Net income more than doubles driven by US tax reform
- Underlying earnings decrease by 5% to
EUR 525 million as a result of a weakening of the US dollar;
expense savings and higher fee revenue from favorable equity
markets were offset by one-time items
- Gain from fair value items of EUR 85
million driven by positive real estate revaluations and hedging
gains
- Other charges of EUR 132 million, as
net book gain on divestments is more than offset by a charge from
model updates and a provision related to a regulatory settlement
expected later this year
- Net income more than doubles to EUR 986
million, as US tax reform leads to one-time tax benefit
- Return on equity for the quarter
amounts to 8.4%
Strong growth in gross deposits; continued momentum in asset
management and UK platform business
- Gross deposits increase by 54% to EUR
35 billion; net outflows of EUR 13 billion driven by
contract discontinuances in the retirement business acquired from
Mercer
- Lower new life sales of EUR 225
million, mostly as a result of a weakening of the US dollar
- Accident & health and general
insurance sales down to EUR 175 million due to lower supplemental
health production
- Market consistent value of new business
increases by 10% to EUR 130 million, partly due to increased scale
in UK
Strong increase in Solvency II ratio to 201%
- Solvency II ratio increases by
6%-points during the quarter to 201%. Solid business performance,
management actions and divestments more than offset adverse impact
from US tax reform and market movements
- Capital generation excluding market
impacts and one-time items of EUR 381 million
- Remittances from units totaling EUR 0.9
billion drive increase in holding excess capital to EUR 1.4
billion
- Gross financial leverage ratio improves
by 60 basis points in the quarter to 28.6% as a result of strong
net income
- Final 2017 dividend per share of EUR
0.14; on track to deliver on EUR 2.1 billion capital return
commitment
Significant increase in future recurring earnings and capital
generation from US tax reform
- Shareholders’ equity increased by EUR
1.0 billion in the fourth quarter resulting from US tax reform, due
to a reduction in net deferred tax liabilities, of which EUR 554
million was recognized in the profit and loss account
- Expected recurring annual benefit of
EUR ~85 million to capital generation and EUR ~120 million to
net underlying earnings. Earnings uplift to lead to over 50 basis
points increase in group return on equity
- RBC ratio of US business could be
impacted by increase in required capital, contingent on regulatory
action to change RBC factors. RBC ratio expected to remain above
mid-point of 350-450% target range
- Remittances from Aegon’s US operations
are expected to remain unchanged in short term, with medium-term
upside
Statement of Alex Wynaendts, CEO
“Aegon’s solid fourth quarter results conclude a year in which
we have grown our business, accomplished many of our strategic
objectives, and strongly increased our financial results. The
actions we have taken led to a significant increase in our solvency
ratio, quality of capital and recurring capital generation. I’m
therefore pleased to announce an increase in our final dividend of
14 cents per share, the sixth consecutive year of growing dividend
to shareholders.
“We are becoming a more agile and technology-driven
organization, and are now better able to respond to the changing
needs of our customers than ever before. The efficient use of new
technologies, in combination with outsourcing, also puts us well on
track to achieve our targeted expense savings.
“2017 saw us pay out over EUR 48 billion in claims and benefits,
which demonstrates the importance of what we do for our customers.
Going forward, we will continue to transform our business in order
to help people around the world achieve a lifetime of financial
security. By doing so, I am very confident that we will be able to
further grow our business, make progress on our ambitious 2018
targets, and generate long-term value for all our
stakeholders.”
Note: All comparisons in this release are against the fourth
quarter of 2016, unless stated otherwise. See page 5 of the press
release for key performance indicators.
Strategic highlights
- Aegon announces significant step to
capture greater operational efficiencies in the US
- Aegon divests additional block of US
run-off businesses to SCOR
- Creation of European asset
management organization to lead to efficiencies and operational
agility
- Global employee engagement survey
results show commitment to become industry’s preferred
employer
Aegon’s strategy
Aegon’s purpose – to help people achieve a lifetime of financial
security – forms the basis of the company’s strategy. The central
focus of the strategy is to further transform Aegon from a
product-based to a customer needs-driven company. This means
serving diverse and evolving needs across the customer life cycle;
being a trusted partner for financial solutions that are relevant,
simple, rewarding, and convenient; and developing long-term
customer relationships by providing guidance and advice, and
identifying additional financial security needs at every stage of
customers’ lives.
Aegon is focused on reducing complexity, eliminating
duplication, improving accuracy, and increasing automation in order
to realize cost efficiencies, allowing investments in its
transformation to a digitally enabled, customer-centric company.
Furthermore, the company is focused on driving scale and
establishing strong positions in its current markets, and adhering
to strict standards to ensure the efficient use of capital by all
of its businesses. There are four key strategic objectives –
Optimized portfolio, Operational excellence, Customer loyalty, and
Empowered employees – embedded in all Aegon businesses that enable
the company to execute its strategy.
Optimized portfolio
On December 28, 2017, Aegon announced the divestment of a block
of life reinsurance business to SCOR and to dissolve a related
captive insurance company. Under the terms of the agreement,
Aegon’s Transamerica life subsidiaries will reinsure approximately
USD 750 million of liabilities to SCOR. The transaction covers
approximately half of the life reinsurance business that
Transamerica retained after having divested the vast majority of
its life reinsurance business to SCOR in 2011. The transaction had
a one-time benefit of USD 79 million on Transamerica’s
capital position and will have a slight positive effect on
recurring capital generation. The divestment resulted in a pre-tax
IFRS loss of USD 119 million reported in Other charges.
Transamerica dissolved a related captive insurance company in place
to finance redundant reserves, and redeemed USD 475 million of
operational leverage supporting that captive.
Aegon announced that its US subsidiary, Transamerica, entered
into an agreement on January 11, 2018, with Tata Consultancy
Services (TCS) to administer the company’s US insurance and annuity
business lines. The partnership will enable Transamerica to
accelerate the enhancement of its digital capabilities and the
modernization of its platforms to serve its customers in all lines
of business. TCS will administer over 10 million of Transamerica’s
life insurance, annuity, supplemental health insurance and
workplace voluntary benefits policies. The agreement, which is
expected to be completed by the second quarter of 2018, will
initially lead to annual run-rate expense savings for Aegon of
approximately USD 70 million, growing to USD 100 million over time.
The majority of the expense savings are expected to benefit
underlying earnings.
Operational excellence
On January 1, 2018, Aegon Asset Management began operating under
two regions: the US and Europe, in which the asset management
activities in the Netherlands and the United Kingdom have been
consolidated under a single leadership team. This will enable Aegon
to achieve greater operational scalability, ensure best practices
are better shared across regions, and reduce costs by removing
duplication across the European region. This will lead to more
efficiencies and further optimize operational agility.
On January 2, 2018, Aegon Asset Management announced the launch
of the first of its kind affordable housing debt fund in the United
States. The US affordable housing debt fund of USD 100 million was
fully subscribed, and is expected to finance 32 loans across 13
states. The debt fund provides debt capital to affordable housing
developments that receive Low Income Housing Tax Credits (LIHTC).
The LIHTC program is one of the most successful federal housing
programs in the US with over 2.8 million homes developed since
inception. Aegon will provide ongoing fund oversight, loan
servicing and asset management services for the life of the debt
fund. Aegon currently manages more than USD 4 billion of tax
credit equity investments and over USD 11 billion of commercial
mortgage loans for its clients.
Customer loyalty
In the United States, Aegon announced a new Wealth + Health
brand identity focused on helping customers improve their overall
well-being by effectively managing both their wealth and their
health. The company’s objective is to offer simple, sound, and
holistic guidance that will help people improve the overall quality
of their lives. Aegon has developed numerous resources to help
customers and financial professionals understand how wealth and
health are connected. On Transamerica’s redesigned website, people
can access research, education and guidance to learn more about how
wealth and health come together. These materials underscore that
financial security and physical health are not only inherently
interconnected, but they are two of the most important components
toward living a long, meaningful life.
The Aegon Center for Longevity and Retirement (ACLR) conducted
its first international survey on retirement aspirations and
planning among the LGBT community. The survey concluded that LGBT
people are more likely to lead solo lifestyles throughout
adulthood, and this is reflected in their views as to how they will
spend their retirement. Furthermore, some LGBT workers still face
open and subtle discrimination that denies them the same
opportunities in the workplace as their heterosexual colleagues.
Aegon discussed the key findings from the report at the High-Level
Conference on Policies for Equal Ageing: A Life-Course Approach
jointly organized by the Organization for Economic Cooperation and
Development (OECD) and the Government of Slovenia on January 25,
2018.
Empowered employees
Results from Aegon’s seventh annual global employee survey
showed improvement in overall engagement, which increased by 2
points to 65 out of a maximum 100 points in 2017. The survey was
completed by over 80% of all Aegon employees worldwide. This
improvement in engagement demonstrates Aegon’s ongoing work to
become the most preferred employer in the sector, which is enabling
Aegon to attract and develop the talent required to best serve the
needs of its customers. Progress has also been made in terms of
implementing Aegon’s FutureFit strategy. The results for Customer
Centricity have, for instance, increased to 74 points,
demonstrating how Aegon is successfully focusing on putting
customers at the heart of all that they do.
In 2017, Aegon’s employees in the United States contributed to
their local United Way chapters as part of the annual campaign to
raise money for this charity. This year, Aegon’s employees raised
more than USD 1.5 million in total, and these funds are being used
to provide people in need throughout the United States with
effective health care, educational support and financial stability
resources. Additionally, Aegon’s employees raised USD 200,000 to
help those affected by hurricanes Harvey, Irma and Maria. The
donations are on top of the many volunteer hours donated by Aegon
employees across the globe to help those in need.
Financial overview
EUR millions Notes
4Q 2017 4Q 2016 % 3Q 2017 %
FY 2017 FY 2016 %
Underlying earnings before tax Americas 352 388 (9 ) 376 (6
) 1,381 1,249 11 Europe 167 174 (4 ) 177 (6 ) 707 655 8 Asia 12 13
(11 ) 14 (18 ) 49 21 131 Asset Management 37 35 5 30 21 136 149 (9
) Holding and other (42 ) (57 ) 26 (41
) (2 ) (170 ) (162 ) (5 )
Underlying earnings before
tax 525 554 (5 ) 556
(6 ) 2,103 1,913 10 Fair
value items 85 (13 ) n.m. 159 (46 ) - (645 ) 100 Realized gains /
(losses) on investments 91 36 157 135 (32 ) 413 340 21 Net
impairments (35 ) (1 ) n.m. 4 n.m. (39 ) (54 ) 28 Other income /
(charges) (132 ) (38 ) n.m. (233 ) 43 (68 ) (771 ) 91 Run-off
businesses (8 ) (1 ) n.m. (3 ) (191 )
30 54 (45 )
Income before tax
526 536 (2 ) 618 (15
) 2,437 836 192 Income tax
460 (66 ) n.m. (149 ) n.m. (76 )
(250 ) 69
Net income / (loss)
986 470 110
469 110
2,361 586 n.m.
Net underlying earnings
392 471 (17
) 412 (5 )
1,543 1,483 4
Commissions and expenses 1,560 1,726 (10 ) 1,435 9
6,309 6,696 (6 ) of which operating expenses 9 984
978 1 909 8
3,878 3,764 3
Gross deposits (on and off balance) 10 Americas 8,358
8,769 (5 ) 8,062 4 38,543 40,881 (6 ) Europe 12,650 3,474 n.m.
9,604 32 44,316 12,773 n.m. Asia 46 54 (15 ) 54 (15 ) 222 304 (27 )
Asset Management 13,863 10,326
34 22,971 (40 ) 61,332 46,366 32
Total gross deposits 34,917
22,625 54
40,691 (14 )
144,412 100,325 44
Net deposits (on and off balance) 10 Americas
(15,326 ) (2,073 ) n.m. (11,929 ) (28 ) (29,713 ) (1,015 ) n.m.
Europe 2,213 411 n.m. 1,033 114 5,921 1,260 n.m. Asia 9 51 (83 ) 35
(75 ) 129 259 (50 ) Asset Management 316
(1,702 ) n.m. 10,365 (97 ) 6,913
2,964 133
Total net deposits excluding run-off
businesses (12,788 ) (3,313 )
n.m. (496 ) n.m. (16,750
) 3,468 n.m. Run-off businesses
(31 ) (179 ) 82 (66 ) 52 (338 ) (759 ) 55
Total net deposits / (outflows)
(12,820 ) (3,492 )
n.m. (563 ) n.m.
(17,088 ) 2,709
n.m. New life sales Life single premiums 560
476 18 329 70 1,764 2,054 (14 ) Life recurring premiums annualized
169 192 (12 ) 169
- 720 764 (6 )
Total recurring plus 1/10
single 225 240 (6 ) 202
11 896 969 (8 ) New
life sales 10 Americas 109 133 (18 ) 113 (4 ) 472 542 (13 )
Europe 77 75 3 63 22 273 299 (9 ) Asia 39
32 22 26 49 151 128
18
Total recurring plus 1/10 single 225
240 (6 ) 202 11 896
969 (8 ) New premium production
accident and health insurance 146 201 (28 ) 157 (7 ) 776 860 (10 )
New premium production general insurance 29
23 27 23 28
109 94 16
Revenue-generating investments
Dec. 31, Sep. 30, Dec. 31,
2017 2017 % 2016 %
Revenue-generating investments (total)
817,447 816,274
- 743,200 10
Investments general account 137,311 138,583 (1 ) 156,813 (12
) Investments for account of policyholders 198,838 197,075 1
203,610 (2 ) Off balance sheet investments third parties
481,297 480,615 -
382,776 26
Operational highlights
Underlying earnings before tax
Aegon’s underlying earnings before tax decreased by 5% compared
with the fourth quarter of 2016 to EUR 525 million driven
by weakening of the US dollar. Earnings were stable on a constant
currency basis, as expense savings and higher fee revenue from
favorable equity markets were offset by unfavorable adjustments to
deferred acquisition costs and one-time expenses. Earnings from
fee-based businesses increased by 6%-points compared with last year
to 45% in the fourth quarter of 2017 supported by strong equity
markets and the acquisition of Cofunds. This quarter’s favorable
claims experience in the United States was offset by unfavorable
adjustments to deferred acquisition costs and one-time expenses in
other business units.
Underlying earnings from the Americas decreased by 9% to EUR 352
million, mostly as a result of weakening of the US dollar. On a
constant currency basis, as expense savings, the higher
contribution from fee-based businesses resulting from favorable
equity markets, and a further improvement in claims experience were
more than offset by one-time items. The current quarter included a
EUR 5 million unfavorable adjustment to deferred acquisition costs,
while the same quarter last year included a positive impact of EUR
17 million. Favorable claims experience this quarter of EUR 22
million was driven by lower supplemental health claims.
Underlying earnings from Aegon’s operations in Europe decreased
by 4% to EUR 167 million, driven by EUR 8 million one-time expenses
in Spain & Portugal. Increased fee revenue in the United
Kingdom and higher interest income in the Netherlands were mainly
offset by a normalization of the Dutch non-life result.
Aegon’s underlying earnings in Asia amounted to EUR 12 million.
Lower earnings from the High-Net-Worth businesses as a result of
the non-recurrence of favorable intangible adjustments offset
higher earnings in all other business lines.
Underlying earnings from Aegon Asset Management increased by 5%
to EUR 37 million, as higher performance and origination fees were
partly offset by lower management fees and EUR 6 million one-time
expenses.
The result from the holding improved to a loss of EUR 42
million, as last year’s one-time charges and project-related
expenses did not reoccur.
Key performance indicators
EUR millions 13
Notes 4Q 2017 4Q 2016 % 3Q 2017
% FY 2017 FY 2016 % Underlying
earnings before tax 1 525 554 (5) 556 (6) 2,103 1,913 10 Net
income / (loss) 986 470 110 469 110 2,361 586 n.m. Sales 2
3,891 2,727 43 4,451 (13) 16,223 11,956 36 Market consistent
value of new business 3 130 118 10 121 7 558 420 33 Return
on equity 4 8.4% 10.5% (19) 8.9%
(6) 8.2% 8.0% 3
US tax reform
On December 22, 2017, the US Tax Cuts and Jobs Act was signed
into law. The key item of this change to tax law is the lowering of
the nominal corporate tax rate from 35% to 21%, which led to a
reduction in net deferred tax liabilities in the fourth quarter of
2017. As a result, shareholders’ equity increased by EUR 1.0
billion, of which EUR 554 million was recognized in the
income tax line in the profit and loss account, and the remainder
directly in shareholders’ equity as it relates to revaluation
reserves. The portion recognized directly in shareholders’ equity
does not impact the group’s return on equity nor the gross
financial leverage ratio.
Net underlying earnings will benefit from the lower corporate
tax rate as of 2018. Aegon expects the effective corporate tax rate
for its business in the United States to reduce to approximately
16% to 18%. Based on the full-year 2017 results, this would lead to
an increase in net underlying earnings of approximately USD 140
million (EUR ~120 million). This will have a positive
impact on the return on capital invested in Aegon’s US business of
approximately 75 basis points, and will lead to an improvement in
the group’s return on equity of approximately 55 basis
points.
The one-time negative impact from tax reform on the RBC ratio in
the fourth quarter of 2017 was 16%-points, mainly due to the
reduction of deferred tax assets that are part of available
capital. This adjustment is reflected in the estimated RBC ratio of
472% per year-end 2017.
Contingent on the decision by the National Association of
Insurance Commissioners (NAIC) to reflect the new tax rate in its
RBC requirements, an additional one-time increase to required
capital is expected in the future. Aegon expects that the RBC ratio
of its US business will remain above the mid-point of its 350 to
450% target range. As a result, the company foresees no changes to
the remittances from its US operations. The group’s Solvency II
ratio is expected to remain well within the upper half of the 150
to 200% target range despite the potential increase in required
capital.
Going forward, based on current projections, Aegon expects a
benefit to capital generation of approximately
USD 100 million (EUR ~85 million) on average per year as
a result of a lower effective tax rate. Increased capital
generation leads to potential upside in medium-term remittances
from Aegon’s US operations.
All ongoing impacts will fluctuate depending on market
conditions and other elements affecting taxable income and the
company’s tax position. In terms of the impact on required capital,
Aegon has made assumptions with regard to the use of a single
corporate tax rate of 21% for Aegon’s US business, and application
of concepts currently exposed by the NAIC regarding capital
requirements. Outcomes are dependent on changes to NAIC
requirements, which may deviate from Aegon’s current
assumptions.
Net income
Net income more than doubled compared with the fourth quarter of
2016 to EUR 986 million, as US tax reform led to a one-time benefit
of EUR 554 million in income taxes, driven by the related reduction
in net deferred tax liabilities.
Fair value items
The gain from fair value items amounted to EUR 85 million.
Positive revaluations on investments and hedging gains in the
Netherlands and the United States more than offset the negative
result on the guarantee provision in the Netherlands.
Realized gains on investments
Realized gains totaled EUR 91 million, and were mainly related
to normal trading activity in the United States and the sale of
bonds in the United Kingdom to fund remittances to the group.
Impairment charges
Impairments amounted to EUR 35 million and mainly related to a
single commercial mortgage loan in the United States and a loan
loss provision related to growing consumer loan origination in the
Netherlands. In 2017, impairments amounted to 3 basis points
of general account investments, which is well below the company’s
long-term average experience.
Other charges
Other charges amounted to EUR 132 million, as a gain on the sale
of UMG in the Netherlands was more than offset by integration
expenses in the United Kingdom and charges in the United States and
Asset Management.
The sale of UMG in the Netherlands closed on November 1, 2017,
and resulted in a gain of EUR 208 million. Expenses related to the
program to integrate Cofunds and BlackRock’s defined contribution
business in Aegon’s platform business in the United Kingdom
amounted to EUR 25 million this quarter.
Aegon has taken a provision in anticipation of a possible
settlement in connection with a previously disclosed investigation
by the US Securities and Exchange Commission (SEC). The
investigation relates to the operation or existence of errors in
the quantitative models in question and disclosures regarding these
matters. Aegon had discovered these errors in its asset management
operations in the United States. The company notified the SEC and
cooperated fully with the investigation. Following the discovery of
the errors, Aegon concluded a comprehensive and detailed
review.
As a result of recent discussions, Aegon has taken a EUR 85
million provision through Other charges in the fourth quarter of
2017 for a potential settlement. This amount is partly recorded in
the Americas (EUR 45 million) and partly in Asset Management (EUR
40 million). Aegon believes that the investigation will come to a
conclusion in 2018.
Charges in the United States of EUR 266 million were mainly
caused by a loss of EUR 105 million from the divestment of an
additional block of life reinsurance business, the aforementioned
settlement provision, and EUR 100 million from model
updates. The latter was mostly driven by a true-up related to the
conversion of the largest block of universal life business to a new
model, while the remainder related to a model update in Fixed
Annuities.
Run-off businesses
The run-off businesses declined to a loss of EUR 8 million as a
result of the divestment of the majority of the remainder of these
businesses in 2017.
Income tax
Income tax amounted to a benefit of EUR 460 million as a result
of the EUR 554 million one-time impact from US tax reform driven by
a reduction in net deferred tax liabilities. Excluding this benefit
and the tax exempt gain on the sale of UMG, the effective tax rate
for the fourth quarter amounted to 26%. The effective tax rate on
underlying earnings was 25%, as the benefit from US tax reform will
only be reflected in net underlying earnings as of 2018.
Return on equity
Return on equity decreased by 210 basis points compared with the
same quarter last year to 8.4%. The decline reflects the fact that
the fourth quarter of 2016 included a non-recurring tax benefit
recorded through net underlying earnings. The return on equity in
the fourth quarter of 2017 did not include the benefit from US tax
reform recognized in the profit and loss account.
Operating expenses
Operating expenses increased by 1% to EUR 984 million, as the
acquisition of Cofunds in the United Kingdom and an increase in
integration and restructuring expenses were only partly offset by
the weakening of the US dollar and the divestment of UMG. Excluding
these items, operating expenses were stable, as expense savings
were partly offset by investments in business transformation and
one-time expenses. Aegon is well on track to implement EUR 350
million of run-rate expense savings by year-end 2018 as part of its
plans to improve the return on equity. Initiatives to reduce
expenses have led to annual run-rate expense savings of
approximately EUR 280 million since the beginning of 2016,
including the recently announced agreement with TCS.
Sales
Aegon’s total sales in the fourth quarter of 2017 were up by 43%
to EUR 3.9 billion. This strong increase was the result of a 54%
increase in gross deposits to EUR 34.9 billion, primarily driven by
strong deposits across all regions in Asset Management, and
institutional platform sales in the United Kingdom. Net outflows
amounted to EUR 12.8 billion, as continued asset
management inflows and increased inflows on the platform in the
United Kingdom were more than offset by net outflows in the
Americas as a result of contract discontinuances in the retirement
business acquired from Mercer. These outflows were in line with the
guidance provided last quarter, and are driven by conversion of
customers to the Transamerica recordkeeping platform. Now that
these conversions have been completed, net deposits are expected to
improve substantially and increase as a result of the momentum that
Transamerica continues to build in the market.
New life sales amounted to EUR 225 million, a decline of 6%.
This was mainly caused by the weakening of the US dollar, lower
term life and indexed universal life sales in the United States,
and was partly offset by strong growth in the Asian High-Net-Worth
business and the successful launch of a new critical illness
product in China.
New premium production for accident & health and general
insurance decreased by 22% to EUR 175 million, or 19% on a
constant currency basis. Product exits and lower supplemental
health sales in the United States more than offset increased
general insurance production supported by a portfolio acquisition
in Hungary.
Market consistent value of new business
The market consistent value of new business (MCVNB) increased by
10% to EUR 130 million. The effect of weakening of the US dollar
was more than offset by the benefit from strong sales and higher
interest rates in Asia, as well as an improvement in MCVNB in the
United Kingdom, which primarily reflects economies of scale on
Aegon’s growing platform business.
Revenue-generating investments
Revenue-generating investments remained stable compared with the
end of last quarter at EUR 817 billion. The favorable impact from
higher equity markets was offset by net outflows and weakening of
the US dollar.
Capital management
Shareholders’ equity increased by EUR 0.5 billion to EUR 20.6
billion on December 31, 2017, as retained earnings and the benefit
resulting from US tax reform more than offset weakening of the US
dollar and a lower revaluation reserve as a result of increased
interest rates. Shareholders’ equity excluding revaluation reserves
and defined benefit plan remeasurements increased by EUR 0.5
billion to EUR 17.4 billion – or EUR 8.47 per common share –
at the end of the fourth quarter. This increase reflects retained
earnings, including the tax benefit resulting from tax reform
reported in the profit and loss account, which were partly offset
by weakening of the US dollar and other items. The gross leverage
ratio improved by 60 basis points to 28.6% as a result of the
increase in equity.
Holding excess capital increased from EUR 0.9 billion to EUR 1.4
billion. The group received EUR 0.9 billion in remittances from
subsidiaries this quarter: EUR 625 million from the
United States, EUR 167 million from the United Kingdom, EUR 27
million from Asset Management, EUR 19 million from Hungary, and EUR
18 million from Spain. These remittances were partly offset by EUR
20 million capital injections to support growth of the business and
EUR 361 million cash outflows mainly related to the share
buyback to neutralize the final 2016 and interim 2017 stock
dividends, in addition to holding funding and operating
expenses.
On December 20, 2017, Moody’s affirmed its ‘A3’ long-term issuer
rating on Aegon N.V., while revising their outlook from ‘negative’
to ‘stable’.
Capital generation
Capital generation of the operating units amounted to
EUR 106 million for the quarter. Market impacts and one-time
items totaled a negative EUR 275 million. Market impacts were
mainly driven by the unfavorable impact from equity market
movements in the United Kingdom and adverse interest rate movements
in the United Kingdom, the United States and Asia. One-time items
included tax benefits in the United States and benefits from
separate account derisking in the Netherlands, which were more than
offset by the reduction of deferred tax assets in the United
States, and model updates and assumption changes. The latter mostly
related to an increase in required capital in the United Kingdom as
a result of a change in tax legislation reducing tax losses carried
forward.
Solvency II ratio
Aegon’s Solvency II ratio increased from 195% to 201% during the
fourth quarter resulting from capital generation including market
impacts and one-time items, and divestments.
The estimated local solvency ratios of Aegon’s main units as of
December 31, 2017, were:
- 472% RBC ratio in the United
States
- 199% Solvency II ratio in the
Netherlands
- 176% Solvency II ratio in the United
Kingdom
Final dividend
At the Annual General Meeting of Shareholders on May 18, 2018,
the Supervisory Board will, in the absence of unforeseen
circumstances, propose a final dividend for 2017 of EUR 0.14 per
common share. If approved, and in combination with the interim
dividend of EUR 0.13 per share paid over the first half of 2017,
Aegon’s total dividend over 2017 will amount to EUR 0.27 per common
share. This is an increase of 4% compared with the 2016 dividend.
The final dividend will be paid in cash or stock at the election of
the shareholder. The value of the stock dividend will be
approximately equal to the cash dividend.
If the proposed dividend is approved by shareholders, Aegon
shares will be quoted ex-dividend on May 22, 2018. The record date
for the dividend will be May 23, 2018. The election period for
shareholders will run from May 29 up to and including June 15,
2018. The stock fraction will be based on the average share price
on Euronext Amsterdam from June 11 until June 15, 2018. The stock
dividend ratio will be announced on June 20, 2018, and the dividend
will be payable as of June 22, 2018.
Annual General Meeting of Shareholders
The record date for attending and voting at the Annual General
Meeting of Shareholders of Aegon N.V. on May 18, 2018, is
April 20, 2018. The agenda for this meeting will be
published on April 6, 2018.
Financial overview, 4Q 2017
geographically
Holding, other Asset activities & EUR millions Americas
Europe Asia Management eliminations
Total
Underlying earnings before tax by line of
business Life 143 91 15 - - 249 Individual savings and
retirement products 120 - (2 ) - - 118 Pensions 90 60 - - - 149
Non-life - 14 - - - 14 Asset Management - - - 37 - 37 Other
- 2 (1 ) - (42 )
(41 )
Underlying earnings before tax 352
167 12 37 (42 ) 525
Fair value items 81 20 (1 ) - (14 ) 85 Realized gains /
(losses) on investments 38 51 2 - - 91 Net impairments (24 ) (10 )
(1 ) - - (35 ) Other income / (charges) (266 ) 166 - (47 ) 16 (132
) Run-off businesses (8 ) - -
- - (8 )
Income before
tax 172 393 12 (10 )
(40 ) 526 Income tax 523
(58 ) - (11 ) 5 460
Net income / (loss) 695
335 12 (21
) (36 ) 986
Net underlying earnings 266
136 3 26
(40 ) 392
Employee numbers
Dec. 31, Sep. 30,
Dec. 31, 2017 2017 2016
Employees 28,318 29,709 29,380 of which
Aegon's share of employees in joint ventures and associates
6,497 6,312 5,944
Full version press release
Use this link for the full version of the press release
Additional information
Presentation
The conference call presentation is available on aegon.com as of
7.30 a.m. CET.
Supplements
Aegon’s 4Q 2017 Financial Supplement and Condensed Consolidated
Interim Financial Statements are available on aegon.com.
Conference call including Q&A
9:00 a.m. CET
Audio webcast on aegon.com
Dial-in numbers
United States: +1 720 543 0214 United Kingdom: +44 330 336 9105 The
Netherlands: +31 20 721 9251 Passcode: 7829075
Two hours after the conference call, a replay will be available
on aegon.com.
Publication dates 2018 results
First half year 2018 – August 16, 2018 Second half year 2018 –
February 14, 2019
DISCLAIMERS
Cautionary note regarding non-IFRS measures
This document includes the following non-IFRS-EU financial
measures: underlying earnings before tax, income tax, income before
tax, market consistent value of new business and return on equity.
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, except for market
consistent value of new business, to the most comparable IFRS-EU
measure is provided in note 3 ‘Segment information’ of Aegon’s
Condensed Consolidated Interim Financial Statements. Market
consistent value of new business is not based on IFRS-EU, which are
used to report Aegon’s primary financial statements and should not
be viewed as a substitute for IFRS-EU financial measures. Aegon may
define and calculate market consistent value of new business
differently than other companies. Return on equity is a ratio using
a non-IFRS-EU measure and is calculated by dividing the net
underlying earnings after cost of leverage by the average
shareholders’ equity, the revaluation reserve and the reserves
related to defined benefit plans. 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.
Local currencies and constant currency exchange rates
This document contains certain information about Aegon’s
results, financial condition and revenue generating investments
presented in USD for the Americas and Asia, and in GBP for the
United Kingdom, because those businesses operate and are managed
primarily in those currencies. Certain comparative information
presented on a constant currency basis eliminates the effects of
changes in currency exchange rates. None of this information is a
substitute for or superior to financial information about Aegon
presented in EUR, which is the currency of Aegon’s primary
financial statements.
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, 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:
- Changes in general economic conditions,
particularly in the United States, the Netherlands and the United
Kingdom;
- Changes in the performance of financial
markets, including emerging markets, such as with regard to:
- The frequency and severity of defaults
by issuers in Aegon’s fixed income investment portfolios;
- 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
- The effects of declining
creditworthiness of certain private sector securities and the
resulting decline in the value of government exposure that Aegon
holds;
- Changes in the performance of Aegon’s
investment portfolio and decline in ratings of Aegon’s
counterparties;
- Consequences of a potential (partial)
break-up of the euro;
- Consequences of the anticipated exit of
the United Kingdom from the European Union;
- The frequency and severity of insured
loss events;
- Changes affecting longevity, mortality,
morbidity, persistence and other factors that may impact the
profitability of Aegon’s insurance products;
- Reinsurers to whom Aegon has ceded
significant underwriting risks may fail to meet their
obligations;
- Changes affecting interest rate levels
and continuing low or rapidly changing interest rate levels;
- Changes affecting currency exchange
rates, in particular the EUR/USD and EUR/GBP exchange rates;
- 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;
- Increasing levels of competition in the
United States, the Netherlands, the United Kingdom and emerging
markets;
- 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;
- Regulatory changes relating to the
pensions, investment, and insurance industries in the jurisdictions
in which Aegon operates;
- 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);
- 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;
- Acts of God, acts of terrorism, acts of
war and pandemics;
- Changes in the policies of central
banks and/or governments;
- 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;
- 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;
- The effect of the European Union’s
Solvency II requirements and other regulations in other
jurisdictions affecting the capital Aegon is required to
maintain;
- Litigation or regulatory action that
could require Aegon to pay significant damages or change the way
Aegon does business;
- As Aegon’s operations support complex
transactions and are highly dependent on the proper functioning of
information technology, a computer system failure or security
breach may disrupt Aegon’s business, damage its reputation and
adversely affect its results of operations, financial condition and
cash flows;
- Customer responsiveness to both new
products and distribution channels;
- Competitive, legal, regulatory, or tax
changes that affect profitability, the distribution cost of or
demand for Aegon’s products;
- 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 and shareholders’ equity;
- 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;
- 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;
- Catastrophic events, either manmade or
by nature, could result in material losses and significantly
interrupt Aegon’s business;
- Aegon’s failure to achieve anticipated
levels of earnings or operational efficiencies as well as other
cost saving and excess capital and leverage ratio management
initiatives; and
- This press release contains information
that qualifies, or may qualify, as inside information within the
meaning of Article 7(1), 7(1)a and 7(4) 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180214006525/en/
AegonMedia relationsDick Schiethart+31 (0) 70 344
8821gcc@aegon.comorInvestor relationsWillem van den Berg+31
(0) 70 344 8305ir@aegon.comorConference call including Q&A
(9:00 a.m. CET)Audio webcast on aegon.comUnited States: +1 720
543 0214United Kingdom: +44 330 336 9105The Netherlands: +31 20 721
9251Passcode: 7829075
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