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As one of the country’s top sellers of standard life insurance products and – as of 2002 – household insurance products, AEGON Hungary celebrated its 10th anniversary as part of the AEGON Group with a solid year, despite the less favorable economic environment, and maintained its leading market position.
Pre-tax earnings totaled EUR 59 million, compared to EUR 60 million in 2001. Profit after tax was EUR 48 million, which is 4% lower than the profit for 2001.
AEGON Hungary experienced important developments in distribution in 2002 with the further expansion of its specialized life agent network to supplement the activities of its traditional distribution network. AEGON Hungary is also building support among brokers and independent agents and expects that a growing portion of sales will come from these new channels. Banks are also emerging as important distribution partners, particularly for life-linked mortgage insurance and mutual fund notes.
AEGON Hungary retained its position as one of the country’s top three asset managers and won the ‘Best Institutional Investor 2001’ award. The value of the assets managed by AEGON Hungary for third-parties reached EUR 471 million as of December 31, 2002, a significant increase compared to 2001.
The non-life segment performed well: despite greater competition and Hungary’s extensive summer flooding, household insurance made a meaningful contribution to the company’s profit, while the motor sector also maintained profitability. Overall, AEGON Hungary maintained its position in the market due to the high quality of its underwriting and a narrowing of risks covered.
In preparation for the commencement of operations in neighboring Slovakia, AEGON Hungary began adapting local products for the Slovak market, building a linked ICT infrastructure. In the beginning of 2003 a license application was submitted to the Slovak regulatory authorities. The Slovak venture will be set up as a branch office of AEGON The Netherlands. A CEO has been appointed for the new venture, which is expected to commence activities in the second half of 2003.
To improve service and enhance the safety of systems, AEGON Hungary took a number of steps, including the transformation of its customer call center and the upgrading of ICT systems designed to enhance web access for agents. These measures are also expected to provide better cost control while speeding claims settlement and other forms of customer service. They will also enable AEGON Hungary to consolidate further its leading position in a market expected to grow significantly thanks to the forthcoming entry to the European Union.
BUSINESS OBJECTIVES
AEGON Hungary’s objectives for 2003 are to further build its life and investment distribution channels providing the best quality products in the Hungarian market and implementing its new life portfolio ICT systems.
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The good returns from the non-life sector helped to offset lower earnings from the life business due to weakened stock markets. Overall, pre-tax earnings totaled EUR 12 million, compared to EUR 16 million in 2001, profit after tax was EUR 9 million, which is substantial lower than the profit for 2001.
In 2002, AEGON Spain continued to implement the strategy introduced in 1999: specialization in personal lines of business and a significant reduction in exposure to industrial risks. Internal reorganization has led to a leading role for branch offices in ensuring portfolio quality and agent productivity, with consolidation of thirty-one provincial offices into fourteen regional areas. These measures have produced a sharp fall in loss ratios and administrative expenses. Positive results were again generated in the health insurance business, in line with recent years.
The Spanish life insurance market has been profoundly affected by the downturn in single premium issuance, which represents 72% of the total life insurance market. The extremely poor performance of the financial markets has caused a sharp drop in individual business, due to both a decline in new production and an increase in the lapse rate. This situation has had a negative impact on AEGON Spain’s revenues. Conversely however, there was significant growth in the area of pensions, resulting from a new law mandating third party administration of corporate pension commitments. The Moneymaxx activities in Spain have been integrated into AEGON Spain’s operations.
In the immediate future, AEGON Spain will continue to concentrate on the recurring premiums business, a market whose growth in Spain has been limited by the lack of a specialist sales network. AEGON Spain also plans to double the number of specialized life agents in its network to over 2,000 within a period of three years.
AEGON Spain is also exploiting recent changes in tax regulations to adapt its products to appeal to particular market segments.
BUSINESS OBJECTIVES
AEGON Spain’s objectives for 2003 are to boost production of recurring premium insurance while improving the quality of the portfolio by intensifying training of the career agents. AEGON Spain will also continue to explore strategic alliance opportunities with financial institutions.
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The Taiwan insurance market can be characterized as a market where the growth rate of life insurance, pensions and savings is faster than GDP growth and where AEGON Taiwan has the potential to become a profitable top five player.
AEGON Taiwan enjoyed a strong 2002, increasing revenues by 81% over 2001 and achieving just over break-even status seven years after its greenfield establishment. With its absorption of the business of Transamerica Taiwan and the acquisition of AXA’s local portfolio, AEGON Taiwan has completed its transformation from a start-up to a fully-fledged member of the AEGON Group, with significant revenue generation.
AEGON Taiwan was one of the first companies in the Taiwanese market to introduce variable universal life insurance. Revenues on this product doubled in 2002 from the previous year and management expects continued fast growth in the future. This market also exhibits great potential for individual and group pension products as the Taiwanese government moves to implement a national pension plan.
During 2002 AEGON Taiwan successfully transformed from 100% agency distribution to multiple distribution channels. The company was strengthened by the establishment of a broker and a bank channel in addition to its existing agency channel. Further ties with the bank channel are being explored.
BUSINESS OBJECTIVES
In 2003, AEGON Taiwan will continue to emphasize profitability while strengthening and deepening its multiple distribution channels. Significant business growth will be generated by new distribution channels. AEGON Taiwan will also seek to exploit the emerging opportunities in the pension market, with an initial focus on the retail segment of the market. AEGON Taiwan’s short-term objective is to be one of the top foreign insurers in Taiwan.
ASIA
AEGON’s activities in mainland China took a significant step forward in May 2002 with AEGON’s entry into a joint venture agreement with China National Offshore Oil Corporation, China’s third largest oil company, which is experienced in working with foreign partners. The joint venture has established offices in the Pudong business district near Shanghai and expects to begin selling insurance by mid-2003. The joint venture’s objective in 2003 is to establish a strong network of approximately 1,000 agents and to develop a distinctive marketing approach to build substantial annual premium income over the coming decade.
Elsewhere in Asia, AEGON’s Indian representative office continues to evaluate local partnership opportunities. AEGON sold its activities in the Philippines in December 2002 in line with AEGON’s strategy to focus on markets where it has a leading position with sufficient scale. Following the establishment of a Tokyo liaison office existing activities in the Asia-Pacific life reinsurance markets will be integrated. In Japan AEGON continues to study business opportunities.
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