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44 Business overview Results of operations the NetherlandsResults 2012 the Netherlands1Higher underlying earnings before tax in the Netherlands were driven by improved Life & Savingsearnings and lower operating expenses following implemented cost reduction initiatives in 2011.Aegon’s business in the Netherlands has already realized EUR 89 million of the targeted EUR100 million reduction in operating expenses. Net income was impacted by a one-off charge of EUR265 million related to the acceleration of product improvement for unit-linked insurance products.Net incomeNet income from Aegon’s businesses in the Netherlands amounted to EUR252 million and included a charge of EUR 265 million before tax related to theacceleration of product improvements for unit-linked insurance products. Realizedgains on investments totaled EUR 138 million for the year and were mainly theresult of asset liability management related trading activity and selective de-risking.Results on fair value items amounted to a gain of EUR 112 million and impairmentsamounted to EUR 29 million.Underlying earnings before taxUnderlying earnings before tax from Aegon’s operations in the Netherlandsincreased 6% in 2012 to EUR 315 million as higher earnings in Life & Savings morethan offset lower earnings in Pension and Non-life. Recurring charges for CorporateCenter expenses amounted to EUR 16 million. Underlying earnings before tax from Aegon’s Life & Savings operations in theNetherlands increased to EUR 262 million, up 42% compared to 2011. Thisincrease was driven by cost savings, a higher contribution from Aegon’sgrowing mortgage portfolio on lower funding costs, the non-recurrence ofcertain expenses and a benefit in the fourth quarter resulting from updatedmortality tables of EUR 24 million. Underlying earnings before tax from the Pension business declined to EUR66 million as the benefit of cost savings and the wind up of several contractswere more than offset by lower interest income, the non-recurrence of aemployee benefit release in 2011 and a charge in 2012 of EUR 17 millionresulting from updated mortality tables. Non-life recorded an underlying loss before tax of EUR 29 million in 2012 as aresult of adverse claim experience on disability and general insuranceproducts. Losses on these products have led to the implementation of actionsto improve future results with disability insurance products already showingimprovements in 2012. In 2012, the distribution businesses recorded an underlying earnings before taxof EUR 16 million, an improvement compared to 2011 due to cost savings andlower amortization of value of business acquired following an impairment in2011.Commissions and expensesCommissions and expenses decreased by 7% in 2012 compared to 2011 driven bylower operating expenses. O perating expenses decreased by 8%, to EUR756 million, as realized cost savings and the non-recurrence of restructuringcharges offset investments in new distribution capabilities and recurring charges forCorporate Center expenses.Aegon is on track to reduce operating expenses by EUR 100 million in comparisonto the cost base for 2010, of which the majority has been achieved in 2012. Overthe years, Aegon has implemented cost savings of EUR 89 million.ProductionNew life sales decreased by 3% in 2012 to EUR 246 million. The decline inIndividual life sales to EUR 46 million, primarily driven by a shrinking Dutch lifeinsurance market, more than offset the 16% increase in pension sales. Productionof mortgages in 2012 amounted to EUR 2.7 billion down from EUR 3.3 billion in2011.Premium production for accident & health amounted to EUR 21 million, down fromEUR 27 million in 2011. Sales in income insurance products were negativelyimpacted by strong competition and price increases to maintain margins. Generalinsurance production amounted to EUR 30 million, up 11% for the year, resultingfrom successful new distribution initiatives.Gross deposits declined to EUR 1,484 million, driven by strong competition on theDutch savings market and a reduction of the rate offered on savings accounts toprotect margins.1 Throughout this report, Aegon the Netherlands refers to all Aegon companies operating in the Netherlands.