Aegon maintains strong capital position despite fourth quarter 2008 loss.
Capital position remains strong; excess capital over AA-requirements EUR 2.9 billion at year-end
- Shareholders’ equity of approximately EUR 6.1 billion at year-end
- Core capital 1) of approximately EUR 9.1 billion at year-end
- Core capital, excluding revaluation reserve, of approximately EUR 16.3 billion at year-end, 78% of total capital base, above target of 70%
- Revaluation reserve declined by EUR 1.7 billion in fourth quarter to negative EUR 7.2 billion
- IGD 2) capital surplus of EUR 5.5 billion, equivalent to IGD solvency ratio of 180% (2007: 190%)
- Aegon USA’s life companies held approximately 350% of the minimum capital required by the NAIC 3) (2007: 336%)
- EUR 1.7 billion of capital released in 2008, including EUR 1 billion in fourth quarter
Net loss for fourth quarter 2008 expected to be approximately EUR 1.2 billion
- Underlying loss before tax of approximately EUR 200 million, due mainly to reserve strengthening and accelerated amortization of deferred acquisition costs in the US, and lower fees
- Underperformance of fair value items of approximately EUR 0.8 billion before tax, as a result of:
- Underperformance of investments accounted on fair value basis
- Increase in fair value of certain guarantees in the Americas and The Netherlands as a result of a decline in equity markets, lower interest rates and higher volatility, partly offset by the positive impact of the credit spread required for the valuation of these guarantees
- Gains on investments of approximately EUR 100 million before tax
- Total impairment charges of approximately EUR 500 million before tax, of which approximately EUR 350 million is related to bonds
Core business remains healthy, despite persistent market turmoil
- Fourth quarter new life sales amount to EUR 0.6 billion
- Total gross deposits reach EUR 12 billion; net deposits of EUR 1.7 billion; fixed annuity gross deposits of EUR 1.7 billion; variable annuity gross deposits of EUR 0.6 billion
Measures to counter effects of financial crisis
- Further release of capital expected of EUR 1.5 billion in 2009
- On track to achieve EUR 150 million in cost savings for 2009
- Reduction of Institutional Markets Division spread-based balances by EUR 14 billion, lowering credit risk and releasing EUR 0.6 billion of capital over two years, of which EUR 0.3 billion in 2009
1) Core capital is the sum of shareholders’ equity and the EUR 3 billion in convertible core capital securities from the Dutch State.
2) The calculation of the IGD (Insurance Group Directive) capital surplus and ratio have been changed and are based on Solvency I capital requirements on IFRS for entities within the EU, and local regulatory solvency measurements for non-EU entities. Specifically, required capital for the life insurance companies in the US is calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance Commissioners in the US.
3) National Association of Insurance Commissioners.
Further details will be made available on March 12 at 7.30 am CET, when Aegon releases its audited fourth quarter 2008 and full-year 2008 results.