|
|
 |
|
|
|
ACCOUNTING CHANGES AND DISCLOSURE
Q: Last August AEGON announced that in 2003 it would begin to disclose embedded value. What does this signify?
A: The complex payment flows and long time scales associated with insurance products make it hard to create an accurate snapshot of how much value is accumulating inside the company. Embedded value is a management tool showing the present value of future distributable earnings from an existing book of business, and is important for corporate planning, since capital and other resources are allocated so as to generate the greatest value.
"Embedded value is a management tool showing the present value of future distributable earnings from an existing book of business."
AEGON has long used embedded value as an internal management tool and will disclose it commencing in the summer of 2003. We believe that embedded value disclosure will help investors and analysts to understand our business and the value we create.
Q: What accounting changes is AEGON looking at?
A: Listed European companies must apply IAS, the harmonized accounting system adopted by the European Union, by 2005. There are important differences between IAS, the Dutch GAAP currently followed by AEGON, and US GAAP reporting. We have long disclosed the significant differences between these last two methods in our Dutch GAAP to US GAAP reconciliation. Given our long-term business perspective, we have used an earnings matching system, which has reflected the long-term nature of our business, but at the same time has made it difficult to compare AEGON with its US and European peers. Now, as we approach a new harmonization with the IAS, our main interest is to ensure a level playing field allowing fair comparison of all companies competing for capital, while for the life insurance industry in particular, to have a system which takes into account the long timeframes involved in life insurance and pensions. Also we have decided to change our accounting for capital gains on equities and real estate beginning January 1, 2004. We will stop using our indirect return system and instead recognize capital gains and losses as income when realized.
|
|
|
|
