We feel better about our business than a year ago. The profitability of our business has been strengthened by our actions to improve margins and has benefited from the improvements in the equity and credit markets.
Aegon reports net income of EUR 470 million for the fourth quarter of 2003, an increase of 32% compared to EUR 355 million in the fourth quarter of 2002. Full year net income of EUR 1,793 million increased 16% compared to EUR 1,547 million in 2002. The largest influences on the increased results for both fourth quarter and full year were improved equity and credit markets as well as improved administrative operating efficiencies.
Transamerica Finance Corporation (TFC), most of which has been sold in line with Aegon’s strategy to concentrate on life insurance, pensions and related savings products, contributed EUR 218 million to net income during 2003 compared to EUR 51 million in 2002. Corporation tax was EUR 219 million higher in 2003 as the effective tax rate increased.
Exchange rate translation negatively impacted the earnings reported in euro, which is the currency of the financial statements. At constant currency exchange rates net income and income before tax increased by 30% and 29% respectively in 2003.
Earnings per share for the full year amounted to EUR 1.15, an increase of 11% compared to EUR 1.04 for last year (adjusted for the 2002 stock dividend).
Standardized new life production was up 1% to EUR 672 million in the fourth quarter of 2003 compared to EUR 666 million in the same period in 2002. For the full year, standardized new life production increased by 3% to EUR 2,545 million, which at constant currency exchange rates would have increased by 15%. The increase in standardized life production is driven by higher production in the Americas, the United Kingdom and Other countries, in particular in Taiwan, partly offset by lower production in the Netherlands.
During 2003, indirect income of EUR 631 million pretax was included in earnings, compared to EUR 758 million pretax in 2002. As announced earlier, effective January 1, 2004, Aegon discontinued the indirect income method for recognizing gains and losses on investments in shares and real estate. A generally accepted and recognized method has been adopted, which is in accordance with International Financial Reporting Standards (IFRS) and is similar to US GAAP. This method recognizes gains and losses on shares and real estate investments when realized.
Donald J. Shepard, Chairman of the Executive Board, said: "We feel better about our business than a year ago. The profitability of our business has been strengthened by our actions to improve margins and has benefited from the improvements in the equity and credit markets. In some cases, the actions we have taken to focus on profitability have come at the expense of new production. Production has been particularly good in our traditional life business in the United States and pension business in the United Kingdom, and life production in Taiwan has been very strong. Through the joint venture with Caja de Ahorros del Mediterráneo in Spain as well as greenfield operations in China and Slovakia we are well-positioned to expand and strengthen our core activities in markets that offer opportunities for both growth and scale. Distribution remains key in our strategy as evidenced by the successful implementation of a multi-channel distribution strategy in Taiwan, the successful integration of the recent IFA acquisitions in the United Kingdom as well as the participation in Unirobe, a major broker in the Netherlands."
The company believes the outlook remains positive. We expect increased volatility of net income as a result of the discontinuance of the indirect income method, effective 1 January 2004. Aegon is not providing earnings forecasts.
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