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AEGON's 2011 Total Embedded Value Increased 10% To EUR 20.7 Billion

THE HAGUE, The Netherlands, May 10, 2012 /PRNewswire/ --

  • Embedded value life insurance declines 7% to EUR 23.9 billion as a result of capital movements
  • Total embedded value attributable to common shareholders increases 11% to EUR 19.6 billion
  • Total embedded value per common share remained level at EUR 10.42

AEGON's total embedded value at the end of 2011 totaled EUR 20.7 billion, an increase of 10% compared with last year, as a lower embedded value life insurance was more than offset by a higher book value for other activities and lower market value of debt.

Embedded value for AEGON's life insurance businesses declined to EUR 23.9 billion mainly due to capital movements to the Group and other activities, and the divestment of Transamerica Reinsurance. Operating margins on embedded value increased to 8.6% in 2011 compared to 5.3% in 2010, driven by new business and a positive performance from AEGON's existing in-force business.

The performance from AEGON's existing in-force business was driven by changes in operating assumptions primarily related to lower future expenses related to the restructuring program in the Netherlands and an update on mortality assumptions on the universal life business in the Americas. This was partly offset by the negative impact from restructuring and project costs and the increase in the provision covering customer redress in the United Kingdom in 2011. The negative impact from economic assumption changes was mainly driven by lower interest rates. This was partly offset by the positive impact of the interest rate hedging program in the Netherlands. Embedded value also benefited from favorable currency movements, in particular a strengthening of the US dollar against the euro.

At the end of 2011, the free surplus on life insurance business declined to EUR 1.6 billion, due mainly to increased capital requirement in the US, and outflow of capital to the Group and other activities. This was partly offset by earnings on the in-force portfolio and the divestment of Transamerica Reinsurance.

AEGON will discontinue publication of traditional embedded value metrics (EEV and VNB). The press release covering the first quarter 2012 results no longer includes traditional VNB, but contains market consistent value of new business (MCVNB) information. AEGON will replace the full year traditional embedded value report with information based on the new regulatory regime, Solvency II.
    Embedded value                                            Year-end Year-end
    (amounts in millions unless stated otherwise, after tax)      2011     2010   
                                                                   EUR      EUR      %
    Life business
    Adjusted net worth (ANW)                                    15,702   15,959     (2)
                        Free surplus (FS)                        1,628    3,261    (50)
                        Required surplus (RS)                   14,074   12,697     11
    Value of in-force life business (ViF)                        8,243    9,798    (16)
                        Present value future profits (PVFP)     13,126   13,570     (3)
                        Cost of capital (CoC)                   (4,883)  (3,772)   (29)
    Embedded value life insurance (EVLI)                        23,945   25,756     (7)
    Other activities
    IFRS book value                                              2,264      733    209
    Total embedded value before holding activities              26,208   26,489     (1)
    Holding activities                                          (5,520)  (7,598)    27
                        Market value of debt, 
                        capital securities & other net 
                        liabilities                             (5,075)  (7,098)    29
                        Present value holding expenses            (446)    (500)    11
    Total embedded value 
    (TEV)                                                       20,688   18,891     10
                        Value of preferred share capital        (1,104)  (1,170)     6
    Total embedded value (TEV) 
    attributable to common shareholders                         19,585   17,721     11
                        TEV attributable to common 
                        shareholders per share (EUR)             10.42    10.38      0


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