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Weighted average exchange rates for currencies of the countries included in the Other Countries segment, and which do not report in euro, are summarized in the table below.
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2003 |
2002 |
| Hungarian Forint (HUF) |
253 |
243 |
| New Taiwan Dollar (NTD) |
39 |
33 |
| Slovakian Koruna (SKK) |
41 |
— |
| Rin Min Bi Yuan (CNY) |
10 |
8 |
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HUNGARY
INCOME BEFORE TAX
ÁB-AEGON’s income before tax of HUF 16.6 billion for 2003 showed a 16% increase compared to 2002. The increase in income before tax came from life business, with 15% growth, and from the non-life business, which showed 20% growth. For both businesses, the main reasons for the increase are the premium income growth and cost efficiencies. Additionally, in non-life, the favorable claim payments were partially offset by a strengthening of technical provisions. The fee income from managed assets rose by 40% to HUF 2.8 billion, reflecting the increase in the pension fund portfolio and assets under management.
Premiums to reinsurers increased by more than 8%, or HUF 0.1 billion. This increase was consistent with the development of premium income. Claim payments increased by HUF 2.8 billion, mainly due to maturities of life policies in the run-off portfolio. Non-life claims developed favorably in 2003 and were HUF 0.5 billion lower than in 2002. Commissions increased by HUF 1 billion, due to high pension fund and non-life sales.
As a result of expense control and technical innovations, expenses decreased by HUF 0.2 billion, or 2%, compared with 2002, despite 5% inflation.
REVENUES
Total revenues increased by HUF 5.1 billion compared to 2002. Premium income increased by HUF 5.1 billion. Life premium income increased by HUF 2.8 billion, mainly due to higher sales of unit-linked products, while non-life premium income increased by HUF 2.3 billion. The non-life growth was due primarily to a HUF 1.5 billion increase in the household portfolio and a HUF 0.8 billion increase in the car insurance and other non-life product lines. The measures taken to protect the existing portfolio as well as the increased number of agents were the main factors in the increase in premium income.
Investment income decreased by HUF 0.9 billion, mainly due to the maturity of high yield long-term bonds. In the second half of the year, as a result of monetary interventions, market yields increased substantially, affecting the investment performance and the market value of the portfolio.
Fee income increased by 40%, or HUF 0.8 billion, from 2002, due to a 31%increase in assets under management and the increase in the number of participants in the pension funds managed by ÁB-AEGON.
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Income before tax |
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Standardized
new premium
production |
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SLOVAKIA
AEGON’s life operations in Slovakia started in September 2003 as planned. Total premium income was SKK 5 million, whereas commissions and expenses were SKK 206 million.
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SPAIN
INCOME BEFORE TAX
AEGON Spain reported income before tax of EUR 36 million for 2003, a significant increase compared to 2002.
Pre-tax results in the life business generated income before tax of EUR 4 million, an increase of EUR 15 million compared to last year’s loss of EUR 11 million. The main reason for the increase was the absence of the negative effects of the previous year. These negative effects were mainly caused by the losses of MoneyMaxx, because of low production resulting from the situation in the equity markets, and accelerated amortization of DPAC.
Non-life business reported income before tax of EUR 32 million in 2003, compared to EUR 23 million in 2002, mainly due to an increase in revenues and a decrease in claims. The non-life claims ratio improved in all lines of business as a result of a decrease in the number of claims. This trend started in 1999, when measures were implemented to improve the quality of the non-life portfolio.
NET INCOME
Net income of EUR 24 million for 2003 reflects a growth of 167%. The effective tax rate increased from 25% in 2002 to 33% in 2003, due to this year’s higher income, whereas tax deductible items remained at the same level as in 2002.
REVENUES
Total revenues of EUR 475 million for 2003 increased by 4% compared to 2002. Compared to 2002, life premiums increased by 6%. Traditional life products premium income increased by 26%, while unit-linked products premium income decreased by 21%. The switch from unit-linked products to traditional life products was due to the situation in the equity markets and a change in Spanish fiscal regulations that has neutralized the tax advantages of unit-linked products.
Non-life premiums increased by 4% compared to 2002. In 2003, AEGON Spain continued to concentrate on personal lines and small companies,while de-emphasizing certain high risk business lines. This was the case for the other general liability branch and the marine, aviation and transport branch, which showed decreases in premium income from 2002 of 22% and 17% respectively.
COMMISSIONS AND EXPENSES
The 2003 results positively reflect a reduction in expenses, mainly due to the discontinuation of the MoneyMaxx business. Deferred policy acquisition costs during 2003 were lower than the previous year, due to the sale of a higher proportion of life products without DPAC. This was offset by lower DPAC amortization. In 2002 there was an accelerated DPAC amortization of EUR 4 million.
PRODUCTION
Life production on a standardized basis increased by 88%, primarily by involving the non-life intermediaries network in the sale of life products and the launch of a group life unit.
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Income before tax |
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Standardized
new premium
production |
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TAIWAN
INCOME BEFORE TAX
AEGON Taiwan reported income before tax of NTD 15.2 million for 2003, an increase of 134% compared to NTD 6.5 million in 2002. This was primarily due to strong growth in new business production, which contributed positively to the bottom line.
REVENUES
Premium income increased 253% to NTD 17,904 million for 2003, compared to NTD 5,073 million for 2002. Life insurance gross premiums of NTD 17,518 million increased by 260% compared to NTD 4,868 million in 2002. Most of the significant growth resulted from the newly developed distribution channels of brokers and banks. Life for account of policyholders premiums of NTD 387 million increased by 89% compared to NTD 205 million in 2002, primarily generated through the agency channels. Investment income increased 26% to NTD 546 million in 2003 compared to NTD 440 million for 2002, mainly due to an increase in the asset base. Investment assets increased from NTD 13.0 billion at December 31, 2002, to NTD 24.6 billion at December 31, 2003, but the investment yield of 3.5% in 2003 declined from 4.2% in 2002, mainly due to declining interest rates on new production.
COMMISSIONS AND EXPENSES
Commissions amounted to NTD 4,853 million for 2003, compared to NTD 1,260 million in 2002. Expenses were up 46% to NTD 940 million from 2002, primarily as a result of an increase in the number of employees, occupancy and policy related costs in connection with the development of new distribution channels and the substantial growth of new business volumes. Acquisition and maintenance expenses significantly decreased as a percentage of premium because of continued stringent expense control, combined with a significant increase in premium.
PRODUCTION
New premium production increased significantly compared to 2002, mainly due to the strong sales of new 104 traditional whole life products through multi-channel distribution.
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Standardized
new premium
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CHINA
AEGON’s launch of the business in China, AEGON-CNOOC, occurred on time despite the impact of administrative restrictions relating to the SARS outbreak. Revenues were CNY 4 million in 2003.
NON-CONSOLIDATED GROUP COMPANIES
Due to the dissimilarity of Transamerica Finance Corporation’s (TFC) operations in relation to AEGON’s operations, AEGON has considered TFC to be non-core. Consequently TFC’s results have not been consolidated in AEGON’s financial accounts.
Net income for TFC for 2003 amounted to EUR 218 million (USD 247 million) compared to EUR 51 million (USD 48 million) in 2002. Business conditions in all segments were more favorable compared to 2002. In addition to lower funding costs, lower expenses, lower credit losses and the recognition of deferred income from the termination of a major client contract for an amount of EUR 31 million (USD 35 million), several one-time tax benefits totaling EUR 27 million (USD 31 million) were realized.
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