Aegon Annual Report 2012

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20Business overview Results of operations worldwideOther chargesOther charges in 2012 amounted to EUR 162 million andwere primarily the result of a EUR 265 million charge inthe Netherlands related to the acceleration of productimprovements for unit-linked insurance policies and a BOLIwrap charge in the United States (EUR 26 million). Providingmost of the offset against these charges were the book gainof EUR 100 million on the sale of Aegon’s minority stake inPrisma Capital Partners and the divestment of Aegon’s 50%stake in the joint venture with Banca Cívica (EUR 35 million).Run-off businessesThe results of run-off businesses amounted to a gain ofEUR 2 million, with positive results from the institutionalspread-based business only partially offset by acceleratedamortization of the pre-paid cost of reinsurance asset relatedto the divestment of the life reinsurance activities in 2011 dueto increased transfers of clients from Aegon to SCOR.Income taxNet income contained a tax charge of EUR 339 million in 2012(including a tax charge of EUR 6 million related to profits ofassociates), resulting in an effective tax rate of 18%. Deviationfrom the nominal tax rate is largely the result of tax exemptitems in the United States and the Netherlands, tax credits whichprimarily relate to low income housing and renewable energyin the United States (EUR 69 million), benefits from a tax ratereduction in the United Kingdom (EUR 70 million), benefitsfrom cross border intercompany reinsurance transactions(EUR 38 million) and a benefit related to the run-off of thecompany’s institutional spread-based activities in Ireland(EUR 51 million). These benefits were partly offset by chargesfor non recognition and impairment of deferred tax assets(EUR 56 million) mainly in the United Kingdom.Commissions and expensesCommissions and expenses in 2012 decreased by 7% comparedto 2011 to EUR 5,829 million, largely driven by lower operatingexpenses. Operating expenses decreased 6% compared to 2011to EUR 3,241 million mainly as a result of the implementation ofcost savings programs in the United Kingdom, the Netherlandsand the Americas.ProductionNew life sales increased in 2012 compared to 2011 in theAmericas and the United Kingdom, partially offset by decreasesin the Netherlands and New Markets. Gross deposits increasedby 25% driven by variable annuity, retail mutual fund, retirementplan and asset management deposits. New premium productionfor accident and health insurance increased by 19% for the yearmainly driven by travel and supplemental health insurance salesin the Americas and growth in Central & Eastern Europe.Capital managementAegon’s core capital excluding revaluation reserves amountedto EUR 18.6 billion, equivalent to 76.7% of the company’s totalcapital base at December 31, 2012 (2011: 73.5%). This is abovethe company’s capital base ratio target of at least 75% by theend of 2012.Shareholders’ equity increased to EUR 24.7 billion, mainly as aresult of net income and an increase in the revaluation reserves.The revaluation reserves increased EUR 2.6 billion during theyear to EUR 6.1 billion, mainly a reflection of lower interest ratesand credit spreads. Shareholders’ equity per common share,excluding preference capital and revaluation reserves, amountedto EUR 8.47 at December 31, 2012 (2011: EUR 8.19).During 2012, Aegon aimed to maintain excess capital at theholding of at least EUR 750 million. At the end of the year,excess capital in the holding amounted to EUR 2.0 billion, anincrease of EUR 0.8 billion compared to year-end 2011, asdividends received from business units were only partly offsetby interest payments and operational expenses.At December 31, 2012, Aegon’s Insurance Group Directive (IGD)ratio amounted to 228%, an increase from the level of 195%at December 31, 2011. Measured on a local solvency basis, theRisk Based Capital (RBC) ratio in the United States increasedto approximately 495%, driven mainly by strong net incomethroughout the year and a capital management transaction inthird quarter, offset by dividends paid to the holding company.The IGD ratio in the Netherlands increased to approximately251% driven mainly by a change in the yield curve to discountliabilities as prescribed by the Dutch Central Bank, offsetsomewhat during the year by interest rate movements. The Pillar Iratio in the United Kingdom decreased to approximately 126%.
Annual Report 2012 21Results 2011 worldwideUnderlying earnings geographicallyAmounts in EUR millions 2011 2010 %Net underlying earnings 1,233 1,417 (13%)Tax on underlying earnings 289 416 (31%)Underlying earnings before tax geographicallyAmericas 1,273 1,414 (10%)The Netherlands 298 385 (23%)United Kingdom 5 72 (93%)New markets 249 245 2%Holding and other activities (303) (283) (7%)Underlying earnings before tax 1,522 1,833 (17%)Net fair value items (416) 221Gains / (losses) on investments 446 658 (32%)Impairment charges (388) (452) 14%Other income / (charges) (267) (309) 14%Run-off businesses 28 (26)Income before tax (excluding income tax from certain proportionately consolidated associates) 925 1,925 (52%)Income tax from certain proportionately consolidated associates included in income before tax 9 11 (18%)Income tax (53) (165) 68%Of which income tax from certain proportionately consolidated associates included in incomebefore tax (9) (11) 18%Net income 872 1,760 (50%)Commissions and expenses 6,272 6,145 2%of which operating expenses 3,442 3,397 1%--New life salesAmounts in EUR millions 2011 2010 %Americas 418 459 (9%)The Netherlands 254 248 2%United Kingdom 852 1,061 (20%)New markets 311 313 (1%)Total life production 1,835 2,081 (12%)Gross deposits (on and off balance)Amounts in EUR millions 2011 2010 %Americas 23,028 21,018 10%The Netherlands 2,048 2,382 (14%)United Kingdom 56 96 (42%)New markets 6,556 9,082 (28%)Total gross deposits 31,688 32,578 (3%)
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336HeadquarterAegon N.V.Aegonplein
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www.aegon.com
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Aegon Annual Report 2012

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