<PAGE>
<TABLE>
<CAPTION>
INDEX
-----
Page no.
--------
<S> <C>
Item 1: Financial Statements
Condensed Consolidated Balance Sheets in Accordance with Dutch Accounting Principles at June 30, 2000 and December 31,
1999 2
Condensed Consolidated Income Statements in Accordance with Dutch Accounting Principles for the six months ended June 30,
2000 and June 30, 1999 3
Condensed Consolidated Cash Flow Statements in Accordance with Dutch Accounting Principles for the six months ended June
30, 2000 and June 30, 1999 4
Notes to the Condensed Consolidated Financial Statements 5
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 14
</TABLE>
Exhibit A
-1-
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
In Accordance with Dutch Accounting Principles
<TABLE>
<CAPTION>
Amounts in million EUR
June 30, December 31,
2000 1999
------- -------
(unaudited) (note)
<S> <C> <C>
Investments 119,868 112,989
Investments for the account of policyholders 115,195 108,276
Other assets 7,349 7,543
------- -------
Total assets 242,412 228,808
Shareholders' equity 12,376 13,543
Capital securities 1,356 1,329
Subordinated (convertible) loans 694 703
Technical provisions 86,870 81,869
Technical provisions with investments for the account of policyholders 115,195 108,276
Other liabilities 25,921 23,088
------- -------
Total liabilities and shareholders' equity 242,412 228,808
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from audited
financial statements at that date but does not include all of the information
and footnotes required for complete financial statements.
See notes to the Condensed Consolidated Financial Statements.
-2-
<PAGE>
CONDENSED CONSOLIDATED INCOME STATEMENTS
In Accordance with Dutch Accounting Principles
<TABLE>
<CAPTION>
Amounts in million EUR (except per share data)
Six months ended
June 30, June 30,
2000 1999
------ ------
(unaudited) (unaudited)
Revenues
--------
<S> <C> <C>
Gross premiums 10,515 6,458
Investment income 4,644 2,591
Income from banking activities 196 330
------ ------
Total revenues 15,355 9,379
Benefits and expenses
---------------------
Premiums to reinsurers 978 272
Benefits paid and provided 10,340 6,083
Profit sharing and rebates 244 431
Commissions and expenses for own account 1,981 1,316
Interest 360 330
Miscellaneous income and expenditure 32 34
------ ------
Total benefits and expenses 13,935 8,466
Income before tax 1,420 913
Corporation tax (412) (234)
------ ------
Net income 1,008 679
Net income per share:
Basic 0.76 0.59
Diluted 0.75 0.58
Dividend per share 0.30 0.26
</TABLE>
See notes to the Condensed Consolidated Financial Statements
-3-
<PAGE>
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
In Accordance with Dutch Accounting Principles
<TABLE>
<CAPTION>
Amounts in million EUR
Six months ended
June 30, June 30,
2000 1999
------- -------
(unaudited) (unaudited)
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income 1,008 679
Increase in technical provisions after reinsurance 6,195 7,201
Other 1,806 183
------- -------
9,009 8,063
CASH FLOW FROM INVESTING ACTIVITIES
Invested and acquired (30,896) (21,219)
Disposed and redeemed 27,170 19,207
Change in investments for account of policyholders (5,608) (6,367)
Other (267) (153)
------- -------
(9,601) (8,532)
CASH FLOW FROM FINANCING ACTIVITIES
Repurchased own shares (425) 0
Dividend paid (136) (251)
Annuity deposits 12,308 5,125
Annuity repayments (10,969) (3,947)
Other (30) (448)
------- -------
748 479
CHANGE IN LIQUID ASSETS 156 10
</TABLE>
The cash flow statement has been set up according to the indirect method and
also complies with International Accounting Standard No. 7. Only those changes
affecting liquid assets have been taken into account. The effects of
revaluations and currency exchange rate differences have therefore not been
included. The influence of currency exchange rate differences on liquid assets
kept in foreign currencies is not material.
Amounts paid in cash in the first six months of 2000 for interest totaled EUR
444 million (1999: EUR 432 million) and for federal and foreign income taxes EUR
503 million (1999: EUR 153 million).
See notes to the Condensed Consolidated Financial Statements.
-4-
<PAGE>
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements are
presented in accordance with Dutch Accounting Principles.
Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted, but all adjustments
(consisting of normal recurring accruals) which in the opinion of management are
necessary for a fair presentation of these interim financial statements are
included.
Net income for the six months ended June 30, 2000 is not necessarily indicative
of the results that may be expected for the year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in AEGON NV's annual report on Form 20-F and the
AEGON Insurance Group annual report for the year ended December 31, 1999.
Foreign currency
Assets and liabilities in foreign currencies are converted at the period-end
exchange rates after consideration of transfer risks, where necessary.
Income statement items in foreign currencies are converted at the average
currency exchange rates for the reporting period.
<TABLE>
<CAPTION>
The most important closing rates are:
June 30, December 31,
2000 1999
<S> <C> <C>
Dutch Guilder (NLG) 2.20371 2.20371
US Dollar (USD) 0.95560 1.00460
Swiss Franc (CHF) 1.55760 1.60550
Pound Sterling (GBP) 0.63230 0.62170
German Mark (DEM) 1.95583 1.95583
Spanish Peseta (ESP) 166.386 166.386
Japanese Yen (JPY) 100.570 102.730
Hungarian Forint (HUF) 260.120 254.920
</TABLE>
-5-
<PAGE>
(2) NET INCOME PER SHARE
Net income per share, based on Dutch Accounting Principles, is set out in the
accompanying condensed consolidated income statements, and is calculated based
on the net income available to common shareholders. The weighted average number
of common shares gives effect, in all periods presented, to stock dividends and
the two for one stock-split, effected May 30, 2000. Per share amounts for net
income were calculated using (1) an earnings per common share basic calculation
and (2) an earnings per common share-assuming dilution calculation. A
reconciliation of the factors used in the two calculations and between the Dutch
and US accounting basis is as follows:
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
<S> <C> <C>
Numerator: (amounts in million EUR) 2000 1999
Dutch accounting principles:
Net income 1,008 679
Less: dividends on preferred shares (2) (1)
Net income used in basic calculation 1,006 678
Plus: interest on convertible debt 1 1
Net income used in diluted calculation 1,007 679
US accounting principles:
Net income based on Dutch accounting principles used in basic calculation 1,006 678
US adjustments to net income 421 308
Net income based on US accounting principles used in basic calculation 1,427 986
Net income based on Dutch accounting principles used in diluted calculation 1,007 679
US adjustments to net income 421 308
Net income based on US accounting principles used in diluted calculation 1,428 987
Denominator: (number of shares, in millions)
Weighted average shares, as used in basic calculation 1,316.0 1,153.9
Shares to cover conversion of convertible debt 3.4 5.3
Addition for stock options outstanding during the year 14.3 17.0
Weighted average shares, as used in diluted calculation 1,333.7 1,176.2
Six months ended June 30,
-------------------------
2000 1999
EUR EUR
Net income per share, based on US accounting principles
Basic 1.08 0.85
Diluted 1.07 0.84
</TABLE>
-6-
<PAGE>
(3) DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES USED BY AEGON AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The accompanying unaudited condensed consolidated financial statements of AEGON
N.V. are presented in accordance with Dutch Accounting Principles. Dutch
Accounting Principles differ in certain respects from accounting principles
generally accepted in the United States ("US GAAP"). The following is a summary
of differences between Dutch Accounting Principles and US GAAP which have an
impact on reported Shareholders' Equity or Net Income. The description of the
Dutch Accounting Principle is shown first followed by a description of US GAAP.
DESCRIPTION OF DIFFERENCES IN ACCOUNTING PRINCIPLES
<TABLE>
<CAPTION>
Amounts in million EUR Shareholders' Equity
US Accounting Principles
higher (lower) than
Dutch Accounting Principles
June 30, December 31,
Dutch Accounting Principles/US Accounting Principles 2000 1999
<S> <C> <C>
Shareholders' Equity in accordance with Dutch Accounting
Principles 12,376 13,543
Adjustments:
Real estate; (829) (793)
Carried at original cost for a maximum of five years;
appraisal increments recognized thereafter;
Carried at depreciated cost.
Debt securities; (895) (816)
Debt securities are valued at amortized cost;
Debt securities are classified as available for sale
and valued at market value. The impact is shown net
of amounts to satisfy policyholder commitments,
adjustment of deferred policy acquisition costs
and applicable taxes.
Goodwill (arising from acquisitions); 6,028 3,986
Directly charged to shareholders' equity in year
of acquisition;
Capitalized and amortized over various periods
not exceeding 20 years.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Amounts in million EUR Shareholders' Equity
US Accounting Principles
higher (lower) than
Dutch Accounting Principles
June 30, December 31,
Dutch Accounting Principles/US Accounting Principles 2000 1999
<S> <C> <C>
Technical provisions (including deferred policy
acquisition costs/acquired insurance in force); 964 901
Calculated on recent assumptions;
Calculated on assumptions when the policy was issued
or on recent assumptions.
Realized gains and losses on debt securities; (178) 33
Realized investment gains and losses on debt securities
are deferred and released to income over the estimated
average remaining maturity term;
Recognized as income when realized.
Deferred taxation; (196) (312)
Calculated using discounted tax rates;
Calculated using nominal tax rates.
Deferred taxation on US GAAP adjustments; (251) (200)
Tax impact on the adjustments.
Dividends; 475 460
Accrued as a liability;
Not recognized until they become irrevocable.
Balance of other items; 146 248
Certain expenses are recorded in different periods
on the two bases of accounting.
------ ------
Approximate Shareholders' Equity in accordance with US GAAP 17,640 17,050
</TABLE>
-8-
<PAGE>
DESCRIPTION OF DIFFERENCES IN ACCOUNTING PRINCIPLES
<TABLE>
<CAPTION>
Amounts in million EUR Net Income
US Accounting Principles
higher (lower) than Dutch
Accounting Principles
Six months ended June 30,
Dutch Accounting Principles/US Accounting Principles 2000 1999
<S> <C> <C>
Net Income in accordance with Dutch Accounting Principles 1,008 679
Adjustments:
Real estate; (26) (18)
Carried at original cost for maximum of five years;
appraisal increments recognized thereafter;
Carried at depreciated cost.
Goodwill (arising from acquisitions); (146) (41)
Directly charged to shareholders' equity in year of acquisition;
Capitalized and amortized over various periods not exceeding
20 years.
Technical provisions (including deferred policy acquisition costs/acquired
insurance in force); 10 (69)
Calculated on recent assumptions;
Calculated on assumptions when the policy was issued
or on recent assumptions.
Realized gains and losses on debt securities; (264) 4
Realized gains and losses on debt securities are deferred and
released to income over the estimated average remaining maturity term;
Recognized as income when realized.
Realized gains and losses on shares and real estate; 755 431
Realized gains and losses on shares and real estate are added
to the revaluation reserve. From this reserve amounts are released
to income, so that together with the direct yield, a 30 year moving
average total rate of return is recognized;
Recognized as income when realized.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Amounts in million EUR Net Income
US Accounting Principles
higher (lower) than Dutch
Accounting Principles
Six months ended June 30,
2000 1999
<S> <C> <C>
Deferred taxation; 43 45
Calculated using discounted tax rates;
Calculated using nominal tax rates.
Deferred taxation on US GAAP adjustments; 134 35
Tax impact on the adjustments.
Cash settlements of convertible loan and stock options; (19) (81)
Charged to shareholders' equity;
Charged to income.
Balance of other items; (66) 2
Certain expenses are recorded in different periods
on the two bases of accounting.
----- -----
Approximate Net Income in accordance with US GAAP 1,429 987
Other comprehensive income, net of tax:
Foreign currency translation adjustments 493 838
Unrealized gains during period 130 188
Reclassification adjustment for gains included in net income (629) (467)
----- -----
Approximate Comprehensive Income in accordance with US GAAP 1,423 1,546
US GAAP approximate net income per share (in EUR):
Basic 1.08 0.85
Diluted 1.07 0.84
</TABLE>
(4) BUSINESS SEGMENT INFORMATION
AEGON has the following reportable geographic segments: Americas, The
Netherlands, United Kingdom and Other countries, which include Hungary, Spain
and other units. Crucial differences exist in local markets and for this reason
AEGON emphasizes a decentralized organization structure. The operating
companies, with knowledgeable and highly experienced local management and
employees, market their own, unique products using tailored distribution
channels. Close to 90% of AEGON's core business is life insurance, pension and
related savings and investment products. The Group is also active in accident
and health insurance, property and casualty insurance and limited banking
activities.
-10-
<PAGE>
AEGON evaluates performance and allocates resources based on income before
interest charges and taxes, based on Dutch accounting principles. The accounting
policies of the reportable segments are the same as those used for the
consolidated financial statements. Intersegment revenue and expenditures for
additions to long-lived assets are not significant.
Set forth below is a summary of total revenues (including investment income) and
income before tax for the major segments of the business.
<TABLE>
<CAPTION>
Six months ended June 30,
(amounts in million EUR) 2000 1999
<S> <C> <C>
Revenues:
Americas 8,340 3,471
The Netherlands 3,202 3,050
United Kingdom 3,250 2,371
Other Countries 524 440
Other 39 47
------ -----
15,355 9,379
Income before tax:
Americas 950 513
The Netherlands 450 418
United Kingdom 168 79
Other Countries 24 (4)
Interest charges and other (172) (93)
------ -----
1,420 913
</TABLE>
(5) TRANSAMERICA NON-INSURANCE OPERATIONS
In the income statement for the first six months of this year, the dividends
from the leasing, lending and real estate information businesses of Transamerica
have offset the financing costs related to these operations, resulting in a
neutral effect on AEGON's earnings.
In connection with AEGON's decision to retain the non-insurance business
acquired in the Transamerica transaction, effective June 30, 2000 the non-
insurance businesses are carried in the balance sheet at their net asset value
of EUR 1.7 billion as unconsolidated holdings, while the net income of the non-
insurance businesses will be included in AEGON's earnings beginning July 1,
2000.
The following summarized balance sheet and income statement present the non-
insurance operations based upon the Transamerica historical US GAAP reporting.
For purposes of the balance sheet the unallocated excess of the purchase price
over the historical carrying amount of the net assets has been recorded as a
single amount and included in the line item "Other assets". Also included in
"Other assets" is EUR 1.9 billion of assets held for sale.
-11-
<PAGE>
<TABLE>
<CAPTION>
Summarized balance sheet:
(amounts in million EUR) June 30, 2000
<S> <C>
Finance receivables, net of unearned charges and allowances for bad debts 9,169
Equipment held for leases 2,233
Other assets 5,178
Total assets 16,580
Notes and loans payable 10,939
Accounts payable and other liabilities 1,979
Shareholders' equity 3,662
Total liabilities and shareholders' equity 16,580
</TABLE>
Operating income, which excludes gains and losses on the sale of business units,
for Transamerica's non-insurance businesses was 5% lower than comparable 1999
results. Lower leasing rates in the marine container leasing business offset the
strong performance of the commercial financing businesses. Higher mortgage
interest rates had an adverse impact on mortgage originations and refinancing,
which are key drivers of the real estate information business.
<TABLE>
<CAPTION>
Summarized income statement: Six months ended
June 30, 2000
<S> <C>
Financing charges 561
Leasing revenue 358
Real estate revenue 147
Other 87
Total revenue 1,153
<CAPTION>
Operating income for Transamerica's non-insurance businesses for the first half
of 2000 (reporting based on Transamerica's historical US GAAP) amounted to:
<CAPTION>
(amounts in EUR million)
<S> <C>
Transamerica Finance Corporation 79
Real Estate Information 10
Other (4)
---
Total 85
Dividend declared 79
Funding costs on the related raised debt (79)
---
Income from participations 0
</TABLE>
-12-
<PAGE>
(6) SUBSEQUENT EVENTS
On July 24, 2000 AEGON announced its decision to retain the non-insurance
businesses acquired with the Transamerica transaction. Effective June 30, 2000
the non-insurance businesses are carried in the balance sheet at net asset value
as unconsolidated participations, while the net income of the non-insurance
businesses will be included in AEGON's earnings beginning July 1, 2000. Since
their acquisition the non-insurance businesses have been accounted for as equity
participations and carried at cost while only dividends declared by these
businesses were included in earnings to an amount that offset the financing
costs. The difference between net asset value and the prior carrying value of
EUR 2.0 billion has been charged as goodwill directly to equity. Sales of
several segments are under discussion and have resulted in the announcement of
the following transactions: the sale of the tank segment for approximately USD
260 million, the sale of the North American Intermodal division on July 28, 2000
and the sale of Intellitech on August 2, 2000. The announced sales will not have
any material effect on AEGON's earnings and will result in modest book gains
which will directly be credited to shareholders' equity.
On August 3, 2000 AEGON announced that it has completed the sale of its banking
subsidiary Labouchere to Dexia, which was already announced on March 14, 2000.
Dexia paid AEGON approximately EUR 900 million for Labouchere. AEGON will use
the proceeds from the sale to redeem outstanding debt, while the book profit of
approximately EUR 600 million will be credited directly to shareholders' equity.
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Introduction
------------
AEGON operates in various countries throughout the world, offering a variety of
products including those having investment risk characteristics, life insurance
protection, health and casualty insurance protection and retirement benefit
programs. These products are offered to and acquired by individuals, of a
variety of ages, as well as corporations and other institutions.
The following discussion is based on the consolidated financial statements of
AEGON prepared in accordance with Dutch Accounting Principles for the six months
ended June 30, 2000 and is compared to the six months ended June 30, 1999.
Summary of revenues for the six months ended June 30, 2000 and 1999.
<TABLE>
<CAPTION>
Revenues Americas The United Other First six First six
Netherlands Kingdom Countries months months
in million EUR 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gross premiums
Life general account single 508 313 137 8 966 451
Life general account recurring 2,522 405 297 80 3,304 1,191
Life policyholders account single 478 372 2,179 103 3,132 2,251
Life policyholders account recurring 77 862 573 64 1,576 1,396
----------------------------------------- ----- ----- ----- --- ------ -----
Total Life insurance 3,585 1,952 3,186 255 8,978 5,289
Accident and Health insurance 1,011 88 - 37 1,136 741
General insurance 3 235 - 163 401 428
----------------------------------------- ----- ----- ----- --- ------ -----
Total gross premiums 4,599 2,275 3,186 455 10,515 6,458
Investment income insurance activities 3,741 731 64 69 4,605 2,544
Income from banking activities - 196 - - 196 330
----------------------------------------- ----- ----- ----- --- ------ -----
Total revenues business units 8,340 3,202 3,250 524 15,316 9,332
Income from other activities 39 47
----------------------------------------- ------ -----
Total revenues 15,355 9,379
Investment income for the account
of policyholders 539 459 (74) 7 931 4,130
Commissions and expenses business units 1,396 276 181 111
Commissions and expenses 1,981 1,316
Gross margin business units/1/ 2,346 726 349 135
Gross margin/1/ 3,401 2,229
Gross deposits in:
Annuities and GICs 12,308 5,125
Savings accounts 1,916 1,838
</TABLE>
/1/ Calculated as the sum of income before tax and commissions and expenses.
-14-
<PAGE>
The following table presents a summary of net income for the first six months of
2000, geographically and by activity, in euro. In order to better reflect the
underlying earnings development in the various countries, expenses related to
the Group overhead are not included in the business units' results, but in the
line "Interest charges & Other".
<TABLE>
<CAPTION>
Net income Americas/1/ The United Other First six First six Increase
Netherlands Kingdom Countries/2/ months months on 1999
in million EUR 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Life insurance (including annuities) 876 354 168 11 1,409 846 67%
Accident & Health insurance 73 12 - 3 88 73 21%
General insurance 1 13 - 10 24 8 200%
Banking activities - 71 - - 71 79 (10)%
Interest charges & Other (172) (93) 85%
-------------------------------------- ----- ---- ----
Income before tax business units 950 450 168 24
Income before tax 1,420 913 56%
Corporation tax business units (329) (108) (45) (2)
Corporation tax (412) (234) 76%
-------------------------------------- ----- ---- ----
Net income business units 621 342 123 22
Net income 1,008 679 48%
Net income business units
first six months 1999 335 329 60 (6)
Increase on 1999 85% 4% 105%
Increase on 1999 excluding Labouchere/3/ 9%
</TABLE>
/1/ The figures under `Americas' include the results of AEGON in the USA, Canada
and Mexico.
/2/ The figures under `Other countries' include the results of the operations in
Hungary, Spain, Germany, Belgium, Taiwan and the Philippines.
/3/ The percentage increase on income before tax without Labouchere amounts to
14%.
Life insurance income before tax increased 67% to EUR 1,409 million in the first
six months of this year (89% of AEGON's total earnings). The operations in the
Americas (USA, Canada, Mexico) contributed to life insurance earnings in the
amount of EUR 876 million (USD 842 million) in the first half, which is 62% of
the total income before tax in this product group. The inclusion of earnings
from Transamerica was the largest factor behind the 71% increase in US dollars.
Beginning with the nine months results earnings comparisons will show lower
increases, since Transamerica's earnings contribution will be included in the
figures for both periods. Life insurance results in the Netherlands rose 13% to
EUR 354 million in the first half, which is 25% of AEGON's total income before
tax in this product group. The increase in premium income was 16%, while
commissions and expenses excluding Labouchere were 3% lower, contributing to the
overall margin improvement of AEGON The Netherlands. The inclusion of earnings
of the Guardian activities, acquired last year, is a major factor behind the 94%
increase (in GBP) in life insurance earnings from the UK. AEGON UK posted a 113%
higher income before tax in euro (totaling EUR 168 million for the first half of
this year; 12% of the Group's life insurance income before tax). The growing
operations in other countries contributed EUR 11 million to the Group's life
insurance income before tax.
Accident & health insurance results totaled EUR 88 million in the first half,
marking an increase of 21% over the first six months of 1999. Accident & health
insurance results in the Americas rose 20% in euro, which includes the positive
effect of the higher average exchange rate. The increase in dollars amounted to
6%, with accident & health insurance income before tax totaling USD 70 million
(EUR 73 million) in the first six months of this year.
-15-
<PAGE>
In the Netherlands, pre-tax profit in this product group increased 20% to EUR 12
million in the first half. Accident & health insurance income from the
operations in other countries totaled EUR 3 million.
Profit before tax from general insurance activities for the first six months of
the year tripled, rising to EUR 24 million. The earnings contribution from AEGON
The Netherlands in this product group totaled EUR 13 million (first half 1999:
EUR 17 million) and were negatively affected by claims related to the explosion
of a fireworks factory and EUR 10 million from other countries (first half 1999:
EUR -10 million). Our insurance joint venture in Mexico accounted for the
remaining EUR 1 million profit in this product group. Revenues in general
insurance decreased mainly as a result of the divestiture of NOWM in the
Netherlands at the end of 1999 and also because of tighter underwriting policies
in all our general insurance operations in various countries.
Income before tax for the first six months of this year from the banking
activities totaled EUR 71 million and include the results from AEGON Bank and
the first quarter earnings contribution from Labouchere. On a comparable basis,
adjusted for the sale of Labouchere, income before tax from the banking
activities increased 69%.
Results of operations
---------------------
The following discussion is based on the results of the operations in the
various countries.
The Americas
------------
Net income from the Americas totaled USD 597 million for the first six months of
this year. Pre-tax income rose 64% in dollars to USD 913 million. The inclusion
of earnings from Transamerica insurance operations (approximately USD 287
million before tax) was the dominant factor behind the overall increase. The
gross margin of our operations in the Americas increased 63%, while commissions
and expenses increased 62% compared to the first half of 1999.
Operational benefits of the merger of AEGON USA and Transamerica activities are
beginning to emerge as the integration and restructuring efforts proceed ahead
of schedule. New business volumes have increased significantly and cost
synergies are now expected to approach USD 200 million in annual savings.
Life insurance results in the first half year totaled USD 842 million before tax
(1999: USD 491 million).
Life insurance premium income (excluding annuity and GIC deposits) totaled USD
3,446 million in the first six months (1999: USD 1,208 million). The increase
was in large part due to the inclusion of Transamerica premium income -
totalling USD 1,683 million in the first half - and to an increase in Bank Owned
Life Insurance (BOLI) single premium production and variable universal life
premium.
Gross annuity and GIC deposits totaled USD 11,831 million in the first six
months (1999: USD 5,581 million).
Income before tax in the product group "Accident & Health Insurance" totaled USD
70 million in the first six months (1999: USD 66 million). Results were
adversely influenced by a discontinued block of business. Accident & health
insurance premium income totaled USD 972 million (1999: USD 675 million).
The results for the first half of Seguros Banamex AEGON and Afore Banamex AEGON
in Mexico further increased, reflecting the continued favorable development of
these businesses.
The Netherlands
---------------
Net income from AEGON The Netherlands totaled EUR 342 million for the first six
months of this year (1999: EUR 329 million). Excluding earnings from bank
Labouchere for 1999 and 2000, net income in the Netherlands increased 9%.
Including the EUR 31 million of net earnings from bank Labouchere in the first
quarter of this year and EUR 44 million in the first six months of 1999, net
income in the Netherlands increased by 4% to EUR 342 million. Income before tax
increased 8% to EUR 450 million. On a comparable basis (i.e. excluding the
-16-
<PAGE>
earnings contribution from Labouchere), income before tax rose 14%. On a
comparable basis (excluding Labouchere) gross margin increased 6%, while
commissions and expenses decreased by 3%. The increase in earnings was driven by
a strong growth in life insurance premium income, while expense levels were kept
close to previous year's, resulting in an improved coverage of fixed costs.
Life insurance income before tax rose 13% to EUR 354 million. Life insurance
premium income was up 16% in the first six months, totaling EUR 1,952 million.
Recurring life insurance premium income increased 6% to EUR 1,267 million. New
tax rules are believed to have impacted new recurring premium production
temporarily, as new products are being introduced to respond to the changed
circumstances. Although new production of recurring premium was below last year,
new production of single premiums increased substantially, reflecting the strong
performance with regard to both pensions and the personal life insurance units.
Non-life insurance income for the first half totaled EUR 25 million before tax
(1999: EUR 27 million). General insurance results were adversely affected by
claims related to the explosion of a fireworks factory in Enschede totaling EUR
11 million gross and EUR 8 million after reinsurance. This was partly offset by
a EUR 4 million release from the millennium claims reserve.
The continued good sales and a continued good investment spread supported the
strong earnings performance of AEGON Bank. The sale of Labouchere was completed
in August 2000. Only the first quarter earnings of Labouchere are included in
the consolidated accounts for 2000. Despite the fact that Labouchere's earnings
were not included for the second quarter, bank earnings decreased by only 10%
driven by the strong performance of AEGON Bank.
United Kingdom
--------------
Net income from AEGON UK totaled GBP 75 million (EUR 123 million) for the first
six months of this year. Income before tax increased 94% in pounds sterling to
GBP 103 million, including the GBP 43 million earnings contribution from the
acquired Guardian businesses. Gross margin increased by 84% and commissions and
expenses by 76%.
The earnings performance of the AEGON UK operations was strengthened by the
continuing integration of the Guardian businesses with Scottish Equitable.
Premium income for the first six months of this year increased 24% and totaled
GBP 1,950 million, including GBP 211 million from the Guardian portfolio (first
half 1999: GPB 1,569 million, before the Guardian acquisition).
New premium production, measured on a standardized basis, including Guardian,
increased by 20%.
Other countries
---------------
Net income from the activities in other countries totaled EUR 22 million in the
first six months (1999: EUR 6 million loss).
Life insurance premium income rose to EUR 255 million for the first half of this
year (1999: EUR 172 million) and life insurance income before tax totaled EUR 11
million (1999: EUR 4 million). Life insurance earnings in Hungary showed a firm
increase. The MoneyMaxx product was launched in Hungary in early April. The
positive contribution from Covadonga, a company acquired in January of this
year, strengthened the increase in life insurance results in Spain.
General insurance results from the operations grouped under "other countries"
totaled EUR 10 million (first half 1999: EUR 10 million loss). The non-life
insurance activities in Spain returned profitable in the first quarter of this
year and continued to do so.
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<PAGE>
Capital gains
-------------
In the first half of this year, EUR 363 million of realized and unrealized gains
from the general account equities and real estate portfolio were credited to the
revaluation account. EUR 267 million was released from the revaluation account
as indirect return to the Group's earnings before tax (1999: EUR 153 million).
Net income and net income per share
-----------------------------------
Net income in the first six months of 2000 totaled EUR 1,008 million (up 48%)
and net income per share increased by 29% to EUR 0.76. The autonomous increase
in net earnings and net earnings per share amounted to 14%. The Transamerica and
Guardian acquisitions accounted for an additional increase in first six months
earnings per share of around 5% and 3% respectively, while several other
acquisitions and divestitures together had a negative effect of about 1%.
Currency exchange rate movements had a positive effect on earnings per share of
just over 8%. This adds up to the overall 29% increase in net income per share.
The increase in total income before tax of 56% exceeds the rise of 48% in net
income, due to the increase in the effective corporate tax rate. The effective
corporate tax rate increased from 26% in the first six months of 1999 to 29% in
the same period of this year. This has been caused by an increase in the
effective tax rate for the Netherlands, as well as by the increased proportion
of earnings coming from the Americas and the UK.
Investments
-----------
Total investments at June 30, 2000, excluding investments for the account of
policyholders, reached EUR 120 billion, an increase of EUR 7 billion over year-
end 1999. Investments for the account of policyholders increased by EUR 7
billion to EUR 115 billion. The investments for the account of policyholders are
composed of about 64% in equities and 36% in fixed income investments.
Capital and funding
-------------------
At June 30, 2000, shareholders' equity totaled EUR 12,376 million, compared to
EUR 13,543 million at year-end 1999. The decrease in shareholders' equity is for
a large part caused by a goodwill charge, related to the required accounting
change regarding Transamerica's non-insurance operations. The retention of
earnings, higher capital gains and the higher period-end exchange rates for the
US dollar and the British pound against the euro all had a positive effect on
shareholders' equity.
Certain effects of US Accounting Principles
-------------------------------------------
Net income for the six months ended June 30, 2000 based on US Accounting
Principles was EUR 1,429 million compared to EUR 987 million in the six months
ended June 30, 1999.
An analysis of the difference between Dutch and US Accounting Principles is
provided in Note 3 to the condensed consolidated financial statements.
-18-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity in the insurance industry generally refers to the ability of a company
to meet all of its cash requirements with funds provided from normal cash flow
from operations. AEGON's net cash provided by operations, calculated in
accordance with International Accounting Standard No. 7, for the six months
ended June 30, 2000 amounted to EUR 9.0 billion. Net cash used in investing
activities was EUR 9.6 billion, while net cash provided by financing activities
amounted to EUR 0.7 billion for the first six months 2000.
Cash flow from operations has been sufficient to fund normal operating needs.
Due to continuous positive cash flows, AEGON has never encountered difficulties
in arranging desired short-term borrowings. AEGON anticipates that cash flow
will continue to be sufficient to service its fixed and other obligations as
they become due. When capital market circumstances are attractive, AEGON
periodically borrows short term funds to invest in anticipation of premium
receipts expected in the near future from interest-sharing policies in order to
fix a positive spread between the yield earned on the investment and the
interest to be paid on the related policies.
The Company's long-term liabilities increased from EUR 3,703 million at year-end
1999 to EUR 3,959 million at June 30, 2000. Capital securities and subordinated
(convertible) loans increased to EUR 2,050 million at June 30, 2000 from EUR
2,032 million at year-end 1999.
Reflecting AEGON's strategic decision to retain Transamerica's non insurance
business, Standard & Poor's has downgraded on July 24, 2000 AEGON's long term
counterparty credit rating to double A minus from double A.
As a holding company, AEGON is dependent on dividends from, and repayment of
debt obligations of its subsidiaries for cash to meet its operating expenses and
pay dividends to its shareholders. Certain of AEGON's direct and indirect
subsidiaries in the US are subject to restrictions on the amount of dividends
and debt repayments that can be made to AEGON and its affiliates. AEGON does not
believe that such restrictions constitute a material limitation on its ability
to meet its obligations.
FORWARD LOOKING INFORMATION
The statements contained in this report, which are not historical facts, are
forward-looking statements. When included in this report, the words "expects",
"intends", "anticipates", "estimates", and analogous expressions are intended to
identify forward-looking statements. Such statements inherently are subject to a
variety of risks and uncertainties that could cause actual results to differ
materially from those projected. Such risks and uncertainties include, among
others, general economic and business conditions, competition, changes in
financial markets (credit, currency, commodities and stocks), changes in
foreign, political, social and economic conditions, regulatory initiatives and
compliance with governmental regulations, judicial decisions and rulings, and
various other matters, many of which are beyond the Company's control. These
forward-looking statements speak only as of the date of this Report. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any statement is based.
-19-
