Aegon Annual Report 2012

Annual Report 201219Results 2012 worldwideAegon’s 2012 net income of EUR 1,571 million and underlying earnings before taxof EUR 1,787 million were higher than in 2011 resulting from business growth,implemented cost reduction programs, the non-recurrence of certain charges inthe United Kingdom, and favorable markets. Sales and deposits increasedcompared to 2011 despite repricing and product changes made to reflect thecontinued low interest rate environment. Growth was driven mostly by pensions,variable annuities, mortgages and asset management. Aegon has continued tomaintain a strong capital position while maintaining its commitment to deliveringsustainable earnings growth with an improved risk-return profile.Net incomeNet income increased to EUR 1,571 million driven by higherunderlying earnings, more favorable results on fair value items,lower impairments and lower other charges. These were onlypartly offset by higher tax charges and lower realized gains.Underlying earnings before taxAegon’s underlying earnings before tax increased 17% toEUR 1,787 million in 2012. This is the result of business growth,implemented cost reduction programs, the non-recurrence ofcertain charges in the United Kingdom, and favorable equitymarkets and currency movements.Underlying earnings before tax from the Americas rose toEUR 1,317 million. The 3% increase compared to 2011 ismainly due to growth of the business and a strengthening ofthe US dollar against the euro. The positive effect of businessgrowth and favorable equity markets was partly offset bylower fixed annuity earnings (as the product is de-emphasized)and lower Life & Protection earnings mostly the result of thenon-recurrence of favorable items in 2011, recurring chargesfor Corporate Center expenses implemented in 2012, higherperformance-related expenses and an increase in employeebenefit expenses.In the Netherlands, underlying earnings before tax increased toEUR 315 million. The 6% increase compared to 2011 was mainlydue to cost savings, lower funding costs, and the wind up ofseveral contracts in Pensions, partly offset by a higher claim ratioand investments in banking activities. Higher earnings in Life &Savings driven by lower funding costs on its growing mortgageportfolio more than offset lower earnings in Pensions and Nonlifemostly driven by unfavorable claim experience.In the United Kingdom, underlying earnings before tax increasedto EUR 105 million. This improvement in earnings compared to2011 was driven by the implementation of the cost reductionprogram and the non-recurrence of charges and executionexpenses related to a program to correct historical issues withincustomer policy records, partly offset by the benefit of changesto employee benefit plans recorded in 2011. Earnings werenegatively impacted in 2012 by additional DAC amortizationrelated to adverse persistency and investments in newpropositions in the pension business.Underlying earnings before tax from New Markets increased10% to EUR 274 million as higher earnings from Aegon AssetManagement and Asia more than offset lower underlyingearnings from Spain and Central & Eastern Europe. Results inSpain were impacted by the divestment of the joint venturewith Banca Cívica and the exclusion of results from Aegon’spartnership with CAM pending the exit from this joint venture.For the holding, underlying earnings before tax amountedto a loss before tax of EUR 224 million. This EUR 79 millionimprovement compared to 2011 was driven mostly by lowerexpenses as Aegon’s Corporate Center expenses are now beingcharged, in part, to operating units. These charges reflectthe services and support provided to operating units by theCorporate Center and amounted to EUR 64 million in 2012.Funding costs were also lower in 2012.Fair value itemsResults from fair value items amounted to a gain ofEUR 52 million driven by positive results on the guaranteeportfolio in the Netherlands, partially offset by negative resultsin the Americas and in the United Kingdom on hedges, due tohigher equity markets.Realized gains on investmentsRealized gains on investments amounted to EUR 407 millionand were mainly the result of asset liability management andnormal activity in the investment portfolio in a low interest rateenvironment.Impairment chargesImpairments decreased 55% in 2012 compared to 2011 toEUR 176 million and continue to be linked primarily to residentialmortgage-backed securities in the Americas.