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Glossary

This glossary provides a simple explanation of many of the terms you're likely hear when people talk about pensions, insurance and investments.

4

401(K) PLAN

This is the common name in the US for a tax qualified defined contribution pension plan account and takes its name from subsection 401(k) of the Internal Revenue Code. Contributions are 'tax-deferred' - deducted from paychecks before taxes and then taxed when a withdrawal is made from the 401(k) account.

403 (B) PLAN

A tax qualified defined contribution pension plan in the US account for non-profit organizations. Contributions are 'tax-deferred' - deducted from paychecks before taxes and then taxed when a withdrawal is made from the 403(b) account.

A

ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE

This is a policy that pays benefits to the beneficiary if the cause of death is due to an accident.

ACCRUAL RATE

The rate at which pension benefits build up during membership of a defined benefit plan.

ACCRUED BENEFITS

The amount of accumulated pension benefits of a pension plan member on the basis of years of service.

ACTIVE MEMBER

A pension plan member who is making contributions (and/or on behalf of whom contributions are being made) and is accumulating assets.

ADMS

Aegon Direct & Affinity Marketing Services Asia Pacific (ADAMS) is the former name of Aegon's marketing arm in the Asia Pacific region. In 2016, the company was renamed Aegon Insights, to better reflect the work it does. Visit www.aegoninsights.com for further information.

AGM

Annual General Meeting of Shareholders. Learn more about our AGM >

AGO

Dutch insurance company that merged with Ennia in 1983 to form Aegon. Learn more about Aegon's history >

ALGEMEEN PENSIOEN FONDS

Algemeen Pensioen Fonds (APF) or General Pension Fund allows multiple pension plans to be combined within a single scheme, overseen by a single independent board, while ring-fencing assets. This new pension vehicle is particularly attractive for those funds that wish to maintain their own identity while also enjoying the benefits of economies of scale and higher quality through shared services. Recognizing opportunities and trends in the Dutch market, Aegon was the first to establish an APF in 2015.

AMORTIZATION

Used by accountants to spread the value of intangible assets such as goodwill, patents and royalties over a specific period, often the lifespan of the asset itself.

ANNUITY

A form of financial contract mostly sold by life insurance companies that guarantees a fixed or variable payment of income benefit (monthly, quarterly, half-yearly, or yearly) for the life of a person(s) (the annuitant) or for a specified period of time. It is different than a life insurance contract which provides income to the beneficiary after the death of the insured. An annuity may be bought through installments or as a single lump sum. Benefits may start immediately or at a pre-defined time in the future or at a specific age.

ANNUITY RATE

The present value of a series of payments of unit value per period payable to an individual that is calculated based on factors such as the mortality of the annuitant and the possible investment returns.

APF

See Algemeen Pensioen Fonds (General Pension Fund).

ASSETS UNDER MANAGEMENT (AUM)

Assets managed or advised by an asset manager within the scope of Aegon Asset Management in return for a fee. This includes assets where the asset manager delegates to a sub-advisor but excludes assets delegated by the insurer to an external party.

Where two Aegon Asset Management units manage the same assets (because one delegates to the other) then both will report the assets and there will be a consolidation adjustment to eliminate double counting.

‘Assets under administration’, or ‘assets serviced’  e.g. where an external party manages the assets and an AAM unit does the administration and valuation, will be excluded. AUM will be reported on a market value basis. The Assets Under Management number will exclude derivative programs that are in place for the purposes of hedging shareholder liabilities but will include derivatives held within funds where the risk is for the account of the customer or policyholder.

AVERAGE EARNINGS SCHEME

This is another name for a career average scheme. This is a scheme where the pension benefits earned for a year depend on how much the member’s pensionable earnings were for that year.

B

BASIC EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income attributable to equity holders, after deduction of coupons on perpetual securities and non-cumulative subordinated notes, by the weighted average number of common shares, excluding common shares purchased by the Company and held as treasury shares.

BENEFIT STATEMENT

A statement of the pension benefits an individual has earned (in a defined benefit plan) or a prediction of what the final pension might be (in a defined contribution plan).

BOND

A tradable security under which an investor agrees to lend money at a fixed interest rate over an agreed period of time.

BOOK RESERVED PENSION PLANS

Sums entered in the balance sheet of the plan sponsor as reserves or provisions for occupational pension plan benefits. Some assets may be held in separate accounts for the purpose of financing benefits, but are not legally or contractually pension plan assets. Most OECD countries do not allow this method of financing. Those that do usually require these plans to be insured against bankruptcy of the plan sponsor through an insolvency guaranty arrangement.

C

CANCER TREATMENT INSURANCE

This provides policyholders with a degree of financial support for the treatment of cancer. Find out if Aegon offers this product in your country >

CEDANT

An insurance company or mutual that has transferred some of the risk it has underwritten to a reinsurer.

CEO

Chief Executive Officer. Learn more about Aegon's CEO >

CFO

Chief Financial Officer. Learn more about Aegon's CFO >

CIO

Chief Information Officer

CONTRIBUTION HOLIDAY

A period when the contributions to a pension scheme are put on hold, the most common reason for this being a situation of overfunding.

CONTRIBUTORY PENSION SCHEME

A pension scheme where both the employer and the members have to pay into the scheme.

CRD

The Capital Requirements Directive and regulation governs the access to deposit-taking activities, while the regulation establishes the prudential requirements institutions need to respect. Further information >

CREDIT SPREAD

The spread between Treasury securities and non-Treasury securities that are identical in all respects except for default risk.

CRITICAL ILLNESS INSURANCE

Also known as critical illness cover, this is an insurance product, where the insurer is contracted to make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy. Find out what types of insurance Aegon offers in your country >

CSR

Corporate Social Responsibility. Learn more about CSR at Aegon >

CTO

Chief Technology Officer

D

DATA POOLING

By data pooling or pooling of information multinational companies are able to consolidate, store, manage and report their pensions information from around the world. For this Aegon Global Pensions has developed a powerful web-based tool, 'Benefit Keeper.' Benefit Keeper is freely available to Aegon Global Pensions clients.

DEFERRED ACQUISITION COSTS (DAC)

Costs related to acquiring new customers. These costs are recognized as an asset and amortized over the expected duration of the insurance contract.

DEFERRED PENSION

A pension arrangement in which a portion of an employee’s income is paid out at a date after which that income is actually earned.

DEFERRED RETIREMENT

A situation when an individual decides to retire later and draw the pension benefits later than their normal retirement age.

DEFINED BENEFIT (DB) OCCUPATIONAL PENSION PLANS

Occupational plans other than defined contributions plans. DB plans generally can be classified into one of three main types, “traditional”, “mixed” and “hybrid” plans.

DEFINED CONTRIBUTION (DC) OCCUPATIONAL PENSION PLANS

Occupational pension plans under which the plan sponsor pays fixed contributions and has no legal or constructive obligation to pay further contributions to an ongoing plan in the event of unfavorable plan experience.

DISCRETIONARY FUND MANAGEMENT (DFM)

A form of investment management in which buy and sell decisions are made by a portfolio manager or investment counselor to meet a clients specific needs. The term "discretionary" refers to the fact that investment decisions are made at the portfolio manager's discretion. Discretionary investment management is generally only offered to high net worth clients who have a significant level of investable assets.

DIRECT LIFE

Life insurance sold directly to the end customer, not via an intermediary. This is normally via an online platform.

DISABILITY INSURANCE

Often called DI or disability income insurance,this is a form of insurance that insures the beneficiary's income against the risk that a disability prevents a person from carrying out their work. It encompasses paid sick leave, short-term disability benefits, and long-term disability benefits.

DIVIDEND

A sum of money, determined by a company's directors, paid to shareholders of a corporation out of earnings. Find out more about Aegon's dividend payments >

DUTCH MORTGAGE FUND

Investment fund offered by Aegon Asset Management consisting of Dutch residential mortgage loans originated and serviced by Aegon The Netherlands.

E

EARNINGS

The annual profits (revenues less cost of sales and operating expenses) of a company after deduction of tax, dividends to preference shareholders and bondholders.

Earnings are important as they indicate the potential for growth, share price appreciation and future dividends payments. Earnings are usually expressed on a per-share basis, and the earnings per share (EPS) figure is calculated by dividing total earnings by the average number of shares in issue for the relevant accounting period.

Earnings, which can be referred to as income, come in several forms: reported earnings (the figure in the company's accounts), underlying earnings (the figure excluding any one-off items such as the sale of land that is not part of the company's normal business), diluted earnings (earnings after adjustment has been made for shares that may be issued in the future if holders of options, warrants and convertibles choose to exercise their rights).

ECBC

The European Covered Bond Council (ECBC) and the European Mortgage Federation established the Covered Bond Label Foundation in 2012.

 

The Foundation grants quality labels which respond to a market-wide request for improved standards and increased transparency in the European covered bond market.

EMBEDDED VALUE

The Embedded Value (EV) of a life insurance company is the present value of future profits plus adjusted net asset value.

EV measures the value of the insurer by adding today's value of the existing business (i.e. future profits) to the market value of net assets (i.e. accumulated past profits).

It is a conservative measure of the insurer's value in the sense that it only considers future profits from existing policies and so ignores the possibility that the insurer may sell new policies in future. As a result the insurer is worth more than its EV.

ENDOWMENT POLICY

An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. Policies are typically traditional with-profits or unit-linked (including those with unitized with-profits funds).

ENNIA

Dutch insurance company that merged with AGO in 1983 to form Aegon. Learn more about Aegon's history >

EQUITIES

Shares listed on a stock exchange.

EXCHANGE TRADED FUND (ETF)

An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.

F

FAIR VALUE

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. See also Fair Value Items

FAIR VALUE ITEMS

Fair value items include the over- or underperformance of investments and guarantees held at fair value for which the expected long-term return is included in underlying earnings. Changes to these long-term return assumptions as well as changes in the derivatives program are also included in the fair value items.

FINAL SALARY SCHEME

A type of defined benefit plan, whereby the pension benefit is typically based on the last few years’ earnings before retirement.

FIXED INCOME PORTFOLIO

A pool of assets for which real return rates or periodic income is received at regular intervals at reasonably predictable levels.

FLAT RATE SCHEME

A type of defined benefit scheme, whereby the pension benefit is only based on the length of membership in the scheme and is not affected by earnings.

FUND MEMBER

An individual who is either an active (working or contributing, and hence actively accumulating assets) or passive (retired, and hence receiving benefits), or deferred (holding deferred benefits) participant in a pension plan.

FUNDING LEVEL

The relative value of a scheme’s assets and liabilities, usually expressed as a percentage figure.

FUNDING PLAN

The timing of payments of contributions with the aim of meeting the cost of a given set of benefits under a defined benefit scheme. Possible objectives of a funding plan might be that, if the actuarial assumptions are borne out: a specified funding level should be reached by a given date; the level of contributions should remain constant, or should after a planned period be the standard contribution rate required by the valuation method used in the actuarial valuation.

FUNGIBILITY

Fungibility refers to a good or asset's interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same.

For example, cross-listed stocks are considered fungible because it doesn't matter if you purchased a share of XYZ stock in its home country or in a foreign country; it should be accepted at either location as XYZ stock.

G

GENERAL ACCOUNT

General account business consists of funds held on the balance sheet of Aegon insurance companies to meet policyholder liabilities, typically where the insurer has given the policyholder a guarantee. These assets are managed to match the insurers' liabilities.

GROUP (PERSONAL) PENSION PLANS

These are personal pensions established by an employer as a way of providing all of its employees with access to a pension plan run by a single provider. It is normally possible for the employer to negotiate favourable terms with the provider, thus reducing the cost of pension provision to the employees. Normally the employer also contributes to the plan.

GROUP PENSION FUNDS

Multi-employer pension funds that pool the assets of pension plans established for related employers.

GUARANTEED ANNUITY

An annuity that is paid until the death of the annuitant. If this occurs prior to a certain date, the annuity is then paid to their dependants until that date.

GUARANTEED MINIMUM DEATH BENEFIT (GMDB)

A benefit term that guarantees that the beneficiary, as named in the contract, will receive a death benefit if the annuitant dies before the annuity begins paying benefits. The benefit received differs among contracts.

GUARANTEED MINIMUM INCOME BENEFIT (GMIB)

A type of option that annuitants can purchase for their retirement annuities. When the annuity has been annuitized, this specific option guarantees that the annuitant will receive a minimum value's worth of payments.

GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)

A type of option that annuitants can purchase for their retirement annuities. This specific option gives annuitants the ability to protect their retirement investments against downside market risk by allowing the annuitant the right to withdraw a percentage of their withdrawal base each year.

H

HYBRID DIRECT BENEFIT (DB) PLAN

A Direct Benefit plan where benefits depend on a rate of return credited to contributions, where this rate of return is either specified in the plan rules, independently of the actual return on any supporting assets (e.g. fixed, indexed to a market benchmark, tied to salary or profit growth, etc.), or is calculated with reference to the actual return of any supporting assets and a minimum return guarantee specified in the plan rules.

I

IFRS

International Financial Reporting Standards.

IMMEDIATE ANNUITY

This is an insurance policy that makes a series of either fixed payments, or payments that increase by a fixed percentage, over a fixed number of years or until the ending of a life or two lives, whichever is longer.

IMPAIRMENTS

An asset is impaired if the carrying amount exceeds the amount that would be recovered through its use or sale.

INCOME DRAWDOWN

Formerly known as an unsecured pension or alternatively secured pension, this is a type of individual pension plan. It allows a saver to take income from his or her pension fund while the fund remains invested and continues to benefit from any fund growth.

INCOME PROTECTION INSURANCE

Commonly known as IPI, it is an insurance policy, available principally in Australia, Ireland, New Zealand, South Africa, and the United Kingdom, paying benefits to policyholders who are incapacitated and hence unable to work due to illness or accident.

INDEXATION

The method with which pension benefits are adjusted to take into account changes in the cost of living (e.g. prices and/or earnings).

INDIVIDUAL PENSION

Sometimes called a private pension, these are schemes into which individuals contribute from their earnings, which then pay them a private pension after retirement. It is an alternative to the state pension. Usually individuals invest funds into saving schemes or mutual funds, run by insurance companies. Often private pensions are also run by the employer and are called occupational pensions.

INDIVIDUAL RETIREMENT ACCOUNT

Tax deductible retirement savings vehicles in the US. Investments growth tax deferred and withdrawals are taxed as ordinary income. Withdrawals before age 59 ½ are subject to a 10% penalty (no penalty for hardship withdrawals: medical expenses, buying a house, tuition, preventing foreclosure/eviction, funeral expenses). Required minimum distributions begin at age 70 ½.

INDUSTRY PENSION FUNDS

Funds that pool the assets of pension plans established for unrelated employers who are involved in the same trade or businesses.

L

LIFE INSURANCE

Also known as life assurance, is where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Other events, such as terminal illness or critical illness may also trigger payment. Specific exclusions often include claims relating to suicide, fraud, war, riot and civil commotion.

LONG-TERM CARE INSURANCE

This is an insurance product generally sold in the US, UK and Canada, that helps provide for the cost of long-term care beyond a predetermined period. Long-term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid.

M

MANDATORY CONTRIBUTION

The level of contribution the member (or an entity on behalf of the member) is required to pay according to pensions scheme rules.

MANDATORY OCCUPATIONAL PLANS

Participation in these pension plans is mandatory for employers. Employers are obliged by law to participate in a pension plan.

Employers must set up (and make contributions to) occupational pension plans which employees will normally be required to join.

Where employers are obliged to offer an occupational pension plan, but the employees' membership is on a voluntary basis, these plans are also considered mandatory.

MANDATORY PERSONAL PENSION PLANS

These are personal plans that individuals must join or which are eligible to receive mandatory pension contributions. Individuals may be required to make pension contributions to a pension plan of their choice normally within a certain range of choices or to a specific pension plan.

MARKET CONSISTENT EMBEDDED VALUE (MCEV)

Click here for more information.

MARKET VALUE

The price at which an asset would change hands if it sold on the open market.

MASTER FUND

An investment vehicle that enables individual investors or small superannuation funds to channel money into one or more underlying investments most commonly wholesale or retail pooled funds operated by professional investment managers.  

Generally three types:

  • discretionary funds: individual investor selects the underlying investment product(s) from a list drawn up by the master fund manager
  • fund of funds: investor selects a general risk profile (e.g. growth, capital stable) but the master fund manager selects the underlying investments from among a range of products managed by external managers
  • feeder funds: operate similarly to fund of funds arrangements, but with the master fund manager also being responsible for managing the underlying investments. 

Master funds which are structured as prescribed interests are commonly referred to as Master Trusts. However, the term master fund encompasses the broader scope of the industry including products offered by life insurance companies.

MASTER TRUST

A master trust is a trust that holds client’s funds from separate pension plans or pools that the client wants combined together for asset management efficiency. It allows for commingled investments among two or more plans maintained by a (single employer or group of employers under common control.)

Reporting is provided at the individual manager account level as well as consolidated across all managers. Likewise, reports at the plan / pool level are generated along with consolidations as needed by the client.

MINIMUM BENEFIT

See: minimum pension

MINIMUM PENSION

The minimum level of pension benefits the plan pays out in all circumstances.

MONEY PURCHASE PLAN

A pension plan providing benefits on a money purchase basis (ie the determination of an individual member’s benefits by reference to contributions paid into the scheme in respect of that member, usually increased by an amount based on the investment return on those contributions).

MULTI-EMPLOYER PENSION FUNDS

Funds that pool the assets of pension plans established by various plan sponsors. There are three types of multi-employer pension funds: a) for related employers i.e. companies that are financially connected or owned by a single holding group (group pension funds); b) for unrelated employers who are involved in the same trade or business (industry pension funds); c) for unrelated employers that may be in different trades or businesses (collective pension funds).

MUTUAL FUND

This is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time. The term mutual fund is less widely used outside of the United States and Canada.

N

NET AMOUNT AT RISK (NAR)

The net amount at risk represents the sum of the positive differences between the discounted maximum amount payable under the guarantees and the account value

NEW MARKETS

New Markets are: Aegon CEE, Aegon Asia, Aegon Spain (& Portugal), VA Europe and Aegon Asset Management.

NON-CONTRIBUTORY PENSION SCHEME

A pension scheme where the members do not have to pay into the scheme.

NORMAL RETIREMENT AGE

Age from which the individual is eligible for pension benefits.

NV

Naamloze vennootschap (usually abbreviated NV) is the Dutch term for a public limited liability corporation. Aegon N.V. is the holding company of all Aegon companies.

O

OCCUPATIONAL PENSION PLANS

Access to such plans is linked to an employment or professional relationship between the plan member and the entity that establishes the plan (the plan sponsor). Occupational plans may be established by employers or groups thereof (e.g. industry associations) and labor or professional associations, jointly or separately. The plan may be administered directly by the plan sponsor or by an independent entity (a pension fund or a financial institution acting as pension provider). In the latter case, the plan sponsor may still have oversight responsibilities over the operation of the plan.

OPERATIONAL FREE CASH FLOW

The capital generated in a local operating unit measured as the change in the local binding capital metric for that period and after investments in new business.

Operational free cash flows reflect the sum of the return on free surplus, earnings on in-force business, release of required surplus on in-force business reduced by first year new business strain.

Operational free cash flow is a non IFRS financial measure that should not be confused with cash flow from operations or any other cash flow measure calculated in accordance with IFRS.

Operational free cash flow provides meaningful information to investors regarding capital generated on a net basis by Aegon's operating subsidiaries that may be available at the holding company.

OVERFUNDING

The situation when the value of a plan’s assets are more than its liabilities, thereby having an actuarial surplus.

P

PENSION FUND ADMINISTRATOR

The individual(s) ultimately responsible for the operation and oversight of the pension fund.

PENSION FUNDS

The pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The plan/fund members have a legal or beneficial right or some other contractual claim against the assets of the pension fund. Pension funds take the form of either a special purpose entity with legal personality (such as a trust, foundation, or corporate entity) or a legally separated fund without legal personality managed by a dedicated provider (pension fund management company) or other financial institution on behalf of the plan/fund members.

PENSION PLAN

A legally binding contract having an explicit retirement objective (or – in order to satisfy tax-related conditions or contract provisions – the benefits can not be paid at all or without a significant penalty unless the beneficiary is older than a legally defined retirement age). This contract may be part of a broader employment contract, it may be set forth in the plan rules or documents, or it may be required by law. In addition to having an explicit retirement objective, pension plans may offer additional benefits, such as disability, sickness, and survivors’ benefits.

PERPETUAL CAPITAL SECURITY

Perpetual capital securities are classified as equity under IFRS, rather than as debt, as these securities have no final maturity date, repayment is at the discretion of the issuer and Aegon has the option to defer coupon payments at its discretion.

PERSONAL PENSION PLANS

Access to these plans does not have to be linked to an employment relationship. The plans are established and administered directly by a pension fund or a financial institution acting as pension provider without any intervention of employers. Individuals independently purchase and select material aspects of the arrangements. The employer may nonetheless make contributions to personal pension plans. Some personal plans may have restricted membership.

PHASED RETIREMENT

A situation when an individual is allowed to retire and receive retirement benefits while continuing to work (usually part-time) and contributing towards the retirement scheme.

PORTABILITY

This is non-technical term refers to the ability of employees to take their rights to benefits, for example pensions, with them when they change employer.

With a mobile workforce in which employees move from one company to another, portability of employee benefits, especially insurance and retirement plans, is important. Concerns about pre-existing conditions or insurability, as well as vesting schedules of qualified pension plans, are critical factors to an employee who entertains a more lucrative employment opportunity elsewhere. Some insurance and brokerage firms stress the portability of their programs.

PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP)

Present value of new business premiums (PVNBP) is the premiums for the new business sold during the reporting period, projected using assumptions and projection periods that are consistent with those used to calculate the market consistent value of new business, discounted back to point of sale using the swap curve (plus liquidity premium where applicable).

PRIVATE PENSION PLANS

A pension plan administered by an institution other than general government. Private pension plans may be administered directly by a private sector employer acting as the plan sponsor, a private pension fund or a private sector provider. Private pension plans may complement or substitute for public pension plans.

PROJECTED BENEFIT OBLIGATION (PBO)

The actuarial present value of vested and non-vested benefits attributed to the plan through the pension benefit formula for service rendered to that date based on employees’ future salary levels.

PUBLIC PENSION PLANS

Social security and similar statutory programmes administered by the general government (that is central, state, and local governments, as well as other public sector bodies such as social security institutions). Public pension plans have been traditionally PAYG financed, but some OECD countries have partial funding of public pension liabilities or have replaced these plans by private pension plans.

R

REALIZED GAINS/LOSSES

The difference as a result from selling an asset at a price higher/lower than the carrying amount adjusted for impairments.

REINSURANCE

The practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. Aegon Blue Square Re is a reinsurer.

Also known as "insurance for insurers" or "stop-loss insurance".

RESIDENTIAL MORTGAGE BACKED SECURITY (RMBS)

Residential Mortgage Backed Security (RMBS) is an asset-backed security that is secured by a mortgage or collection of mortgages.

RETURN ON EQUITY (ROE)

Ratio of net underlying earnings after cost of leverage to average shareholders' equity excluding the revaluation reserves and the remeasurement of defined benefit plans

REVENUE GENERATING INVESTMENTS

Sum of investment for general account, investments for account of policyholders and off balance sheet investments third parties.

REVERSAL (IMPAIRMENT)

The reversal is recognized in the income statement to the extent that it reverses impairment losses previously recognized in the income statement.

RUN-OFF BUSINESS

Certain business units where management has decided to exit the market and to run-off the existing block of business. The earnings of these blocks of businesses are excluded from underlying earnings enhancing the comparability from period to period.

Current businesses which are in run-off include the institutional spread-based business, structured settlements blocks of business, Bank-Owned and Corporate-Owned Life Insurance (BOLI/COLI) business and life reinsurance business in Aegon Americas.

S

SALES

Sales is defined as new recurring premiums plus 1/10 of single premiums plus 1/10 of gross deposits plus new premium production accident and health plus new premium production general insurance.

SERVICE PERIOD

The length of time an individual has earned rights to a pension benefits.

SOLVENCY II

The Solvency II regime introduces for the first time a harmonized, sound and robust prudential framework for insurance firms in the European Union (EU). It is based on the risk profile of each individual insurance company in order to promote comparability and transparency. Take a look at our Solvency II infographic for a quick overview or see our FAQs about Aegon & Solvency II.

SOLVENCY RATIO

A key metric used to measure the company's ability to meet its obligations to its customers and investors.

SRI

Socially Responsible Investment. Sometimes also referred to as Sustainable Responsible Investment.

STOCK OPTION

A financial instrument that gives the holder the right, but not the obligation, to buy shares at a pre-determined price.

T

TECHNICAL PROVISIONS

Amount set aside on the balance sheet to meet liabilities arising out of insurance contracts. Including claims provision, provisions for unearned premiums, provision for unexpired risks. life assurance provision and other liabilities related to life insurance contracts.

TERM LIFE INSURANCE

Also known as term assurance, is life insurance which provides coverage at a fixed rate of payments for a limited period of time. After that period expires, coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary.

TRANSAMERICA INSTITUTE

The Transamserica Institute is a nonprofit, private foundation dedicated to identifying, researching and educating the public about retirement, health coverage, and other relevant financial issues facing Americans today.

 

Transamerica Institute comprises two divisions: Transamerica Center for Retirement Studies® and Transamerica Center for Health Studies®, both based in the United States. The Transamerica Center for Retirement Studies works closely with the Aegon Center for Longevity and Retirement based in the Netherlands.

 

Transamerica Institute is funded by contributions from Transamerica Life Insurance Company, an Aegon subsidiary, and its affiliates and may receive funds from unaffiliated third parties. For more information about the Institute, please refer to www.transamericainstitute.org

U

UCITS

'UCITS' or 'Undertakings for the Collective Investment in Transferable Securities' are investment funds regulated at European Union level. They account for around 75% of all collective investments by small investors in Europe. The legislative instrument covering these funds is Directive 2014/91/EU. Further information >

UNDERFUNDING

The situation when the value of a plan’s assets are less than its liabilities, thereby having an actuarial deficiency.

UNDERLYING EARNINGS

Income before tax excluding run-off businesses, other income/charges, net impairments, realized gains/losses and fair value items.

UNIVERSAL LIFE INSURANCE

A type of permanent life insurance, primarily in the US where the excess of premium payments above the current cost of insurance are credited to the cash value of the policy. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance charge, as well as any other policy charges and fees which are drawn from the cash value, even if no premium payment is made that month.

V

VALUE-AT-RISK (VAR)

Value-at-Risk (VaR) is a commonly used measure in financial services to assess the risk associated with a portfolio of assets and liabilities. VaR answers the question how much money would be lost, if events develop in an adverse and unexpected way. More precisely, Value-at-Risk (VaR) measures the worst expected loss under normal conditions over a specific time interval at a given confidence level. For example, if VaR is measured over a one-year period at a confidence level of 99.5% then this corresponds to the worst loss one would expect to occur in a single year over the next two hundred years.

A reason for two capital requirements is to establish a better early warning mechanism (allows more time for supervisory intervention).

If an insurer's available resources fall below the SCR, then supervisors must act to restore the insurer’s finances back into the level of the SCR as soon as possible. But if the financial situation of the insurer continues to deteriorate, then the level of supervisory intervention will be progressively intensified. The aim of this 'supervisory ladder' of intervention is to capture any ailing insurers before a serious threat to policyholders' interests.

If, despite supervisory intervention, the available resources of the insurer fall below the MCR, then 'ultimate supervisory action' will be triggered i.e. the insurer's liabilities will be transferred to another insurer and the license of the insurer will be withdrawn or the insurer will be closed to new business and its in-force business will be liquidated.

European Standard Formula is the new basic calculation method that insurers can use to determine their solvency capital requirement (SCR). The final calibration will be included in an implementing measure that will contain the technical detail needed for insurers to run the formula in practice. This implementing measure will be agreed after the Framework Directive has been finalized, following a careful analysis of the results of QIS 3 and QIS 4, and after consultation with the co-legislators and stakeholders. It is expected that the final formula will be known in the second half of 2009.

VARIABLE ANNUITY

This is an insurance policy that, over a fixed number of years, pays out amounts that vary according to the investment performance of a specified set of investments, typically bond and equity mutual funds. Money deposited in a variable annuity grows on a tax-deferred basis, so that taxes on investment gains are not due until a withdrawal is made.

VOLUNTARY CONTRIBUTION

An extra contribution paid in addition to the mandatory contribution a member can pay to the pension fund in order to increase the future pension benefits.

W

WAITING PERIOD

The length of time an individual must be employed by a particular employer before joining the employer’s pension scheme.

WHOLE LIFE INSURANCE

Also known as whole of life assurance, is a life insurance policy that remains in force for the insured's whole life and requires (in most cases) premiums to be paid every year into the policy.

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