We made significant progress in line with Aegon's strategy to increase profitability, enhance distribution and expand geographically into regions that offer long term growth potential for our core products and services.
Net income increased 2% for the full year; operating earnings up 32%
- Value of new business increased 41% totaling EUR 775 million, ahead of target to double VNB by 2010
- New life sales1) increased 20% with record sales in the UK and Poland. Sales in the Americas and Netherlands return to growth
Year marked by successful expansion
- Global pension capability expanded with new pension initiatives in Poland and Mexico, supported by strong growth in UK and CEE
- Expansion plans realized in Mexico, India and China; in 2007 further expansion into Romania and Japan
- Announced acquisitions of US-based Clark, Inc. and Unirobe in the Netherlands strengthen multi-channel distribution
Strong capital position and cash flows support both dividend increase and expansion
- Significant increase in proposed final dividend, increasing the full year dividend by 22% to EUR 0.55
- Going forward, Aegon aims to increase dividends in relation to the development of capital position and cash flows
1) New life sales refers to standardized new premium production and is defined as new recurring premium + 1/10 of single premium
View here the Earnings summary.
Highlighting key developments during 2006, Aegon's Chairman of the Executive Board Donald J. Shepard, stated:
"During the past year, we made significant progress in line with Aegon's strategy to increase profitability, enhance distribution and expand geographically into regions that offer long term growth potential for our core products and services. The significant increases in Aegon's proposed full-year and final dividend are evidence of Aegon's continued strong capital position and cash flows.
"The 32% increase in operating earnings reflects solid growth across most lines of business especially in the Americas and the UK. The 2% increase in Aegon's net income for the year reflects higher operating earnings, as well as lower gains on our investment portfolio and lower book gains.
"Aegon's value of new business for 2006 increased 41%, driven by strong business growth in both our established and developing markets. Despite a number of significant one-off items in the Americas, the increase represents better-than-expected progress toward our goal of doubling Aegon's value of new business to EUR 1.1 billion by 2010 as announced last November.
"The increase in Aegon's internal rate of return on new business for the year from 12.4% to 14.5% - well above our internal 11% hurdle rate - is a clear indication of our determination to grow our business profitably. We are pleased by the improving internal rate of return in Aegon The Netherlands which increased to 9.8% from 9.2% in the comparable period.
"In 2006, new life sales increased 20% for the full year, reflecting record sales in the UK which were nearly double the industry rate with a 54% increase, as well as a rebound in retail life sales in the US and improved sales in the Netherlands. In Spain, new life sales more than doubled as a result of our recent partnerships with major savings banks. In Central and Eastern Europe new life sales were particularly strong in Poland during the year, with record sales in the fourth quarter. Our Taiwanese business is making a successful transition to a more balanced product portfolio during 2006. Nearly half of the new business came from high margin unit-linked products.
"The opportunity for pensions globally continues to be an area of primary focus for Aegon. During the year, sales of pension-related products were the main driver behind the strong sales growth in the UK. Membership in Aegon's pension funds in Hungary and Slovakia grew considerably during 2006, and in the Netherlands sales of individual and group pension products showed a promising increase. In the US, our award-winning pension business continues to experience good growth with over USD 9.3 billion in total deposits during the year. Our agreement to acquire a top-ten pension fund management company in Poland and our newly-formed pension fund management joint venture in Mexico will add additional momentum to Aegon's leading pension position internationally.
"We further broadened Aegon's distribution capability through our acquisition of a leading provider of bank-owned and corporate-owned life insurance in the United States and with our acquisition of the remaining 55% of Unirobe, a company of independent financial advisors in the Netherlands. Our two new joint ventures with Spanish savings banks began writing business mid-year, expanding Aegon's position in the bank channel in Spain.
"During 2006, and in the early days of 2007, we have fulfilled our intention to enter a number of key growth markets. In Mexico, we acquired 49% of Seguros Argos, a fast-growing life insurance company specializing in worksite marketing. In India, we established a partnership with the Ranbaxy Promoter Group to provide life insurance and asset management products across the country. Aegon's rollout in China continued with new operations in the Shandong province. We also announced our plans to form a mandatory pension company with Banca Transilvania in Romania given the implementation of pension reforms expected next year. In addition, we will form a life insurance company in Romania that will utilize Banca Transilvania's broad distribution capability. And finally, we have established a new partnership with Sony Life to form a life insurance company that will initially provide variable annuity products through its extensive LIFEPLANNER® agent channel and through other financial institutions throughout Japan.
"As we continue to leverage Aegon's broad capabilities across business and country units, we have been working toward a more coordinated approach to leveraging our global asset management expertise. During the coming months we will be looking to develop ways to bring our distinct asset management capabilities even closer together to better serve the evolving needs of our customers. We believe that this approach will enhance Aegon's advantage in an increasingly competitive market.
"The past year was one of strong growth for Aegon in terms of sales, operating earnings, and profitability. We intend to build on the promising achievements of 2006 as Aegon looks to further strengthen its position as a leading provider of life insurance, pensions and investment products internationally."