;
* Changes in the policies of central banks and/or governments;
* Litigation or regulatory action that could require us to pay significant
damages or change the way we do business;
* Customer responsiveness to both new products and distribution channels;
* Competitive, legal, regulatory, or tax changes that affect the distribution
cost of or demand for our products;
* Our failure to achieve anticipated levels of earnings or operational
efficiencies as well as other cost saving initiatives;
* The impact on our reported financial results and financial condition as a
result of our adoption of International Financial Reporting Standards.
ABOUT AEGON
AEGON is one of the world's largest life insurance and pension companies, and
a strong provider of investment products. We empower our local business units
to identify and provide products and services that meet the evolving needs of
our customers, using distribution channels best suited to their local markets.
We take pride in balancing a local approach with the power of an expanding
global operation.
With headquarters in The Hague, the Netherlands, AEGON companies employ
approximately 27,000 people. AEGON's three major markets are the United
States, the Netherlands and the United Kingdom. In addition, the Group is
present in a number of other countries including Canada, China, Czech
Republic, Hungary, Poland, Slovakia, Spain and Taiwan.
Respect, quality, transparency and trust constitute AEGON's core values as the
company continually strives to meet the expectations of customers,
shareholders, employees and business partners. AEGON is driven to deliver new
thinking and our ambition is to be the best in the industry.
CONTACT INFORMATION
Group Corporate Affairs & Investor Relations
The Hague, the Baltimore, the United States
Netherlands
Analysts & +31 (0)70 344 83 05 +1 877 548 9668 (toll free) / +1
Investors 410 576 45 77
Media +31 (0)70 344 83 44 +1 410 576 45 26
E-mail gca-ir@aegon.com ir@aegonusa.com
Website www.aegon.com
PRESS CONFERENCE AND WEBCAST DETAILS
Press conference call
A press conference call on the first quarter 2006 results will be held this
morning at 09.30 hrs (Dutch time). This call will be webcast live on AEGON's
website www.aegon.com.
Analyst and investor conference call
An analyst and investor conference call on the first quarter 2006 results and
the 2005 Embedded Value will be held today at
Amsterdam 15.00 hrs
London 14.00 hrs
New York 09.00 hrs
The listen-only phone numbers for the conference call are as follows:
+31 (0)20 794 8504 (the Netherlands)
+44 (0)20 7190 1595 (United Kingdom)
+1 480 629 9562 (United States and Canada)
Audio webcast
The conference call and Q&A session can be followed simultaneously via an
audio webcast on our website www.aegon.com.
END
AEGON N.V.: AEGON reports first quarter 2006 results
© 2006 PR Newswire
Sie erhalten auf FinanzNachrichten.de kostenlose Realtime-Aktienkurse von und
Werbehinweise: Die Billigung des Basisprospekts durch die BaFin ist nicht als ihre Befürwortung der angebotenen Wertpapiere zu verstehen.
Wir empfehlen Interessenten und potenziellen Anlegern den Basisprospekt und die Endgültigen Bedingungen zu lesen,
bevor sie eine Anlageentscheidung treffen, um sich möglichst umfassend zu informieren, insbesondere über die potenziellen
Risiken und Chancen des Wertpapiers. Sie sind im Begriff, ein Produkt zu erwerben, das nicht einfach ist und schwer zu
verstehen sein kann.
