Embedded value life insurance increases to EUR 25.8 billion
Aegon’s total embedded value at the end of 2010 totalled EUR 18.9 billion, an increase of 6% compared with last year, mainly driven by a higher embedded value life insurance (EVLI).
Embedded value is a key measure of an insurance company’s underlying worth, and embedded value life insurance (EVLI) estimates the value of future profits expected from existing insurance contracts. Aegon believes that, along with other publicly disclosed financial data, embedded value provides valuable additional information for analysts and investors.
Embedded value for Aegon’s life insurance business increased to EUR 25.8 billion and includes new business worth of approximately EUR 0.6 billion. The figures reflect a positive performance from Aegon’s existing in-force business, partly as a result of cost savings measures, as well as improved financial markets and strengthening of currencies against the euro, particularly the US dollar. Changes in operating assumptions had a negative effect and were primarily due to strengthening of persistency in the Americas and assumed increasing longevity in the Netherlands. The negative impact from economic assumption changes, largely caused by the impact of lower interest rates in the Netherlands, were offset by improved long-term investment returns mainly as a result of the positive impact of the interest rate hedging program in the Netherlands.
At the end of 2010, the free surplus on life insurance business increased to EUR 3.3 billion, due mainly to strong earnings on the in-force portfolio and lower capital required for new business. Operating margins on embedded value declined slightly from 5.8% to 5.3%, with stronger in-force performance offsetting a lower level of new business value.