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Securities and Exchange Commission
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d/16
of the Securities Exchange Act of 1934
August 2019
AEGON N.V.
Aegonplein 50
2591 TV THE HAGUE
The Netherlands
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Aegon’s condensed consolidated interim financial statements 1H 2019, dated August 15, 2019, are included as appendix and incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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AEGON N.V.
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(Registrant) |
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| Date: August 15, 2019 | By |
/s/ J.H.P.M. van Rossum |
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| J.H.P.M. van Rossum | ||||||
| Executive Vice President and Head of Corporate Financial Center | ||||||
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Notes to the Condensed consolidated interim financial statements |
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1 Amounts have been restated to reflect the voluntary change in accounting policies related to liability adequacy testing that was adopted by Aegon effective January 1, 2019. Refer to note 2.2 Voluntary changes in accounting policies for details about this change.
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1 Amounts have been restated to reflect the voluntary change in accounting policies related to liability adequacy testing that was adopted by Aegon effective January 1, 2019. Refer to note 2.2 Voluntary changes in accounting policies for details about this change.
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1 For a breakdown of share capital please refer to note 12.
2 Issued capital and reserves attributable to owners of Aegon N.V.
3 Amounts have been restated to reflect the voluntary change in accounting policies related to liability adequacy testing that was adopted by Aegon effective January 1, 2019. Refer to note 2.2 Voluntary changes in accounting policies for details about this change.
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1 Trust pass-through securities.
2 Included in net increase / (decrease) in cash and cash equivalents are: interest received (2019: EUR 2,983, 2018: EUR 2,740 million), dividends received (2019: EUR 1,067 million, 2018: EUR 664 million), interest paid (2019: EUR 137 million, 2018: EUR 71 million) of which payment of the interest portion of the lease liability (2019: EUR 5 million).
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Notes to the Condensed consolidated interim financial statements
Amounts in EUR millions, unless otherwise stated
Aegon N.V., incorporated and domiciled in the Netherlands, is a public limited liability company organized under Dutch law and recorded in the Commercial Register of The Hague under number 27076669 and with its registered address at Aegonplein 50, 2591 TV, The Hague, the Netherlands. Aegon N.V. serves as the holding company for the Aegon Group and has listings of its common shares in Amsterdam and New York.
Aegon N.V. (or ‘the Company’) and its subsidiaries (‘Aegon’ or ‘the Group’) have life insurance and pensions operations in more than 20 countries in the Americas, Europe and Asia and are also active in savings and asset management operations, accident and health insurance, general insurance and - to a limited extent - banking operations. Headquarters are located in The Hague, the Netherlands. The Group employs almost 26,000 people worldwide.
1. Basis of presentation
The condensed consolidated interim financial statements as at, and for the six months period ended, June 30, 2019 (first half 2019), have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’, as adopted by the European Union (hereafter ‘IFRS-EU’). They do not include all of the information required for a full set of financial statements prepared in accordance with IFRS-EU and should therefore be read together with the 2018 consolidated financial statements of Aegon N.V. as included in Aegon’s Integrated Annual Report for 2018. Aegon’s Integrated Annual Report for 2018 is available on its website (aegon.com).
The condensed consolidated interim financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value. The condensed consolidated interim financial statements as at, and for the six-month period ended, June 30, 2019, were approved by the Supervisory Board on August 14, 2019.
The condensed consolidated interim financial statements are presented in euro (EUR) and all values are rounded to the nearest million unless otherwise stated. The consequence is that the rounded amounts may not add up to the rounded total in all cases.
The published figures in these condensed consolidated interim financial statements are unaudited.
2. Significant accounting policies
All accounting policies and methods of computation applied in the condensed consolidated interim financial statements are the same as those applied in the 2018 consolidated financial statements, except for new IFRS accounting standards and a voluntary accounting policy change that became effective per January 1, 2019:
2.1. New IFRS accounting standards effective from 2019
The following standards, interpretations, amendments to standards became effective for Aegon in 2019 and have been endorsed by the European Union:
| • |
IFRS 16 Leases; |
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IFRIC 23 Uncertainty over Income Tax Treatments; |
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Annual Improvements to IFRS Standards 2015-2017 Cycle; and |
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Amendments to IAS 19: Plan Amendment, Curtailment or Settlement. |
Except for IFRS 16 Leases, none of these revised standards and interpretations are significantly impacting the financial position or the condensed consolidated interim financial statements.
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IFRS 16 Leases
IFRS 16 Leases was issued by the IASB in January 2016 and replaced IAS 17 Leases and IFRIC 4 on January 2019. The most significant change of IFRS 16 is related to leases that were identified as operational leases held by a lessee under IAS 17. Under IAS 17 these leases were reported as (off- balance) Operating lease obligations, and after January 1, 2019 reported as (on-balance) lease liabilities with the accompanying lease assets.
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4.
Policy applicable from January 1, 2019
As a lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of real estate and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses (using the same rate to measure the lease liability), if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘Other assets and receivables’ and lease liabilities in ‘Other liabilities’ in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets, including small office equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
As a lessor
From a lessor perspective, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17, only with additional disclosure requirements. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
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Transitional disclosures
The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at January 1, 2019.
As a lessee
The Group has adopted a number of key options and practical expedients allowed under IFRS 16 as disclosed in the 2018 consolidated financial statements.
As a lessor
The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.
Impacts on financial statements
At transition, the Group recognized EUR 235 million of right-of-use assets and lease liabilities of EUR 285 million, recognising the adverse impact of EUR 41 million in shareholders’ equity, in retained earnings. The right-of-use assets mainly consist of approximately EUR 212 million real estate and of approximately EUR 23 million equipment. The largest right-of-use assets are office buildings located in the United Kingdom and US for an amount of EUR 116 million and EUR 50 million respectively. The Group does not expect material movements in net income going forward.
When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 3.46%.
The reconciliation between operating lease commitments at December 31, 2018 and lease liabilities at January 1, 2019 is as follows:
| EUR millions | January 1, 2019 | |||
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Operating lease commitments at December 31,
2018
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386 | |||
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Discounted using the incremental borrowing rate at January 1, 2019 |
302 | |||
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Recognition exemption for: |
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Short term leases |
(7 | ) | ||
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Extension and termination options reasonably certain to be exercised |
(4 | ) | ||
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Exclusion of non-lease components |
(6 | ) | ||
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Lease liabilities recognized at January 1, 2019 |
285 | |||
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2.2. Voluntary change in accounting policy
Effective January 1, 2019 Aegon adopted a voluntary accounting policy change related to the liability adequacy test (LAT) of Aegon the Netherlands, which is applied retrospectively for all periods presented.
The recognition of a LAT deficit (refer to note 13) in Aegon the Netherlands triggered a review and change of its existing accounting policy related to the LAT. The change relates to the period considered for the unrealized gains on financial assets that are accounted for at amortized cost which are taken into account in the LAT, specifically where they relate to intercompany transactions between insurance and non-insurance entities.
The change does not impact other reporting units within Aegon as this change is specific to Aegon the Netherlands.
The impact of the change in accounting policy on the current period, first half of 2019, is a decrease in net income of EUR 32 million, a decrease in shareholders’ equity of EUR 7 million, an increase in insurance contracts of EUR 9 million and a decrease in other liabilities of EUR 2 million.
Impact of the adjustment on previous periods is provided in the following tables, including references to the notes that are impacted by the change in accounting policy.
1 As reported in Aegon’s Annual Report dated March 21, 2019.
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1 As reported in Aegon’s Annual Report dated March 21, 2019.
2.3. Other
Taxes
Taxes on income for the six-month period ended June 30, 2019, are calculated using the tax rate that is estimated to be applicable to earnings for the full year.
Judgments and critical accounting estimates
Preparing the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions, including the likelihood, timing or amount of future transactions or events, that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates made.
In preparing the condensed consolidated interim financial statements, significant judgments made by management in applying the Group’s accounting policies and the key sources of estimating uncertainty were not significantly different than those that were applied to the consolidated financial statements as at, and for the year ended, December 31, 2018.
Exchange rates
Assets and liabilities of foreign operations are translated to the presentation currency at the closing rates on the reporting date. Income, expenses and capital transactions (such as dividends) are translated at average exchange rates or at the prevailing rates on the transaction date, if more appropriate. The following exchange rates (most important rates) are applied for the condensed consolidated interim financial statements:
Closing exchange rates
| USD | GBP | |||||||
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June 30, 2019 |
1 | EUR | 1.1388 | 0.8948 | ||||
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December 31, 2018 |
1 | EUR | 1.1432 | 0.8976 | ||||
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Weighted average exchange rates |
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| USD | GBP | |||||||
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Six months ended June 30, 2019 |
1 | EUR | 1.1299 | 0.8730 | ||||
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Six months ended June 30, 2018 |
1 | EUR | 1.2113 | 0.8794 | ||||
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3. Segment information
3.1. Performance measure
Aegon has changed the grouping of the operating segments included in the performance measure. Previously, the operating segments ‘Spain & Portugal’ and ‘Central & Eastern Europe’ were disclosed separately in the segment information whilst as of 2019 these are being disclosed combined under the operating segment ‘Southern & Eastern Europe’. As a result the tables presented in section 3.2 and 3.3 have been updated to reflect this change. Note that there are no changes to numbers reported for the reportable segment Europe.
3.2. Income statement
| EUR millions | Americas |
The Netherlands |
United Kingdom |
Southern &
Eastern Europe |
Europe | Asia |
Asset Management |
Holding and
other activities |
Eliminations |
Segment
total |
Joint
ventures and associates eliminations |
Consolidated | ||||||||||||||||||||||||||||||||||||
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Six months ended June 30, 2019 |
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Underlying earnings before tax geographically |
576 | 328 | 70 | 42 | 439 | 32 | 60 | (97 | ) | - | 1,010 | 26 | 1,037 | |||||||||||||||||||||||||||||||||||
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Fair value items |
157 | (459 | ) | (76 | ) | - | (536 | ) | (5 | ) | - | (10 | ) | - | (394 | ) | (42 | ) | (436 | ) | ||||||||||||||||||||||||||||
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Realized gains / (losses) on investments |
24 | 230 | 1 | 21 | 252 | (2 | ) | - | 1 | - | 275 | (1 | ) | 274 | ||||||||||||||||||||||||||||||||||
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Impairment charges |
(30 | ) | (13 | ) | - | - | (13 | ) | - | - | (10 | ) | - | (54 | ) | - | (53 | ) | ||||||||||||||||||||||||||||||
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Impairment reversals |
11 | 4 | - | - | 4 | - | - | - | - | 15 | - | 15 | ||||||||||||||||||||||||||||||||||||
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Other income / (charges) |
(63 | ) | 4 | (16 | ) | 41 | 29 | (16 | ) | (1 | ) | (41 | ) | - | (93 | ) | - | (93 | ) | |||||||||||||||||||||||||||||
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Run-off businesses |
8 | - | - | - | - | - | - | - | - | 8 | - | 8 | ||||||||||||||||||||||||||||||||||||
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Income / (loss) before tax |
685 | 93 | (22 | ) | 103 | 174 | 8 | 59 | (159 | ) | - | 767 | (16 | ) | 751 | |||||||||||||||||||||||||||||||||
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Income tax (expense) / benefit |
(101 | ) | (26 | ) | (23 | ) | (10 | ) | (59 | ) | (1 | ) | (16 | ) | 28 | - | (149 | ) | 16 | (133 | ) | |||||||||||||||||||||||||||
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Net income / (loss) |
584 | 67 | (44 | ) | 92 | 115 | 7 | 43 | (130 | ) | - | 618 | - | 618 | ||||||||||||||||||||||||||||||||||
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Inter-segment underlying earnings |
(33 | ) | (56 | ) | (42 | ) | (8 | ) | (106 | ) | (2 | ) | 96 | 46 | ||||||||||||||||||||||||||||||||||
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Revenues |
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Life insurance gross premiums |
3,619 | 852 | 3,291 | 277 | 4,420 | 417 | - | 6 | (4 | ) | 8,458 | (374 | ) | 8,084 | ||||||||||||||||||||||||||||||||||
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Accident and health insurance |
702 | 164 | 14 | 97 | 275 | 51 | - | - | - | 1,028 | (32 | ) | 996 | |||||||||||||||||||||||||||||||||||
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Property & casualty insurance |
- | 66 | - | 193 | 259 | - | - | 1 | (1 | ) | 259 | (63 | ) | 196 | ||||||||||||||||||||||||||||||||||
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Total gross premiums |
4,320 | 1,081 | 3,305 | 568 | 4,954 | 468 | - | 6 | (5 | ) | 9,745 | (469 | ) | 9,276 | ||||||||||||||||||||||||||||||||||
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Investment income |
1,577 | 1,122 | 1,230 | 39 | 2,391 | 149 | 2 | 139 | (144 | ) | 4,114 | (31 | ) | 4,083 | ||||||||||||||||||||||||||||||||||
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Fee and commission income |
848 | 114 | 95 | 25 | 235 | 29 | 297 | - | (94 | ) | 1,315 | (102 | ) | 1,213 | ||||||||||||||||||||||||||||||||||
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Other revenues |
3 | - | - | - | - | 1 | - | 3 | - | 7 | (4 | ) | 3 | |||||||||||||||||||||||||||||||||||
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Total revenues |
6,749 | 2,318 | 4,631 | 632 | 7,581 | 646 | 300 | 148 | (243 | ) | 15,180 | (606 | ) | 14,575 | ||||||||||||||||||||||||||||||||||
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Inter-segment revenues |
- | 4 | - | - | 4 | - | 94 | 144 | ||||||||||||||||||||||||||||||||||||||||
| EUR millions | Americas |
The Netherlands |
United Kingdom |
Southern &
Eastern Europe |
Europe | Asia |
Asset Management |
Holding and
other activities |
Eliminations |
Segment
total |
Joint
ventures and associates eliminations |
Consolidated | ||||||||||||||||||||||||||||||||||||
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Six months ended June 30, 2018 |
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Underlying earnings before tax geographically |
602 | 318 | 69 | 49 | 435 | 31 | 83 | (88 | ) | - | 1,064 | 26 | 1,090 | |||||||||||||||||||||||||||||||||||
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Fair value items |
(75 | ) | 81 | (4 | ) | - | 76 | (2 | ) | - | (3 | ) | - | (3 | ) | (51 | ) | (54 | ) | |||||||||||||||||||||||||||||
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Realized gains / (losses) on investments |
(124 | ) | 39 | 21 | 1 | 61 | (9 | ) | 2 | 3 | - | (67 | ) | (2 | ) | (69 | ) | |||||||||||||||||||||||||||||||
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Impairment charges |
(17 | ) | (4 | ) | - | (1 | ) | (4 | ) | - | - | (5 | ) | - | (26 | ) | - | (26 | ) | |||||||||||||||||||||||||||||
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Impairment reversals |
21 | 4 | - | 1 | 5 | - | - | - | - | 26 | - | 26 | ||||||||||||||||||||||||||||||||||||
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Other income / (charges) |
(87 | ) | 27 | (182 | ) | (25 | ) | (179 | ) | (5 | ) | (1 | ) | (21 | ) | - | (294 | ) | 1 | (294 | ) | |||||||||||||||||||||||||||
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Run-off businesses |
(7 | ) | - | - | - | - | - | - | - | - | (7 | ) | - | (7 | ) | |||||||||||||||||||||||||||||||||
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Income / (loss) before tax |
313 | 466 | (97 | ) | 26 | 395 | 15 | 83 | (113 | ) | - | 692 | (27 | ) | 665 | |||||||||||||||||||||||||||||||||
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Income tax (expense) / benefit |
(74 | ) | (98 | ) | - | (9 | ) | (106 | ) | (14 | ) | (27 | ) | 21 | - | (201 | ) | 27 | (174 | ) | ||||||||||||||||||||||||||||
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Net income / (loss) |
239 | 368 | (97 | ) | 17 | 288 | 1 | 55 | (92 | ) | - | 491 | - | 491 | ||||||||||||||||||||||||||||||||||
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Inter-segment underlying earnings |
(28 | ) | (52 | ) | (44 | ) | (9 | ) | (104 | ) | (2 | ) | 98 | 37 | ||||||||||||||||||||||||||||||||||
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Revenues |
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Life insurance gross premiums |
3,392 | 902 | 3,900 | 321 | 5,124 | 440 | - | 4 | (3 | ) | 8,956 | (313 | ) | 8,644 | ||||||||||||||||||||||||||||||||||
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Accident and health insurance |
810 | 152 | 15 | 95 | 262 | 50 | - | - | - | 1,123 | (24 | ) | 1,099 | |||||||||||||||||||||||||||||||||||
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Property & casualty insurance |
- | 70 | - | 173 | 243 | - | - | 1 | (1 | ) | 243 | (56 | ) | 187 | ||||||||||||||||||||||||||||||||||
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Total gross premiums |
4,202 | 1,125 | 3,915 | 589 | 5,629 | 490 | - | 5 | (4 | ) | 10,322 | (393 | ) | 9,929 | ||||||||||||||||||||||||||||||||||
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Investment income |
1,494 | 1,109 | 765 | 42 | 1,915 | 128 | 3 | 135 | (136 | ) | 3,539 | (29 | ) | 3,510 | ||||||||||||||||||||||||||||||||||
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Fee and commission income |
951 | 98 | 105 | 31 | 234 | 30 | 326 | - | (102 | ) | 1,440 | (128 | ) | 1,312 | ||||||||||||||||||||||||||||||||||
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Other revenues |
2 | - | - | - | - | 1 | 1 | 2 | - | 5 | (4 | ) | 2 | |||||||||||||||||||||||||||||||||||
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Total revenues |
6,650 | 2,332 | 4,785 | 662 | 7,779 | 649 | 330 | 141 | (242 | ) | 15,307 | (554 | ) | 14,752 | ||||||||||||||||||||||||||||||||||
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Inter-segment revenues |
- | 1 | - | - | 1 | - | 102 | 139 | ||||||||||||||||||||||||||||||||||||||||
Aegon’s segment information is prepared by consolidating on a proportionate basis Aegon’s joint ventures and associated companies.
A pre-tax charge of EUR 64 million (1H 2018: EUR 7 million pre-tax charge) has been recorded in other income/(charges) in respect of assumption changes and model updates. The impact is mainly attributable to Aegon’s business in the Americas. Assumption changes and model updates in the Americas led to a net negative impact of EUR 71 million mainly driven by updates to Universal Life products for surrender, lapse and mortality to reflect actual experience, partially offset by gains driven by updates to the annuitization of Variable Deferred Annuities Guaranteed Minimum Income Benefit and to the returns on Equity-Index Universal Life.
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3.3 Investments
Amounts included in the tables on investments are presented on an IFRS basis, which means that investments in joint ventures and associates are not consolidated on a proportionate basis. Instead, these investments are included on a single line using the equity method of accounting.
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4. Premium income and premiums paid to reinsurers
| EUR millions |
First half
2019 |
First half
2018 |
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Premium income |
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Life insurance |
8,084 | 8,644 | ||||||
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Non-life insurance |
1,192 | 1,285 | ||||||
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Total premium income |
9,276 | 9,929 | ||||||
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Accident and health insurance |
996 | 1,099 | ||||||
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Property & casualty insurance |
196 | 187 | ||||||
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Non-life Insurance premium income |
1,192 | 1,285 | ||||||
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Premiums paid to reinsurers 1 |
||||||||
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Life insurance |
1,163 | 1,293 | ||||||
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Non-life insurance |
73 | 75 | ||||||
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Total premiums paid to reinsurers |
1,236 | 1,369 | ||||||
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Accident and health insurance |
67 | 70 | ||||||
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Property & casualty insurance |
6 | 5 | ||||||
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Non-life Insurance paid to reinsurers |
73 | 75 | ||||||
| 1 |
Premiums paid to reinsurers are recorded within Benefits and expenses in the income statement - refer to note 7 - Benefits and expenses. |
5. Investment income
| EUR millions |
First half
2019 |
First half
2018 |
||||||
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Interest income |
2,971 | 2,799 | ||||||
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Dividend income |
1,051 | 643 | ||||||
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Rental income |
60 | 68 | ||||||
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Total investment income |
4,083 | 3,510 | ||||||
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Investment income related to general account |
2,632 | 2,523 | ||||||
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Investment income for account of policyholders |
1,451 | 987 | ||||||
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Total |
4,083 | 3,510 | ||||||
6. Results from financial transactions
| EUR millions |
First half
2019 |
First half
2018 |
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Net fair value change of general account financial investments at FVTPL other than derivatives |
173 | (12 | ) | |||||
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Realized gains /(losses) on financial investments |
262 | (70 | ) | |||||
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Gains /(losses) on investments in real estate |
89 | 118 | ||||||
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Net fair value change of derivatives |
1,557 | 106 | ||||||
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Net fair value change on for account of policyholder financial assets at FVTPL |
22,146 | 752 | ||||||
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Net fair value change on investments in real estate for account of policyholders |
(6 | ) | 11 | |||||
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Net foreign currency gains /(losses) |
14 | 26 | ||||||
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Net fair value change on borrowings and other financial liabilities |
1 | 17 | ||||||
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Total |
24,237 | 948 | ||||||
The increase in results from financial transactions is driven by the higher net fair value change on for account of policyholder financial assets at FVTPL for the first six months of 2019 compared to the first six months of 2018. The increase is mainly driven by favorable equity markets and decreasing interest rates. Net fair value change on for accounts of policyholder financial assets at FVTPL is offset by amounts in the “Claims and benefits” line reported in note 7 Benefits and expenses.
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7. Benefits and expenses
| EUR millions |
First half
2019 |
First half
2018 |
||||||
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Claims and benefits |
37,876 | 14,665 | ||||||
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Employee expenses |
1,078 | 1,049 | ||||||
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Administration expenses |
720 | 688 | ||||||
|
Deferred expenses |
(407 | ) | (417 | ) | ||||
|
Amortization charges |
403 | 500 | ||||||
|
Total |
39,671 | 16,484 | ||||||
| EUR millions |
First half
2019 |
First half
2018 |
||||||
|
Benefits and claims paid life |
9,545 | 9,974 | ||||||
|
Benefits and claims paid non-life |
814 | 846 | ||||||
|
Change in valuation of liabilities for insurance contracts |
20,560 | 3,517 | ||||||
|
Change in valuation of liabilities for investment contracts |
4,587 | (2,262 | ) | |||||
|
Other |
(37 | ) | (8 | ) | ||||
|
Policyholder claims and benefits |
35,469 | 12,066 | ||||||
|
Premium paid to reinsurers |
1,236 | 1,369 | ||||||
|
Profit sharing and rebates |
8 | 11 | ||||||
|
Commissions |
1,164 | 1,219 | ||||||
|
Total |
37,876 | 14,665 | ||||||
The lines “change in valuation of liabilities for insurance contracts” and “change in valuation of liabilities for investment contracts” reflect changes in technical provisions resulting from net fair value changes on for account of policyholder financial assets at FVTPL included in Results from financial transactions (note 6) of EUR 22,146 million for 1H 2019 (1H 2018: EUR 752 million). In addition, the line “change in valuation of liabilities for insurance contracts” includes an increase of technical provisions for life insurance contracts of EUR 1,965 million for 1H 2019 (1H 2018: increase of EUR 793 million).
8. Impairment charges/(reversals)
| EUR millions |
First half
2019 |
First half
2018 |
||||||
|
Impairment charges / (reversals) comprise: |
||||||||
|
Impairment charges on financial assets, excluding receivables |
70 | 24 | ||||||
|
Impairment reversals on financial assets, excluding receivables |
(15 | ) | (26 | ) | ||||
|
Impairment charges / (reversals) on non-financial assets and receivables |
98 | 21 | ||||||
|
Total |
153 | 19 | ||||||
|
Impairment charges on financial assets, excluding receivables, from: |
||||||||
|
Shares |
3 | 3 | ||||||
|
Debt securities and money market instruments |
29 | 1 | ||||||
|
Loans |
38 | 20 | ||||||
|
Total |
70 | 24 | ||||||
|
Impairment reversals on financial assets, excluding receivables, from: |
||||||||
|
Debt securities and money market instruments |
(11 | ) | (19 | ) | ||||
|
Loans |
(4 | ) | (6 | ) | ||||
|
Other |
(1 | ) | (1 | ) | ||||
|
Total |
(15 | ) | (26 | ) | ||||
Impairment charges/(reversals) on non-financial assets and receivables are mainly due to a write-off (EUR 76 million) of VOBA and DPAC as a result of a LAT shortfall in Aegon the Netherlands. Refer to note 13 “Insurance contracts” for further details on the LAT impact.
|
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|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
9. Investments
|
|
||||||||
| EUR millions | Jun. 30, 2019 | Dec. 31, 2018 | ||||||
|
Available-for-sale (AFS) |
89,821 | 84,675 | ||||||
|
Loans |
44,197 | 43,052 | ||||||
|
Financial assets at fair value through profit or loss (FVTPL) |
7,539 | 8,597 | ||||||
|
Financial assets, for general account, excluding derivatives |
141,557 | 136,324 | ||||||
|
Investments in real estate |
2,754 | 2,700 | ||||||
|
Total investments for general account, excluding derivatives |
144,311 | 139,024 | ||||||
|
Financial assets, for general account, excluding derivatives
|
||||||||||||||||
|
EUR millions |
AFS | FVTPL | Loans | Total | ||||||||||||
|
Shares |
420 | 1,931 | - | 2,351 | ||||||||||||
|
Debt securities |
81,720 | 2,869 | - | 84,589 | ||||||||||||
|
Money market and other short-term investments |
6,783 | 170 | - | 6,953 | ||||||||||||
|
Mortgages loans |
- | - | 37,642 | 37,642 | ||||||||||||
|
Private loans |
- | - | 4,188 | 4,188 | ||||||||||||
|
Deposits with financial institutions |
- | - | 119 | 119 | ||||||||||||
|
Policy loans |
- | - | 1,993 | 1,993 | ||||||||||||
|
Other |
899 | 2,569 | 255 | 3,722 | ||||||||||||
|
June 30, 2019 |
89,821 | 7,539 | 44,197 | 141,557 | ||||||||||||
| AFS | FVTPL | Loans | Total | |||||||||||||
|
Shares |
478 | 1,682 | - | 2,161 | ||||||||||||
|
Debt securities |
77,340 | 3,913 | - | 81,253 | ||||||||||||
|
Money market and other short-term investments |
5,955 | 352 | - | 6,307 | ||||||||||||
|
Mortgages loans |
- | - | 36,639 | 36,639 | ||||||||||||
|
Private loans |
- | - | 4,103 | 4,103 | ||||||||||||
|
Deposits with financial institutions |
- | - | 141 | 141 | ||||||||||||
|
Policy loans |
- | - | 1,973 | 1,973 | ||||||||||||
|
Other |
902 | 2,649 | 196 | 3,747 | ||||||||||||
|
December 31, 2018 |
84,675 | 8,597 | 43,052 | 136,324 | ||||||||||||
10. Investments for account of policyholders
|
|
||||||||
| EUR millions | Jun. 30, 2019 | Dec. 31, 2018 | ||||||
|
Shares |
23,622 | 20,640 | ||||||
|
Debt securities |
21,183 | 20,441 | ||||||
|
Money market and short-term investments |
1,566 | 1,578 | ||||||
|
Deposits with financial institutions |
3,126 | 3,263 | ||||||
|
Unconsolidated investment funds |
158,675 | 143,800 | ||||||
|
Other |
4,362 | 4,020 | ||||||
|
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives |
212,535 | 193,741 | ||||||
|
Investment in real estate |
603 | 612 | ||||||
|
Total investments for account of policyholders |
213,137 | 194,353 | ||||||
Investments for account of policyholders increased in the first half of 2019 by EUR 18.8 billion to EUR 213 billion compared to December 31, 2018 mainly due to increased investment return, driven by positive equity market movements and declining interest rates.
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|
|
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Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
11. Fair value
The following tables provide an analysis of financial instruments recorded at fair value on a recurring basis by level of the fair value hierarchy:
|
Fair value hierarchy
|
||||||||||||||||||||||||||||||||
| EUR millions | As at June 30, 2019 | As at December 31, 2018 | ||||||||||||||||||||||||||||||
| Level I | Level II | Level III | Total | Level I | Level II | Level III | Total | |||||||||||||||||||||||||
|
Financial assets carried at fair value |
||||||||||||||||||||||||||||||||
|
Available-for-sale investments |
||||||||||||||||||||||||||||||||
|
Shares |
83 | 168 | 170 | 420 | 82 | 155 | 241 | 478 | ||||||||||||||||||||||||
|
Debt securities |
25,596 | 55,109 | 1,014 | 81,720 | 24,652 | 51,446 | 1,242 | 77,340 | ||||||||||||||||||||||||
|
Money markets and other short-term instruments |
1,863 | 4,471 | 449 | 6,783 | 1,427 | 4,528 | - | 5,955 | ||||||||||||||||||||||||
|
Other investments at fair value |
- | 392 | 507 | 899 | - | 409 | 493 | 902 | ||||||||||||||||||||||||
|
Total Available-for-sale investments |
27,542 | 60,140 | 2,140 | 89,821 | 26,160 | 56,538 | 1,976 | 84,675 | ||||||||||||||||||||||||
|
Fair value through profit or loss |
||||||||||||||||||||||||||||||||
|
Shares |
156 | 325 | 1,450 | 1,931 | 217 | 239 | 1,226 | 1,682 | ||||||||||||||||||||||||
|
Debt securities |
275 | 2,590 | 5 | 2,869 | 1,868 | 2,028 | 17 | 3,913 | ||||||||||||||||||||||||
|
Money markets and other short-term instruments |
18 | 152 | - | 170 | 17 | 335 | - | 352 | ||||||||||||||||||||||||
|
Other investments at fair value |
1 | 1,003 | 1,564 | 2,569 | 1 | 1,272 | 1,376 | 2,649 | ||||||||||||||||||||||||
|
Investments for account of policyholders 1 |
114,915 | 95,826 | 1,794 | 212,535 | 103,977 | 87,893 | 1,871 | 193,741 | ||||||||||||||||||||||||
|
Derivatives |
37 | 11,623 | 70 | 11,730 | 53 | 7,527 | 35 | 7,615 | ||||||||||||||||||||||||
|
Total Fair value through profit or loss |
115,401 | 111,519 | 4,884 | 231,804 | 106,134 | 99,295 | 4,525 | 209,954 | ||||||||||||||||||||||||
|
Total financial assets at fair value |
142,943 | 171,659 | 7,024 | 321,625 | 132,294 | 155,833 | 6,502 | 294,628 | ||||||||||||||||||||||||
|
Financial liabilities carried at fair value |
||||||||||||||||||||||||||||||||
|
Investment contracts for account of policyholders 2 |
- | 55,427 | 193 | 55,620 | - | 49,641 | 206 | 49,847 | ||||||||||||||||||||||||
|
Borrowings 3 |
- | 537 | - | 537 | - | 536 | - | 536 | ||||||||||||||||||||||||
|
Derivatives |
162 | 6,872 | 3,136 | 10,171 | 93 | 4,648 | 2,489 | 7,230 | ||||||||||||||||||||||||
|
Total financial liabilities at fair value |
162 | 62,836 | 3,329 | 66,327 | 93 | 54,824 | 2,695 | 57,613 | ||||||||||||||||||||||||
1 The investments for account of policyholders included in the table above represents only those investments carried at fair value through profit or loss.
2 The investment contracts for account of policyholders included in the table above represents only those investment contracts carried at fair value.
3 Total borrowings on the statement of financial position contain borrowings carried at amortized cost that are not included in the above schedule.
Significant transfers between Level I, Level II and Level III
There have been no significant transfers between Level I, II and III for financial assets and financial liabilities recorded at fair value on a recurring basis during the six-month period ended June 30, 2019.
Movements in Level III financial instruments measured at fair value
The following table summarizes the change of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (‘Level III’), including realized and unrealized gains (losses) of all assets and liabilities and unrealized gains (losses) of all assets and liabilities still held at the end of the respective period.
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|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
| EUR millions |
January 1, 2018 |
Acquisitions through business combinations |
Total gains / losses in income statement 1 |
Total gains / losses in OCI 2 |
Purchases | Sales | Settlements |
Net exchange differences |
Reclassification |
Transfers from Level I and Level II |
Transfers to Level I and Level II |
December 31, 2018 |
Total unrealized gains and losses for the period
recorded in
the P&L for
December 31, 2018 ³ |
|||||||||||||||||||||||||||||||||||||||
|
Financial assets carried at fair value available-for-sale investments |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Shares |
288 | - | 21 | (12 | ) | 9 | (77 | ) | - | 10 | 2 | - | - | 241 | - | |||||||||||||||||||||||||||||||||||||
|
Debt securities |
1,447 | - | 26 | 2 | 494 | (76 | ) | (452 | ) | 51 | 1 | 58 | (310 | ) | 1,242 | - | ||||||||||||||||||||||||||||||||||||
|
Other investments at fair value |
583 | - | (83 | ) | (38 | ) | 125 | (102 | ) | (21 | ) | 25 | 3 | - | - | 493 | - | |||||||||||||||||||||||||||||||||||
| 2,318 | - | (36 | ) | (48 | ) | 629 | (255 | ) | (473 | ) | 87 | 6 | 58 | (310 | ) | 1,976 | - | |||||||||||||||||||||||||||||||||||
|
Fair value through profit or loss |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Shares |
604 | - | 104 | - | 541 | (61 | ) | 1 | 1 | 36 | - | - | 1,226 | 105 | ||||||||||||||||||||||||||||||||||||||
|
Debt securities |
4 | - | (25 | ) | - | 37 | - | - | - | - | - | - | 17 | (24 | ) | |||||||||||||||||||||||||||||||||||||
|
Other investments at fair value |
1,255 | - | 11 | - | 332 | (307 | ) | - | 64 | - | 94 | (72 | ) | 1,376 | 3 | |||||||||||||||||||||||||||||||||||||
|
Investments for account of policyholders |
1,784 | 130 | 76 | - | 537 | (660 | ) | - | 3 | - | - | - | 1,871 | 35 | ||||||||||||||||||||||||||||||||||||||
|
Derivatives |
57 | - | 57 | - | - | (80 | ) | - | - | - | - | - | 35 | 59 | ||||||||||||||||||||||||||||||||||||||
| 3,705 | 130 | 223 | - | 1,447 | (1,108 | ) | - | 69 | 36 | 94 | (72 | ) | 4,525 | 177 | ||||||||||||||||||||||||||||||||||||||
|
Financial liabilities carried at fair value |
||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Investment contracts for account of policyholders |
219 | - | (10 | ) | - | 7 | (14 | ) | - | 4 | - | - | - | 206 | - | |||||||||||||||||||||||||||||||||||||
|
Derivatives |
1,845 | - | 613 | - | - | - | - | 31 | - | - | - | 2,489 | 613 | |||||||||||||||||||||||||||||||||||||||
| 2,064 | - | 604 | - | 7 | (14 | ) | - | 35 | - | - | - | 2,695 | 614 | |||||||||||||||||||||||||||||||||||||||
1 Includes impairments and movements related to fair value hedges. Gains and losses are recorded in the line item results from financial transactions of the income statement.
2 Total gains and losses are recorded in line items Gains/ (losses) on revaluation of available-for-sale investments and (Gains)/ losses transferred to the income statement on disposal and impairment of available-for-sale investment of the statement of other comprehensive income.
3 Total gains / (losses) for the period during which the financial instrument was in Level III.
Fair value information about financial instruments not measured at fair value
The following table presents the carrying values and estimated fair values of financial assets and liabilities, excluding financial instruments which are carried at fair value on a recurring basis.
Financial instruments for which carrying value approximates fair value
Certain financial instruments that are not carried at fair value are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and cash equivalents, short-term receivables and accrued interest receivable, short-term liabilities, and accrued liabilities. These instruments are not included in the table above.
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Unaudited
|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
12. Share capital
| EUR millions | Jun. 30, 2019 | Dec. 31, 2018 | ||||||
|
Share capital - par value |
322 | 322 | ||||||
|
Share premium |
7,347 | 7,487 | ||||||
|
Total share capital |
7,669 | 7,808 | ||||||
|
Share capital - par value |
||||||||
|
Balance at January 1 |
322 | 322 | ||||||
|
Dividend |
- | - | ||||||
|
Balance |
322 | 322 | ||||||
|
Share premium |
||||||||
|
Balance at January 1 |
7,487 | 7,731 | ||||||
|
Share dividend |
(139 | ) | (244 | ) | ||||
|
Balance |
7,347 | 7,487 | ||||||
| EUR millions |
First half
2019 |
First half
2018 |
||||||
|
Earnings per share (EUR per share) |
||||||||
|
Basic earnings per common share |
0.28 | 0.21 | ||||||
|
Basic earnings per common share B |
0.01 | 0.01 | ||||||
|
Diluted earnings per common share |
0.28 | 0.21 | ||||||
|
Diluted earnings per common share B |
0.01 | 0.01 | ||||||
|
Earnings per share calculation |
||||||||
|
Net income / (loss) attributable to owners of Aegon N.V. |
618 | 491 | ||||||
|
Coupons on other equity instruments |
(48 | ) | (57 | ) | ||||
|
Earnings attributable to common shares and common shares B |
570 | 434 | ||||||
|
Earnings attributable to common shareholders |
566 | 431 | ||||||
|
Earnings attributable to common shareholders B |
4 | 3 | ||||||
|
Weighted average number of common shares outstanding (in millions) |
2,036 | 2,032 | ||||||
|
Weighted average number of common shares B outstanding (in millions) |
572 | 570 | ||||||
Final dividend 2018
It was decided at the Annual General Meeting of Shareholders on May 17, 2019, to pay a final dividend for the year 2018 of EUR 0.15 per common share. After taking into account the 2018 interim dividend of EUR 0.14 per common share, this resulted in a total 2018 dividend of EUR 0.29 per common share. Final dividend for the year and total 2018 dividend per common share B amounted to 1/40th of the dividend paid on common shares.
The final dividend for 2018 was paid in cash or stock at the election of the shareholder. The value of the stock dividend and the cash dividend are approximately equal in value and 45% of shareholders elected to receive the stock dividend. Those who elected to receive a stock dividend received one Aegon common share for every 28 common shares held. The stock fraction was based on Aegon’s average share price as quoted on Euronext Amsterdam, using the high and low of each of the five trading days from June 10, 2019 up to and including June 14, 2019. The average share price calculated on this basis amounted to EUR 4.2396. The dividend was paid as of June 21, 2019.
13. Insurance contracts
The June 30, 2019 insurance contracts liabilities increased as a result of a LAT deficit in Aegon the Netherlands. The positive LAT headroom of Aegon the Netherlands at the end of 2018 of EUR 0.6 billion was negatively impacted by adverse credit spread movements (widening mortgage spreads, tightened liquidity premium) of EUR 1.1 billion and the impact of lower interest rate of EUR 0.8 billion.
|
Unaudited
|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
The LAT deficit of EUR 1.4 billion as per June 30, 2019 is recorded in the income statement. The LAT deficit was partly recorded as an impairment of DPAC and VOBA balances (EUR 76 million) (refer to note 8 “Impairment charges/(reversals)”) and for the remainder by increasing the insurance liability by EUR 1.3 billion.
Due to the positive LAT headroom of Aegon the Netherlands at the end of 2018, changes in the LAT margin triggered by up or down interest shocks could be absorbed by the revaluation reserves on available for sale assets (shadow accounting). However, due to the current negative headroom position, changes in the LAT margin of Aegon the Netherlands, triggered by up or down interest shocks, will now be directly recognized in the income statement.
As a result, the IFRS P&L of Aegon the Netherlands is now less sensitive for interest movements as the interest risk was, and is, economically hedged using derivatives largely offsetting the impact of a changed LAT margin. Please refer to the table below for updated Group sensitivities on interest rate risk.
| EUR millions | Jun 30, 2019 | Dec 31, 2018 | ||||||||||
| On shareholders’ | On shareholders’ | |||||||||||
| Sensitivities - estimated approximate effects | equity | On net income | equity | On net income | ||||||||
|
Shift up 100 basis points - parallel movement of yield curve |
(3.202) | (191 | ) | (3.874) | (563 | ) | ||||||
|
Shift down 100 basis points - parallel movement of yield curve |
3.080 | 205 | 3.067 | 843 | ||||||||
Furthermore, as a result of the current negative LAT headroom position, future results will become more volatile due to changes in credit spreads as these are not hedged. Please find below the estimated sensitivities on shareholders’ equity and on net income of Aegon the Netherlands, for up and down shocks for credit spreads, mortgage spreads for the bond and mortgage portfolio and liquidity premium shocks for general account insurance liabilities.
| EUR millions | Jun 30, 2019 | |||||||
| On shareholders’ | ||||||||
| Sensitivities - estimated approximate effects | equity | On net income | ||||||
|
Shift up 50 basis points - NL bond credit spreads |
(992 | ) | - | |||||
|
Shift down 50 basis points - NL bond credit spreads |
1.216 | - | ||||||
|
Shift up 50 basis points - NL mortgage spreads |
(684 | ) | (684 | ) | ||||
|
Shift down 50 basis points - NL mortgage spreads |
787 | 787 | ||||||
|
Shift up 5 basis points - liquidity premium |
140 | 140 | ||||||
|
Shift down 5 basis points - liquidity premium |
(177 | ) | (177 | ) | ||||
14. Insurance contracts for account of policyholder
Insurance contracts for account of policyholders increased by EUR 11.3 billion to EUR 128.4 billion compared to December 31, 2018 mainly due to positive equity market movements and declining interest rates.
15. Investment contracts for account of policyholders
Investment contracts for account of policyholders increased by EUR 7.7 billion to EUR 87.8 billion compared to December 31, 2018 mainly due to positive equity market movements and declining interest rates.
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Unaudited
|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
16. Borrowings
| EUR millions | Jun. 30, 2019 | Dec. 31, 2018 | ||||
|
Capital funding |
1,778 | 1,774 | ||||
|
Operational funding |
7,722 | 10,287 | ||||
|
Total borrowings |
9,500 | 12,061 | ||||
Included in borrowings is EUR 537 million relating to borrowings measured at fair value (December 31, 2018: EUR 536 million). During the first six months of 2019, the operational funding decreased by EUR 2.6 billion mainly due to the early redemption of a USD 1.54 billion Variable Funding Surplus Note (EUR 1.4 billion), following a restructuring of this financing transaction in the US. In addition, a further decrease was driven by the redemption of ‘SAECURE 14’ of EUR 0.9 billion and the paydown of FHLB advances of EUR 1.3 billion. This was partly offset by an increase in other mortgage loan funding of EUR 0.5 billion and the issuance of EUR 500 million senior non-preferred notes with a coupon of 0.625%.
17. Capital management and solvency
Aegon’s capital consists of 3 Tiers as an indication of its quality, with Tier 1 capital ranking highest. The available own funds number reflects Aegon’s interpretation of Solvency II requirements which is subject to supervisory review.
The table below provides the composition of Aegon’s available own funds across Tiers:
|
June 30,
2019
own funds |
December 31, 2018 Available own funds |
|||||||
|
Tier 1 - unrestricted |
11.916 | 12.204 | ||||||
|
Tier 1 - restricted |
3.493 | 3.406 | ||||||
|
Tier 2 |
1.528 | 1.487 | ||||||
|
Tier 3 |
743 | 505 | ||||||
|
Total available own funds |
17.679 | 17.602 | ||||||
Tier 1 unrestricted capital decreased compared to December 31, 2018. The decrease in Tier 1 unrestricted capital amounted to EUR 288 million, and is mainly driven by the narrowing of the European Insurance and Occupational Pensions Authority (EIOPA) VA from 24 bps to 9 bps, widening of credit spreads on mortgages and lowering of the UFR rates, partly offset by the positive expected return on Aegon inforce insurance portfolio and declining interest rates. The restricted Tier 1 capital has increased by EUR 87 million, mainly due to the issuance of EUR 500 million Restricted Tier 1 perpetual contingent convertible securities, partly offset by the redemption of the USD 500 million perpetual capital securities.
Tier 2 capital increased by EUR 41 million as a result of increased market value of Tier 2 instruments.
Tier 3 capital as of June 30, 2019 is comprised of deferred tax assets balances related to Solvency II entities. The increase of EUR 238 million is mainly driven by Aegon the Netherlands as a result of declined interest rates which increase liabilities, the remaining increase is contributed by Aegon US non-regulated entities.
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Unaudited
|
|
|
Table of Contents
Condensed consolidated interim financial statements 1H 2019 Results
|
IFRS-EU equity compared to Solvency II own funds
|
|
|||||||
| EUR millions |
June 30, 2019
|
December 31, 2018
|
||||||
|
Shareholders’ Equity |
21.481 | 19.518 | ||||||
|
IFRS adjustments for Other Equity Instruments and non controlling interests |
3.406 | 3.342 | ||||||
|
Group Equity |
24.887 | 22.860 | ||||||
|
Solvency II revaluations |
(8.859) | (6.911) | ||||||
|
Transferability restrictions 1 |
(2.031) | (1.884) | ||||||
|
Excess of Assets over Liabilities |
13.997 | 14.065 | ||||||
|
Availability adjustments |
4.486 | 4.326 | ||||||
|
Fungibility restrictions 2 |
(804) | (789) | ||||||
|
Available own funds |
17.679 | 17.602 | ||||||
1 This includes the transferability restriction related to the new RBC CAL conversion methodology.
2 Amongst others, this contains the exclusion of Aegon Bank.
The Solvency II revaluations and reclassifications of EUR 8,859 million negative (2018: EUR 6,911 million negative) stem from the difference in valuation and presentation between IFRS-EU and Solvency II frameworks. The change in Solvency II revaluations per June 30, 2019 compared to December 31, 2018 is mainly driven by lower interest rates and tightening credit spreads during 1H 2019, increasing the revaluation reserves in Aegon US.
The Solvency II revaluations can be grouped into four categories:
| ◆ |
Items that are not recognized under Solvency II. The most relevant examples of this category for Aegon include Goodwill, DPAC and other intangible assets (EUR 1,886 million negative, December 31, 2018: EUR 2,024 million negative); |
| ◆ |
Items that have a different valuation treatment between IFRS-EU and Solvency II. Solvency II is a market consistent framework hence all assets and liabilities are to be presented at fair value while IFRS-EU also includes other valuation treatments in addition to fair value. The most relevant examples of this category for Aegon Group include Loans and Mortgages, Reinsurance Recoverables, Deferred tax assets balances and Technical provisions. The revaluation difference stemming from this category amounted to EUR 2,073 million positive (2018: EUR 2,471 million positive) compared to the IFRS-EU Statement of Financial Position; |
| ◆ |
The Net Asset Value of subsidiaries that are included under the Deduction & Aggregation method (on provisional equivalence or Standard Formula basis) in the Group Solvency II results. The revaluation difference stemming from this category amounted to EUR 5,678 million negative (2018: EUR 4,095 million negative) compared to the IFRS-EU Statement of Financial Position; |
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Reclassification of subordinated liabilities of EUR 3,368 million negative (2018: EUR 3,262 million negative). The movement of subordinated liabilities mainly stem from the redemption of perpetual capital securities of USD 500 million, and the issuance of EUR 500 million Restricted Tier 1 perpetual contingent convertible securities during the first half of 2019. |
The increase in availability adjustments compared to December 31, 2018 is mainly driven by the movement of treasury shares, which has decreased by EUR 191 million due to the final dividend payout over 2018 of stock dividend.
18. Commitments and contingencies
In March 2019, affiliates of Transamerica Corporation entered into a series of agreements with LTCG, an independent third party administrator, to transfer the administration and claims management of its long term care insurance business line. The transaction enables Transamerica to accelerate the enhancement of its digital capabilities and the modernization of its long term care insurance platform. Services are expected to commence in the second half of 2019. LTCG will provide comprehensive third party administration services for Transamerica’s long term care insurance product line including new business, policyholder service, claims processing and care management. The contract is a multi-year contract and the agreement also contains a termination clause in which case Transamerica- subject to certain limitations – agrees to compensate LTCG, on a specified schedule, for early termination.
There have been no other material changes in commitments and contingencies as reported in the 2018 consolidated financial statements.
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19. Acquisitions/Divestments
Aegon Czech Republic and Slovakia
On January 8, 2019, Aegon completed the sale of its businesses in Czech Republic and Slovakia. The businesses consisted mainly of unit linked life insurance coverage, term life products and pension reserves. The proceeds of the sale amount to EUR 155 million and the book gain amounts to approximately EUR 70 million, which were reflected in other income. As a consequence of the transaction, annual income before tax and underlying earnings before tax have decreased. In 2018, the underlying earnings before tax of the combined operations amounted to EUR 17 million.
Aegon Japan
On May 17, 2019, Aegon announced an agreement to sell its 50% stake in the variable annuity joint ventures in Japan for total cash proceeds of approximately EUR 130 million (JPY 16 billion). The divestment will not have a material impact on Aegon’s capital position and is expected to lead to an IFRS gain of approximately EUR 50 million. This divestment has no material impact on underlying earnings before tax going forward. Closing of the transaction is subject to normal regulatory approvals for transactions of this nature and is expected to be completed by the end of 2019.
20. Post reporting date events
On July 9, 2019, Aegon closed a transaction under the Dutch SAECURE program to sell Class A mortgage backed securities (RMBS). ‘SAECURE 18 NHG’ consists of EUR 512 million of class A notes with an expected weighted average life of 4.8 years and a coupon of 3 month Euribor plus 40bps.
Between July 1, 2019 and August 2, 2019, Aegon has completed the share buyback program to neutralize the dilutive effect of the 2018 final dividend paid in shares, and repurchased a total of 32,873,805 common shares, at an average price of EUR 4.52 per share.
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Management statement
The interim report for the six months period ended June 30, 2019, consists of the condensed consolidated interim financial statements, the first half 2019 results release and this responsibility statement by the Company’s Executive Board. The information in this interim report is unaudited.
The Executive Board is responsible for preparing the condensed consolidated interim financial statements in accordance with Dutch law and IAS 34, Interim Financial Reporting, as adopted by the European Union.
The Executive Board declares that, to the best of its knowledge, the condensed consolidated interim financial statements which have been prepared in accordance with lAS 34, Interim Financial Reporting, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial condition and profit or loss of Aegon N.V. and the undertakings included in the consolidation as a whole and that the first half 2019 results release includes a fair review of the information required pursuant to section 5:2Sd, subsections 8 and 9 of the Dutch Act on Financial Supervision (Wet op het financieel toezicht).
The Hague, the Netherlands, August 14, 2019
Alexander R. Wynaendts
Chairman of the Executive Board and CEO
Matthew J. Rider
Member of the Executive Board and CFO
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Review report
To: The Supervisory Board and the Executive Board of Aegon N.V.
Introduction
We have reviewed the accompanying condensed consolidated interim financial information for the six-month period ended June 30, 2019 of Aegon N.V., the Hague, which comprises the condensed consolidated statement of financial position as at June 30, 2019, the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement for the period then ended and the selected explanatory notes. The Executive Board is responsible for the preparation and presentation of this (condensed) interim financial information in accordance with IAS 34, ‘Interim Financial Reporting’ as adopted by the European Union. Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope
We conducted our review in accordance with Dutch law including standard 2410, Review of Interim Financial Information Performed by the Independent Auditor of the entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial information for the six-month period ended June 30, 2019 is not prepared, in all material respects, in accordance with IAS 34, ‘Interim Financial Reporting’ as adopted by the European Union.
Amsterdam, August 14, 2019
PricewaterhouseCoopers Accountants N.V.
Original has been signed by G.J. Heuvelink RA
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Disclaimers
Cautionary note regarding non-IFRS-EU measures
This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax and income before tax. These non-IFRS-EU measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies. The reconciliation of these measures to the most comparable IFRS-EU measure is provided in note 3 ‘Segment information’ of Aegon’s Condensed Consolidated Interim Financial Statements. Aegon believes that these non-IFRS-EU measures, together with the IFRS-EU information, provide meaningful supplemental information about the underlying operating results of Aegon’s business including insight into the financial measures that senior management uses in managing the business.
Forward-looking statements
The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, could, is confident, will, and similar expressions as they relate to Aegon. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Aegon undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:
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Changes in general economic and/or governmental conditions, particularly in the United States, the Netherlands and the United Kingdom; |
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Changes in the performance of financial markets, including emerging markets, such as with regard to: |
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The frequency and severity of defaults by issuers in Aegon’s fixed income investment portfolios; |
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The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities Aegon holds; and |
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The effects of declining creditworthiness of certain public sector securities and the resulting decline in the value of government exposure that Aegon holds; |
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Changes in the performance of Aegon’s investment portfolio and decline in ratings of Aegon’s counterparties; |
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Consequences of an actual or potential break-up of the European monetary union in whole or in part; |
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Consequences of the anticipated exit of the United Kingdom from the European Union and potential consequences of other European Union countries leaving the European Union; |
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The frequency and severity of insured loss events; |
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Changes affecting longevity, mortality, morbidity, persistence and other factors that may impact the profitability of Aegon’s insurance products; |
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Reinsurers to whom Aegon has ceded significant underwriting risks may fail to meet their obligations; |
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Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; |
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Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates; |
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Changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general such as changes in borrower and counterparty creditworthiness; |
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Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets; |
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Changes in laws and regulations, particularly those affecting Aegon’s operations’ ability to hire and retain key personnel, taxation of Aegon companies, the products Aegon sells, and the attractiveness of certain products to its consumers; |
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Regulatory changes relating to the pensions, investment, and insurance industries in the jurisdictions in which Aegon operates; |
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Standard setting initiatives of supranational standard setting bodies such as the Financial Stability Board and the International Association of Insurance Supervisors or changes to such standards that may have an impact on regional (such as EU), national or US federal or state level financial regulation or the application thereof to Aegon, including the designation of Aegon by the Financial Stability Board as a Global Systemically Important Insurer (G-SII); |
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Changes in customer behavior and public opinion in general related to, among other things, the type of products Aegon sells, including legal, regulatory or commercial necessity to meet changing customer expectations; |
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Acts of God, acts of terrorism, acts of war and pandemics; |
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Changes in the policies of central banks and/or governments; |
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Lowering of one or more of Aegon’s debt ratings issued by recognized rating organizations and the adverse impact such action may have on Aegon’s ability to raise capital and on its liquidity and financial condition; |
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Lowering of one or more of insurer financial strength ratings of Aegon’s insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability and liquidity of its insurance subsidiaries; |
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The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital Aegon is required to maintain; |
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Litigation or regulatory action that could require Aegon to pay significant damages or change the way Aegon does business; |
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As Aegon’s operations support complex transactions and are highly dependent on the proper functioning of information technology, operational risks such as system disruptions or failures, security or data privacy breaches, cyberattacks, human error, failure to safeguard personally identifiable information, changes in operational practices or inadequate controls including with respect to third parties with which we do business may disrupt Aegon’s business, damage its reputation and adversely affect its results of operations, financial condition and cash flows; |
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Customer responsiveness to both new products and distribution channels; |
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Competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for Aegon’s products; |
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Changes in accounting regulations and policies or a change by Aegon in applying such regulations and policies, voluntarily or otherwise, which may affect Aegon’s reported results, shareholders’ equity or regulatory capital adequacy levels; |
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Aegon’s projected results are highly sensitive to complex mathematical models of financial markets, mortality, longevity, and other dynamic systems subject to shocks and unpredictable volatility. Should assumptions to these models later prove incorrect, or should errors in those models escape the controls in place to detect them, future performance will vary from projected results; |
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The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including Aegon’s ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; |
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Catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt Aegon’s business; and |
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Aegon’s failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving and excess cash and leverage ratio management initiatives. |
This document contains information that qualifies, or may qualify, as inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation (596/2014). Further details of potential risks and uncertainties affecting Aegon are described in its filings with the Netherlands Authority for the Financial Markets and the US Securities and Exchange Commission, including the Annual Report. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, Aegon expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Aegon’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
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Corporate and shareholder information
Headquarters
Aegon N.V.
P.O. Box 85
2501 CB The Hague
The Netherlands
+ 31 (0) 70 344 32 10
aegon.com
Group Corporate Communications & Investor Relations
Media relations
+ 31 (0) 70 344 8344
gcc@aegon.com
Investor relations
+ 31 (0) 70 344 83 05
or 877 548 96 68 - toll free, USA only
ir@aegon.com
| Publication dates results | ||
| February 13, 2020 | 2H 2019 Results | |
| August 13, 2020 | 1H 2020 Results |
About Aegon
Aegon’s roots go back 175 years – to the first half of the nineteenth century. Since then, Aegon has grown into an international company, with businesses in more than 20 countries in the Americas, Europe and Asia. Today, Aegon is one of the world’s leading financial services organizations, providing life insurance, pensions and asset management. Aegon’s purpose is to help people achieve a lifetime of financial security. More information: aegon.com .
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