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Results 2011 worldwide Aegon’s 2011 underlying earnings before tax of EUR 1,522 million and net incomeof EUR 872 million were impacted by considerable charges, expenses related t o thecustomer redress program in the United Kingdom and business restructuring in itsestablished markets. New life sales volumes were below those of 2010 as a resultof repricing of products, however, deposits continued to be strong, particularly in theAmericas. Aegon maintained a strong capital position during the year and bycompleting the repurchase of convertible core capital securities, the company hasturned its focus on carrying out a strategy to deliver sustainable earnings growthwith an improved risk-return profile.Net incomeNet income in 2011 of EUR 872 million was lower than net income in 2010 (2010:EUR 1,760 million), primarily the result of lower underlying earnings before tax, lessgains on investments and a significant decline in results on fair value items.Underlying earnings before taxAegon’s underlying earnings before tax declined to EUR 1,522 million in 2011 fromEUR 1,833 million in 2010. The decline compared to last yea r was mainly du e t ohigher charges and expenses in the United Kingdom related to the customerredress program, higher provisioning for longevity in the Netherlands and the effectsof lower interest rates and lower equity markets.Underlying earnings before tax in the Americas decreased 5% to USD 1,771 million.Earnings from Life & Protection decreased mainly as a result of unfavorablepersistency and lower spreads. Individual Savings & Retirement earnings remainedstable as increased earnings from variable annuities and retail mutual funds wereoffset by lower earnings from fixed annuities as the product is de-emphasized.Earnings from Employer Solutions & Pensions increased as a result of continuedstrong growth of the business.Underlying earnings from Aegon’s operations in the Netherlands amounted to EUR298 million, a decrease of 23% compared to 2010. Additional provisioning forlongevity of EUR 82 million was only partly offset by the positive impact of favorabletechnical results.In the United Kingdom, underlying earnings before tax declined significantly toG BP 5 million. This was mainly due to charges and expenses related to an ongoingprogram to correct historical issues within customer policy records and theexecution of this program partly offset by the benefit of changes to employee benefitplans. The sale of G uardian during the third quarter 2011, and the subsequent lossof earnings, also contributed to the decrease.Annual Report on Form 20-F 2012In New Markets, Aegon reported underlying earnings before tax of EUR 249 million,an increase of 2% compared to 2010. The increase is primarily the result of higherunderlying earnings before tax from Aegon Asset Management.For Holding and other activities, underlying earnings before tax amounted to a lossof EUR 303 million which is the result of higher expenses related primarily to thepreparation for implementation of Solvency II, and higher funding costs.Fair value itemsIn 2011, fair value items recorded a loss of EUR 416 million. The significant declinecompared to 2010 was driven mainly by lower results from fair value items in theAmericas as Aegon lowered its interest rate assumptions which negatively impactedresults during the third quarter with EUR 168 million. In addition, lower interestrates, spread widening and volatile equity markets also negatively affected resultson fair value items. Less favorable results on fair value movements in theNetherlands also contributed to the decline.Realized gains on investmentsIn 2011, realized gains on investments amounted to EUR 446 million and were theresult of a decision to replace equities by fixed income securities in the Netherlands,the divestment of the life reinsurance activities in the Americas in addition to normaltrading in the investment portfolio.Impairment chargesImpairment charges improved from the 2010 level of EUR 452 million andamounted to EUR 388 million in 2011. In the United States, impairments weremostly linked to residential mortgage-backed securities. Impairments in the UnitedKingdom related primarily to exchange offers on specific holdings of Europeanbanks and in Central & Eastern Europe impairments were largely att ributable to newlegislation in Hungary, related to Swiss franc denominated mortgages, affecting themortgage portfolio.Other chargesOther charges amounted to EUR 267 million, an improvement compared to chargesof EUR 309 million in 2010. In the Americas, a charge of EUR 37 million related toincreased reserves in connection with the company’s use of the US Social SecurityAdministration’s death master-file. Restructuring charges in the Netherlands relatedto a restructuring program to reduce operating expenses going forward amounted toEUR 92 million and a write-down of intangible assets related to the distributionbusinesses led to a charge of EUR 75 million. In the United Kingdom, restructuringcharges amounted to EUR 86 million. In New Markets, charges of EUR 17 millionrelated to the Hungarian bank tax are included, offset by a benefit of EUR 37 millionrelated to a settlement of legal claims by Aegon Asset Management.23