Aegon Ltd (AEG) 2002 Q4 法說會逐字稿

Welcome to Aegon's conference call and our full-year 2002 results. I am Michiel van Katwijk, Senior Vice President and Group Treasurer. Before we begin, I need to make you aware of our cautionary note regarding any forward-looking statement. There it is on slide two. Legal counsel has requested that we read it in full at the end of this call, but now let me turn the call over to Don.

Here are my Executive Board colleagues, Jos Streppel, Paul van de Geijn and Johan van der Werf. Also joining us today are , Chief Executive Officer of Aegon USA, and , CEO of our UK operation. Of course, Michiel van Katwijk and Bob McGraw are also here as well. Since the time of our analyst meeting last November, we have been directing the greatest portion of our efforts to strengthening our existing business. Nonetheless, we still have time to secure all regulatory approvals for our initial 20% stake in Le Mondial and we signed an agreement to transfer our Philipines activities to another carrier, keeping with our strategy to focus on markets where we think we can take a leading position. We also completed several acquisitions in the UK and a acquisition in the Netherlands. After a few remarks by myself and Jos, we'll give you some comments from the country unit CEOs, and then we'll take your questions.

Slide three. Before I discuss our results and production numbers for 2002, let's take a look at the financial markets, which have had such a significant impact on our performance. I won't spend much time recapping what you already know, but while the equity markets recovered about 10% during the fourth quarter, and then of course have weakened again this quarter so far, the dollar weakened further against the euro by approximately 6%, and both the Federal Reserve and European Central Bank delivered basis-point rate cuts. For the year, the dollar lost 16% in value against the Euro, and for the major equity market indices that influenced our results, declines of 17% at the Dow, up to 36%, and the occurred during 2002. Interest rates remained at historically low levels, and corporate default rates, though trending lower, remained at historically high levels. It has probably been the most difficult financial market environment we can recall. It's also been a time when the strength and quality of our people at Aegon and our distributors have been clearly evident.

Net income, a forward. Net income of 1,547,000,000 euros was in line with our November 2002 forecast. Net income per share for the year was 1.08 euros. Lower fourth quarter pretax earnings were partially offset by tax benefits and a lower effective tax rate. Results for the year were affected by additions to the bond default provision of 817 million euros, unlocking of 450 million euros, and increased provisions for benefit guarantees of 482 million euros. Currency exchange rates had a negative impact on net income of approximately 2% for the year. Included in the amortization and benefit guarantee provisions is the impact of lowering our long-term and mean reversion assumptions for equity returns, which Jos Streppel will discuss with you in a few minutes. Lower fees on unit length and variable business as well as spread compression on our general account business all contributed to the lower pretax earnings. Cost management is an integral part of our long-term strategy of profitable growth. We are, and need to be, a low-cost provider. While the numbers show a 14% increase in commissions and expenses during the year, this is inclusive of the acquired JC Penney operations and the additional amortization of the deferred acquisition costs.

If you adjust for these items, total commissions and expenses show an increase of 3%. With our ongoing cost reduction initiatives in the UK and the US, we are on the right track for good long-term profitability. Slide--oh, excuse me. Shareholders equity decreased 11% over 2001, due primarily to the weakened US dollar and unrealized investment losses, offset partially by the additional paid in capital on the preferred shares resulting from the transaction with . Total negative exchange rate differences were 2.2 billion euros, while unrealized investment losses were approximately 1.6 billion euros. The additional paid in capital totaled just over 2 billion euros. Total assets decreased 10%, due primarily to the weaker dollar and equity market performance in variable and accounts.

We have proposed a full-year dividend for 2002 of 74 euro cents per share. This represents a final dividend and interim dividend of 37 euro cents each. In order to preserve capital, the final dividend will be paid in stock. We have also indicated that we expect to consider proposing a full-year dividend of 4 euro cents for 2003. This would be paid in cash or stock or some combination thereof, depending upon the development of our capital position.

Slide five. Overall, new production was strong in the fourth quarter. Standardized life sales in the fourth quarter were quite strong, increasing by 80%. This increase during the quarter was led by the Americas, with a 12% increase, followed by the Netherlands with a 5% increase, and the UK with a 1% increase. Standardized life production fell 5% short of full-year 2001. It's distorted somewhat by the inclusion of reported life production in Mexico during 2001. Without this influence and the currency influence of the US dollar, standardized life production would have decreased 1%.

Slide six. Total deposits of $26.9 billion in the Americas increased 14% over 2001. Fixed annuity deposits increased 6% for the year, but were lower in the fourth quarter as we lowered new business crediting rates below the levels offered by some of our principle competitors. Variable annuities increased 119% over the same quarter last year, bringing the full-year increase to 67% over 2001. The high level of variable annuity sales has been driven by the expansion of our distribution network and some of the guarantee features of certain products. In January of this year we discontinued selling variable annuity products that had a guaranteed income benefit rider. As a result we are seeing a reduction in sales of this product line so far in 2003. and funding agreement deposits were 10% lower than the prior year, due in part to maintaining our pricing discipline in a very competitive market. Savings deposits were 21% lower for the same reason. Despite weak market conditions, off balance sheet production, which is mostly in the Americas, showed an 8% increase for the year with strong increases in mutual fund and managed asset sales, and a 4% increase in synthetic sales. The increase in euros was just 2% due to the lower dollar exchange rates.

, Johan and David will talk to you about production in each of the country units in a few minutes.

Slide seven. During the past several years, we have successfully met the challenges presented by volatile equity markets and weak credit markets. Similar market circumstances have continued the first couple of months of this year. We therefore remain cautious in our outlook for 2003, and are not providing an earnings forecast at this time. What is certain though is that we will continue to implement cost reduction initiatives, expand distribution, and strengthen our partnering relationships, and maintain our pricing and risk management disciplines. We are committed to our long-term strategy while fully recognizing the changing political and fiscal environment. New regulatory and tax proposals in the US, the Netherlands and the UK are an important part of the changing environment. While current proposals may not all be adopted, we do expect changes in some form in most of the markets we operate in. We are highly flexible with the capability to adapt and benefit from new market opportunities.

I will now turn the presentation over to Jos Streppel who will bring his own clarity to the financial and accounting issues underlying our results, as well as some pending and future accounting and disclosure developments. Jos?

Thank you Don. Let's start with slide eight. After a quick summary of the exceptional earnings charges for 2002, I will briefly update you on the changes in our reinvestment portfolio, discuss the exposure, and provide some further detail on the credit quality of the US bond portfolio. I will also discuss policy acquisition costs and benefit guarantees and the effect of changing our long-term and equity returns assumptions. Of course, our capital position and dividends are of interest to you, as are changes to our accounting standards and our plans for value disclosure.

Slide nine. The increase in the exceptional pretax charges included in 2002 earnings was more than 1 billion euros higher than in 2001. In comparing 2002 results with the 2001 results, we also note that the 2001 figures included 343 million euros of pretax gain on the sale of our operations in Mexico, as well as 81 million euros of operating earnings. In total, these items fully account for the nearly 1.4 billion euro decrease in pretax earnings from 2001 to 2002. Adjustment for these items, 2002 pretax earnings would have been marginally higher than 2001 pretax earnings.

Slide ten. Total euro investments were 9% lower than the prior year. Excluding the influence of the weakened dollar, total investments would have increased 2%. The equity and real estate portfolios had the largest percentage changes. The general account equities in our real estate portfolio decreased 20%, while the equities and real estate within the policyholders decreased by 31%. Policyholder transfers from equities to fixed income within the policyholders continued through the fourth quarter. Our total general account equity investments at year-end 2002 of 6.3 billion euros were 5% of our total general portfolio. In the fixed-income portfolio at year-end, we had gross unrealized gains of 5.3 billion euros, and net unrealized gains of 3.2 billion euros. Nearly 90% of our general accounts fixed-income portfolio, is invested in bonds and in the US.

Slide eleven. But before I get to the , I will give you some details of our exposure. Based on market values as of this week, our estimated market loss for on both equity and , is approximately 150 million euros. In our portfolio, nearly 8 shares of common stock, and nearly 32 shares of preferred stock. We also have interest in which on a proportional basis is not material to our exposure. On a basis there are 160 million euros of bond, of which 110 million euros are secured. totalled 32 million dollars, ratios.

Slide twelve. Bonds represent $88 billion of our $106 billion the Americas. The 60% increase in the bond portfolio during 2002 lastly reflects the increase in new deposits, which Don discussed, and improved persistency in the fixed annuity and business. The of our US bond portfolio improved during the year, as securities increased from 5 to 7% of the portfolio, and securities were reduced from 31% to 29%. The improvement is the result of high-quality new investments. We also made an portfolio quality remained at . The bond was strengthened by an additional million during the fourth quarter, and $206 million that were charged against the provision.

For the year we added $774 million to the provision, and at the end of the year $280 million . In 2001 we added $565 to the provision, and ended 2001 with a balance of--with a balance of $298 million.

298.

2001, yeah, 2001 with a balance of 298.

I'm sorry for that.

Slide thirteen. In the fourth quarter, the corporate bond market outperformed government bonds. The was most pronounced in the portion of the investment-grade market, and distressed and high yields. On this slide, you see our updated corporate bonds holding by sector, representing approximately 60% of our total bond portfolio. No significant movements in allocations occurred during the fourth quarter. For the year, the financials, communications and utility sectors decreased somewhat, while the consumer non cyclical and energy sectors increased slightly.

Slide fourteen. Deferred policy acquisitions costs were 15.2 billion euros at year-end, approximately 1.3 billion euros lower than at year-end 2001. Much of the decrease is due to the weaker dollar. The increase in amortization to 1.85 billion euros is heavily influenced by the accelerated amortization, or unlocking, of 450 million euros. This includes the fourth quarter impact of the change in the long-term equity return assumptions from 9 ½ to 9, and the mean reversion increment from 5% to 3% for five years. As a result, $86 million, or 90 million euros, is included in the 1.85 billion euro amortization amount. Our fixed income long-term assumptions remain unchanged at 6% and 3 ½% respectively. The estimate that at year-end in the long-term equity return assumption would impact pretax earnings by approximately $110 million.

It is estimated that the elimination of the mean reversion assumptions would impact pretax earnings by approximately million. These estimates take into account both the effects and the additional provisions that would be required for guaranteed minimum benefits. Deferred policy acquisitions costs of billion shares on annuities are at 4.8% of the $31.4 billion of variable annuity policyholders account balances.

Slide fifteen. During the fourth quarter, the increased reserve from benefit guarantees by 156 million euros, largely reflecting the change in our long-term equity return and mean reversion assumptions in the Americas. The impact of the assumption change was $84 million in the USA, and 67 million Canadian dollars in Canada. Additional provisions not related to the change in assumptions were 25 million euros in the Netherlands.

Slide sixteen. You will note that shareholder equity that had been reported for 2001 has been adjusted upwards by euro 631 million for the change in the accounting policies which we instituted this year. In accordance with Dutch law, this change in accounting policy means we no longer accrue for the payments of dividends, which have not been declared. During 2002, shareholders equity and total capital were heavily influenced by the weaker dollar and unrealized investment losses. The quality if our capital base was strengthened due largely to the addition of paid-in capital on preferred shares, which served to reduce our debt level. At year-end 2002, shareholders equity accounted for 71% of the capital base. Being above our stated target of 70%, we continue to have good financial flexibility and our operating subsidiaries continue to have strong financial strength ratings.

On the left, Moody's recently downgraded our holding company credit rating, bringing our rating structure into line with their standard practice of a difference between the credit rating of the parent, and the financial strength rating of the subsidiaries. At the same time, with the high capital needs of our operating companies, due largely to increased acquisition costs and solvency requirements on strong new business production in the United States, and admission of the full provisions and equity market weakness and volatility, we believe it is in the best long-term interest of shareholders to conserve capital by having the final dividend for of 37 euro cents taken entirely in common shares, which we have proposed. Don has already mentioned that we consider proposing a full-year dividend of .40 for 2003, to be paid in cash or shares, depending upon development of our capital position.

Slide seventeen. We are now preparing for International Accounting Standards to become Aegon's reporting standard in 2005. As many of you are probably--probably aware, it is currently expected that the best-practices approach will be the basis of accounting for insurance liabilities, and while there are other differences in the US such as goodwill, pensions and certain asset valuation items, the net effect is that reconciling items between IAS and US cap will become much less significant than is currently the case between Dutch cap and US cap. As a first step it is Aegon's intention to discontinue the indirect return system of accounting for capital gains following publication of its 2003 results. The realized portion of the revaluation account will be transferred to the general reserve at that time.

Beginning January 1st 2004, we will adopt IAS as our reporting standard for capital gains. I should mention, however, that the proposal of the Commission is now before Dutch Parliament. This proposal, if passed as currently submitted, would require that we discontinue the indirect return system retroactively to January 1st, 2003. We believe that there will not as a retroactive act.

Slide eighteen. We will be publishing our 2002 results at the same time as our second quarter 2003 results. It is our intention to publish these results by product line and by country. As we have indicated in the past, we believe that an and the value of new business are best represented by a range of values. It is our intention to show using minimum regulatory capital as well as on our internal accounting standards. We shall also provide multiple sensitivity analysis.

Let me now turn it over to who will give you an update on our--on recent developments in the United States and Canada.

All right Jos, thanks. Good day all of you. The year 2002 for Aegon Americas was a year where we had good growth in sales and sales momentum, particularly in the area of traditional life insurance sales. A year where excluding asset issues, we experienced good growth and profitability in the life insurance area, and funding agreements businesses, pension businesses, direct-response business, and actually had a good year in the Transamerica Finance companies as well. We also completed a very simple integration of JC Penney into our direct response operations.

Operating expenses decreased 4%. Our actual percentage dropped from 105% to 101%, and actually in the fourth quarter we were at 100%, and our head count dropped throughout the year, 566 employees. This is not a response--the expense efficiencies is not a response to the difficult asset environment, but rather reflective of the execution of plans already in place coming into the year, and whether or not the difficult asset environment continues, we'll continue to pursue those expense efficiencies. On the other hand, asset issues, while ultimately cyclical, overshadowed much of the progress we made--we made this year; however, when it all shakes out we believe out operating fundamentals will be in better shape to take advantage of a more favorable environment.

Let's look forward to 2003. We have made the decision to back away from certain equity guarantee features that were sold as part of variable annuity contracts. This is likely to reduce the overall sales of variable annuities for the year, but it's difficult to detect as competitor responses, rating agency actions and ultimately the equity market will all play in how much new business will be sold. With respect to fixed annuity sales, we have led the market in working with the various state regulators to reduce minimum guaranteed interest credit rates from 3% down to 1 ½ to 2%, and we have led the market in implementing new products with lower crediting rate guarantees. This should allow us to maintain reasonable profit spreads in our fixed annuity business, but again, we're leading the market--may result in somewhat lower product in 2003. Again, this will largely depend on competitor reactions. With respect to asset issues, we expect 2003 to be a difficult year overall; however, our analysis suggest that a lot of the shakeout should be behind us and that the balance sheet quality and coverage ratios of the companies in which we hold positions in are starting to look better. We expect to grow our traditional life insurance business and direct-response businesses in 2003. We're getting our returns there and clearly we benefit from selling true protection products. We'll also pursue profitable and risk-acceptable business in our annuity, pension and and agreement businesses, and we also believe our reinsurance division is entering a cycle where risk-adjusted returns will be accessible to us. We anticipate that getting more of Aegon's product portfolio in front of our existing distributions will lead to more efficient production and closer distribution ties, and finally, as I said before, we'll continue to pursue our expense-reduction initiatives where we actually have projects lined up that will produce additional expense savings over the next three to four years.

So in conclusion, we expect to emerge from this difficult asset environment more efficient with broader distribution capabilities and certainly better positioned to grow profitably when the market turns. And now let me turn it over to Johan van der Werf, who will tell you about the Netherlands.

Thank you, Pat. Declining markets and the restructuring of the Dutch fiscal system have caused a difficult life insurance market in 2002 in the Netherlands. We have taken measures to regain customer attention by innovating and expanding our product range, and therefore we are focusing on products that enable customers to resolve their pension gap. life sales showed a limited 2 ½% decrease which outperformed the life market in the Netherlands, and in quarter 4, life sales were up 5% again. Adjusted for the divestiture of a large portfolio of 182 million euros, our group pension business showed satisfactory growth and premium of 8%, which makes us the market leader in 2002, we think. Compared to 2001, the year 2002 shows an 84% increase in the sales of mortgage-related insurance. 2002 was a disappointing year in profits.

As you already know, net income decreased by 25% to 523 million. The 2002 provisions related to guaranteed investment products have been strengthened with another 209 million. Expenses and commissions increased by 20%, amounting to 666 million . A large part of this increase is accounted for by the change in presentation of expenses and revenues of investment management. As from 2002, asset management fees are no longer subtracted from expenses, but shown as revenues from our newly formed business unit, Aegon . The effect on 2002 is about 60 million euros, and accounts for 11% of the 20% increase. The remainder is based on inflation, an additional write off of acquisition cost as a consequence of higher than expected during previous years. Excluded for these effects, expenses equal 2001. Our head count in 2001 dropped 2%. Concentrating back offices, develop increased quality of services, can decrease costs even further in the future. Over 50% of standardized life is by now sold to distribution channels related to Aegon Nederland and their share in Aegon's production is growing rapidly, but of course, will be an important distribution channel for Aegon in the future, especially life and pension products need face-to-face support from these highly qualified advisors.

A lot of emphasis has been put on distribution channels specializing in pension products. We consider this our core business. Our group pension units are now market leader in their segment. This success is mainly due to the Aegon improved service level to their customers. Retention of expiring contracts in that business is very satisfactory, over 95%. Although the simple annuities market is another market because of the of fiscal deductibility, Aegon is confident that to expect a clear increase in this market still. Life insurance units and pension units will extend their product range with annuity products. Marketing and sales activities with regard to existing customers have proven to be very successful. A large number of customers have decided to increase their number of Aegon products. This is--there is a shift in payment of commissions in the Netherlands on new production. Rather than an upfront payment of acquisitions commission, a number of agents have decided to switch to an annual renewal commission, and Aegon Nederland supports this switch.

Now I'll pass it on to David Henderson, Chief Executive Officer of Aegon UK.

Thank you Johan. Good afternoon everyone. 2002 was certainly a year of some interesting challenges for a business involved in the UK's long-term savings market. Although equity market performance has a major impact on the savings and insurance markets in all territories, the impact of markets is especially significant for UK businesses, given the popularity of high equity content products. In the UK market, therefore, equity market returns do not only have the obvious impacts on earnings and solvency, but also have a direct impact on customer buying sentiment in many crucial markets for us, especially in the pensions and investment arenas. Given that fact then, our 8% reduction in standardized new life production to 588 million pounds was a reasonable performance. Our pension bias means that we have been more affected by market conditions than some of our competitors; however, off balance sheet production rose by 59%, largely based on increased institutional investment management mandates, mainly fixed-interest mandates. Some of our other business units also performed very well. Individual protection new business is up 57 percent to 22 million APE, and our offshore business is up 17 percent to 24 million pounds APE.

The take on competitive position on improved margins, the current market economics have prompted us to review our cost base aggressively. This has resulted in an expense management program, which is on target to reduce our operating expenses by an annualized 40 million pounds by the end of 2003. There have also been some other exciting developments in the UK business and marketplace, which we believe will provide us with opportunities and add significant value to the UK business over time.

The proposed regulatory changes led us to acquiring significant interest in IFE's for the first time. This means that we access distribution profit for the first time as well as creating revenue and cost benefits by building a distribution player. Our ability to enter into distribution agreements with partners has been enhanced by regulatory change, and we recently announced the first of these with the supply of protection products in St. James Place.

Some of the industry wide discussions are beginning to address the issue of how best the UK long-term savings market can be . Which we believe may result in more favorable operating conditions for UK insurers. We believe that for the first time in a long time that the policy makers are listening.

Despite the difficulties caused by the current market conditions, we must never lose sight of the fact that the UK market is one of the world's major long term savings markets with major drivers both political and consumer led, to bridge the savings gap estimated to be around 30 billion pounds per annum.

We believe that only the largest and most efficient of the UK businesses will be able to thrive and service that market and that we at Aegon UK are very well positioned to be one of the winners going forward. Thank you. I think we are now ready to open for questions.

First question please.

Thank you sir. Ladies and gentlemen, at this time we will begin the question and answer session. If you have a question, please press the star followed by the one on your push button phone. If you wish to cancel your request, please press the star followed by the two. Your questions will be answered in the order they are received.

If you are using speaker equipment today, please lift the handset before making your selections. One moment please, for the first question. The first question comes from Mr. . Please state your name followed by your company name and your location, sir.

Yes. Good afternoon gentlemen. , . I have a couple of questions. First one, could you elaborate a little bit more on and business for the tech in both quarter. And it's not very clear to me where I come from, and why you didn't state it earlier, because the fact that you met your earnings outlook that's very dependent on .

And second question, concerns the definite statements for 2003, why are you so early in year that you give statement on this issue? And am I correct that you do it on a basis of 85 cents, taking into account payout of 47 percent? That's it.

Is that a question? Let me first state that the taxes - what we - there are a couple of - no . About taxes, there are a couple of reasons that we have some of tax benefits in our net earnings in the last quarter. The first is that the last couple of months we had a total review on the tax situation in the U.S.

You may remember that at the end of the '90s, what Providian and Transamerica integrated at an Aegon U.S.A.. We are prudent in our provision in making for tax deferrals caused it to be started in big reassurance at the end of the year in the last months of the year, review all the tax items. We filed our 2001 tax - corporate tax in the U.S. and we came to the conclusion that we in the of time, have been too overly prudent and that we should release some of our cautions. That's the first.

Second is that we did a tax deal in the UK, the tax expenditure was loan outstanding. The third reason I would want to give you is that we have a lot of credit losses and provisions taking that, of course, is lowering ours.

We also used up some loss carry forwards, as evident.

I didn't even hear the question.

The question was, why are we so early giving a proposal consideration of a second month?

I guess two things. One, we thought that it would make sense to give some guidance looking forward. As you all know, in the past we paid out 47 percent of earnings. We kind of had that as our method of handling dividends in the past.

One of the difficulties going forward is what will be the definition of earnings with the loss of our revaluation account, which Joseph told you ends at the end of this year, and our change to IAS for the capital gains treatment. And the other issues going on on the overall accounting, we thought it made a lot of sense to decouple dividends from earnings.

Particularly since there are always some parts of earnings that are cash earnings. So, we're trying to take a look at it on a more prudent basis. And of course with the volatile financial markets and the effects that's had on our earnings and our capital, we thought it made a lot of sense to be prudent and just to get out in front a little bit and give you some guidance on where we think we're going to be.

Yes. I think that's where we come from, and then you pick the figure where you're comfortable with in normal circumstance.

Next question.

The next question comes from Mr. . Please state your company name followed by your question, sir.

Yes. Hello. It's , Morgan Stanley here. Good afternoon. Can you hear me? Because the line I've got at least is very bad, I don't know whether that's true for other people as well. But I've got a few questions.

Firstly, I'm intrigued by the statement you make in the release where you say we are reexamining our product portfolio and pricing strategies in terms of risks and reward, which may lead to modifications in benefits and pricing. Can you just expand a little bit on what you're really getting to there?

I think you've referred to blocking the guarantees on variable annuity business in the U.S., but is this a much broader issue in terms of what would appear to be pretty low new business profitability given where bond deals are? That's the first question.

Second question I have is just regarding the traditional life business, if I look at the result from this business it appears to produce a pretty stable pre-tax earnings of about $200 million per quarter over the past year. And I'm just interested in the dynamics of that business in terms of what the policy holder is actually getting, whether that business is being effected by falling bond deals or whether most of the margin in that business effectively comes from mortality charging and mortality profits, in essence?

And the third question I had, just in terms of dropping the indirect investment return, I'm just wondering how much of this 700 million or so which you reported in 2002 actually relates to holdings in the Dutch market? And therefore, what I'm trying to get to is the significant negatives in terms of profitability, the apparent profitability of the Dutch life business looking forwards.

Thank you . First of all, the review. All of our products - and this isn't necessarily just now but, you know, we review our products to look at which ones are an efficient use of capital the way their structured, and whether or not we can restructure commissions or the method of dealing with a product to make it more capital efficient and to get our returns.

And also looking at the inherent risks in different products. So I think that as you mentioned, the variable product that had the guaranteed minimum death benefit, that - or the guaranteed minimum income benefit, that product had been around but it just kind of took off this year. And we just got enough of it. We didn't feel like we wanted to take any more risks in that particular segment.

So we discontinued the sale of that particular writer. Other types of things like our fixed annuity business, where rather than paying an upfront commission with some of our distributors, we're using a levalized commission rather than paying the upfront commissions. Which is a better use of our capital. So it's that type of thing.

In terms of - what was the second question, ?

Yes. , would you like to take that.

, this is . On the traditional life I'll break it into two components. One is a fixed universal life business and the other is our home service business. And the fixed universal life business, which is where the growth is coming from, we are able to change crediting rates as rates have dropped and you're able to protect your spread. That along with mortality, we are getting the desired hurtle rates in the universal life business.

You know, the customer you asked, I think, what is the customer getting? The customer is getting certainly more of a protection product into the extent interest crediting is lower and obviously it's going to cost the customer more to maintain the protection in place. But as rates rise and, of course, the cost may drop.

On our home service business, where you're not able to adjust the crediting rate, the margins do get squeezed in that business and they have gotten squeezed. But, of course, that business does not grow.

All right. I'm sorry. Is there any way you could, even in broad terms, split that 200 million or so per quarter between what is essentially mortality profit and what is spread earning?

Well I'd be guessing.

, I think I'll be seeing you in the next couple of days. At least I don't have that information with me right now. No.

OK. OK.

As to the indirect returns, this is again. In the Dutch market the indirect return was 480 million over 2002. on shares. It's also on part of real estate. If you see, look at our press release, you see that we will discontinue the indirect return system.

That the number, as guidance, we give you for 2003 is 450 and the biggest part of that will be the Netherlands in that assumption. Have to the indirect run is just a question of timing differences, and that if you go IES that every capital gain you make and you realize is going to appear now.

So it's just a question of timing differences.

Yes. Can I just come back very quickly on the answer to the first question? I mean, in the variable annuity business you had very strong growth of I think 60 percent plus in terms of sales, and you cited more distribution agreements as well as the guarantees there.

I mean, again, I guess it's difficult to split it out into those two components, but on the distribution side is there any particular relationships, new relationships, or deepened relationships with selling partners that you would dole out that have supported that sales trend. Because I think you've jumped quite a few notches in terms of your ranking, if you like, in the lead table of the eight players in the U.S.

Yes, . On the - about half of the variable annuity profit, or deposits this past year had the guarantee writer on it. So just about half the deposits. But a lot of the production, I think, was that we had the guarantees, which was a hot item this past year. And, but also as many of you recall, a few years ago we weren't really a player in the variable annuity business and we made the investments in the late nineties to develop a wholesaling team, a fairly significant one, so that we could distribute variable annuity products through the larger broker dealers.

And we've been pretty successful in entering the major brokerage houses.

OK. Thank you very much.

Thanks .

The next question comes from Mr. . Please state your company name followed by your question, sir.

Good afternoon gentlemen. It's , BMP . I think there's a comment that's cost you a 150, 160 million, and what will be the PNL account effect of that?

Well, that's a little hard to say. Let me explain. On a fair value basis ...

No, term to term accounting.

Yes, certainly. On a fair value - you're misunderstanding me with fair value. On a market value basis, this is difficult because some of the stuff we have is unquoted. That's why it says fair value.

On a market value basis, our loss now is 150 million. We own one percent in the order of shares in and we own just over four percent in preference shares in Aegon. We have 50 million in unsecured bonds. We have 110 million in secured bonds, and we are the owner of mortgages on real estate for as a tenant.

This is the portfolio. On all the secured bonds and all the mortgages, we believe that our risks there are pretty limited. But we valued them at fair value with the reflection to market prices today. As far as the loss on orderly shares and preference shares, our concern is that on a market value basis today about 95 million and that will go through the reevaluation reserve.

And the rest upon realization or impairment, which we do not foresee at the moment.

So the quick loss on the bond portfolio, how does that effect the PNL account?

The what loss?

The ...

The bond portfolio.

Yes.

If would ever come into a phase that they would be in default, it would be through our corporate bonds in the U.S.

Yes, but you said that you had lost some - I thought it was 160 million. The world at large is going to think this is going to be a charge in your PNL account, but you just said that the equity result is going to be charged to the 2.6 billion.

So what's going to happen to the bond loss?

The bond loss ...

To market on the bond.

Nothing at the moment because the bonds are recorded at around 70 percent and that's just an unrealized revaluation. That's all.

And what's the - your total position on your bond portfolio's and marked market against carrying value?

If you - if the bonds are ...

He's talking about the total portfolio, so if you do just the corporate bonds, I think the - I'll get corrected if I'm wrong, but I think it's a 1.6 billion positive.

This isn't in your equity at the moment on your present accounting.

No.

Under IAS does it come into your equity?

Depends on the outcome of the discussion on IAS 39, which is unsure.

Corporate bonds are what, two thirds of the bond portfolio or half?

Half.

And so presume you've got a similar sort of gain on your non-corporate bond portfolio?

I think that, , if you include the mortgage and the others it's probably about two and a half.

I kept the number in the wrong place. I have the number somewhere.

So you present to the press the statement that you've lost 150 million in . In fact, that's not going to have any effect on the PNL account, and did you tell the press about the 2.5 billion gains you've got on your bond portfolios?

No.

All right.

No. We have for the - 2.7 billion in unrealized gains on our 15 .

And can I ...

Net. Net.

Net. Good heavens.

Six billion unrealized. Two point billion unrealized losses. One point two billion in U.S. dollars, swap losses would make net 2.7 billion unrealized gains.

Right. Thank you. And can we just get back to point about the repricing of your products or addressing the repricing of products? Are you going to reduce the - your required return on equity for your products?

No. I heard a comment about margin squeeze, but is that your intention to recognize low interest rates by reducing the client returns?

The client returns are a function of the cost of capital and since the interest rates came down there is a tendency to lower to make the cost of capital a lot lower, but on the other hand to scratch risk factors all over the world. So we think that the minimal cost of capital net, net, net would be nine percent for us at this moment.

And that's the absolute minimum you can sell products on, but we like to have a certain on the efforts.

I seem to remember a figure higher than that in the past.

, I think that the answer is is that we do price our products higher, but it's unrealistic to expect to get them with the lower interest rates that we're getting on products today. And so we're making some judgments on individual products where we believe we can reprice them to continue with our franchise.

I think things where we could reset rates and reset profits, particularly we made some short-term basis is look at it a little bit differently.

And they do rate . So it's not for every product the same.

Yes.

And can I just investigate the - you've come up with this shocking statement about the dividends, which has got clear indications about folks and possibly clear implications about what you think about your cash earnings are going to be in the current year.

You must have made some assumptions about what would be happening to equity markets and bond defaults as major items. Are you assuming a continuation of bond defaults at the current level? And your thinking about the year going forward? I would have thought that would be surprising given the sort of underlying improvement .

Well what we did is very simple, . We just looked at a level where we are comfortable with. We have no idea what the financial markets are going to bring us in 2003. We know there is a lot of volatility out there. I agree with you if you only look to corporate bond markets in the U.S., that we in the fourth quarter saw a slight improvement.

We had hoped that that will be consistent, but it's too early to count on that. So all in all we said that we would propose to consider to propose 40 cents, and that's a level that we comfortable with and have taken into account that there might be a lot of volatility in the world.

And perhaps addressing the issue in a slightly different way. You've taken what we might call equity market related charges, or back out guarantees and so both 931 million Euros in the last year. If the market's stay unchanged at the first of January now, which means rising from this level.

But if they still haven't changed at the first January level, what would be the - what would that imply in terms of any further charge in 2003?

, why don't you - been doing some work on that here.

, we changed the functions from 10.5 percent down to 12 percent. The five years and down to nine percent. Obviously if half of these market levels stay the same for this year, but it means that we did not achieve the 12 percent in the current year and we would then have to take a look at what we think would be reasonable assumptions going forward the next several years. There's a lot of scenarios you could have, but the influences that might be probably result in some charge but could not identify what .

Sorry, you're on a very bad speakerphone.

Did you hear any of that?

I didn't get - all I heard was that it might result in some charge.

Yes. Well, it might result in some charge because we would have to take a look again at our assumption going forward. Obviously if we don't get a return this year, we're going to change our view on what we should look at in terms of returns going forward. And if we don't get a return we're probably going to result in some additional charge, but that we would be dependent upon what our assumptions would be going forward.

I see. Oh well, thank you for the clarity.

Thank you. The next question comes from Mr. . Please state your company name followed by your question, sir.

Hello. This is with . I've got actually four questions. The first one, could you state on the margins your making currently in the fixed annuity business? And given some explanations both what you've mentioned earlier about the different types of commissioning these sort of product.

Third question would be, the dividend cut for 2003 has this anyway been agreed with the fine Aegon, have they been consult for this? And fourth question, is actually the change in up front commissioning or commissioning policy in the Netherlands having an effect on future ? And can you specify on this? Thank you.

All right. This is . Let me start with my understanding of your first question, which was fixed annuity spreads. They have been declining. We have been aggressively resetting crediting rates, but the spreads have been declining from a little over 200 basis points throughout 2002 and are now down in the 165 basis point area range, spread range.

And , you asked a question about commissions. Could you repeat that again please?

Yes. mentioned that you wouldn't commissioning the same way as some of the competitors are doing and this would not be favorable for you. So I didn't quite get this when he was answering to , actually.

OK. Well, rather than paying a larger up front commission, we are looking at spreading the commissions with some of our product providers. And with those partners that we are spreading the commission for, actually we do expect to continue production. It will result in lower up front deferred acquisition costs being set up and we think it's more favorable for the customer.

There are several states. There are five states where they have not accepted the lower minimum guarantee and in those states we are reducing commissions and to the extent the competition does not follow, then we are likely to see reduced reduction in those states. And I think that was in response to what - clarification of what had said.

What are these states, actually?

Connecticut, New York, New Jersey, and North Dakota, and before the end of your question, I will get the other state for you.

OK.

State of Washington.

If there is any concerns and just note that Aegon was not consulted and we never do that. They got the press release this morning, but Aegon, I can say that we'll not run into any difficulties because their interest coverage on the loans is already covered with the preference .

OK. And the impact on for change in ...

You mean, the effect of changing from commission to reduced commission?

Yes. In the Netherlands.

That won't have an effect on the . That change will only occur on new policies, not on the existing policies we already have. But it's changed the new .

Yes.

Because you never set up a deck of higher risk than what your actual paying.

Yes. OK. But I would have liked some numbers to get a feeling. What was the usual deck you booked every year for the Netherlands?

It depends on what products we saw on the pricing, so we - the measurement is for you for or is actual is lower. That's what you do and it's different per .

OK.

Next question.

Thank you.

The next question comes from Mr. . Please state your company name followed by your question, sir.

, Deutsche Bank in London. I'd like to say the only person I've heard with any clarity has been when he asked the question. So, not a very good line for us.

But I've got a simple question. You give your combination of equities in real estate, could you give separately what your equity in real estate levels are, please?

Yes.

And second, in relation to your Dutch life margins, we've seen with one or two of your competitors margins falling off a cliff. I wondered if you could give us any comfort that your margins are not on a rapidly declining trend? Thank you.

We own equities for our own accounts in the Netherlands and in the U.S. General account in U.S. for equities is 2.8 billion in shares, convertible and alternative investments. And a part of that is real estate in that 643 million.

But it's a different position than for the Netherlands because there we have 3.4 billion invested in shares and that's really for our own account. So if you added up the 2.8 and the 3.4 that makes the five percent in the general account, but a composition of what is under the line shares in the U.S., there's a different nature because that's including alternative investments and convertibles.

Do you have any hedging on that?

Alternative investments are the most hedging instruments, but it isn't a line of shares. And the question is that on the real exposure and that's no more than four billion in the general account to our own equity investments. No we did not take and hedge.

Thanks. So basically you've got 8.5 billion of equities in real estate and what you're saying is four billion of those equities?

Hang on just a minute here.

We have 8.5 billion in equities in real estate and 3.4 plus 2.8, is the equity line.

OK.

OK.

So you've got about 2.3 billion in real estate?

That's about correct.

OK. Thanks.

Another question on margins and Dutch life insurance?

Yes.

Declining. It's not declining. No signals of that. We are careful in sales of life products in the Netherlands and we expect to make our margins.

So there's no underlying margin decline at all within the Dutch market?

Not in the - at least in the guaranteed products. In the unit link products we see that our fees go down a little, but at the same time we take care that we adjust our pricing. That's what we did in the last 12 months to stay profitable in the future.

Thank you very much.

The next question comes from Mr. . Please state your company name followed by your question, sir.

Hi. with Stephens. All questions have been asked and answered. Thanks.

Thanks .

The next question comes from Mr. . Please state your company name followed by your question, sir.

Yes. Good afternoon. This is from Bank of . I have three questions. First, this development in the Dutch banking operations which had a very poor quarter, is that related to mostly or is it also other factors that I don't know of?

Second, could you tell me a little bit more or do you have any guidance with respect to the tax rate moving forward because of all the one or more structural factors that have pushed the tax rate down in this year or in 2002? And third, maybe a very stupid question but if I compare Aegon with respect to dividend deals and look at the U.S. competitors, Aegon seems to be top of the class by far.

Is there any difference between Aegon being a non-U.S. company versus the U.S. competitors with respect to dividends, taxable deductibility of the dividends over there, or is there any other reason - is there maybe something like a - well, I don't know. Is there any explanation why the dividend yield is so high with respect to the U.S. competitors?

That question, the one about the banking in the Netherlands. This is .

Yes.

We showed negative 24, and it's mainly caused by a provision of 20 million for one of our portfolios and credit risks in there.

OK.

And narrowing our asset has nothing to do with .

OK. Thanks.

On the tax rate going forward, this is simple cut back treasurer. We would expect the tax rate to be somewhere between 24 and 28. It's a little bit hard to predict, but last - in the last quarter of last year we had quite a bit of one offs. We expect that to return in the 24 to 28 range.

OK.

On the dividend deal comparison to the U.S., traditionally U.S. life insurers pay somewhere between 20 and 30 percent of their operating earnings as dividends. Whereas traditionally, and as you know we have abandoned that, we have paid 47 percent of net earnings. I think that is both someway to explain the difference.

I don't think there is a lot of difference in tax treatment, although ...

This is . I would just say when on a statutory accounting basis, which we file with the state regulators and of which they base the ability to pay the dividends out, you are not allowed to capitalize and amortize commissions. You have to expense them right away.

So as companies in the U.S. grow, then they have less statutory earnings from which to pay dividends out. So I think that is also part of the reason why U.S. companies have lower dividend yields.

OK. Thank you very much.

The next question comes from Mr. . Please state your company name followed by your question, sir.

Good afternoon. at Amish Securities in Amsterdam. I have three questions. First question is about the size of the total end of year provisions of guaranteed minimum income benefits, also for guaranteed minimum death benefits. Because until now we only have seen the addition, and my question is what is the total amount at the end of the year in the provisions?

Second question is about your solvency. You are talking about two times the . What is the minimum amount required? In my estimates this is around 10 to 11 billion Euros. Is this correct?

And the last question is about the unrealized gains in the bond portfolio of 2.7 billion Euros. Is this totally for the shareholder or is the profit sharing also part of the policyholder? And can you explain which part is for the shareholder and which part is for the policyholder?

, do you want to go ahead and take the total amount? You've got it there on your GMBD and GMIB.

Yes. On a Dutch account - this is . On a Dutch accounting basis, the guaranteed minimum death benefit reserve is for the U.S. businesses is $206 million. In Canada it is $81 million. The guaranteed minimum income benefit reserve in the U.S. on a GAP basis is $65 million.

OK.

The 2.7 billion that we have now is unrealized gains on the fixed income portfolio. If you realize them, a part of that you will need to come up for the liabilities on your balance sheet and that's one of the strange things you see on the U.S. GAP where people realize that and compensate that with credit default so that you are not seeing the right level of credit default that most of our U.S. competitors.

But then you will see that the returns in the future will be lower, but the greater part of the - the greater part of your of unrealized gain is needed to come up with your liabilities. So it depends profit sharing schedules you have with your policyholder what part is for the insurance company and what part is for the policyholder.

And I don't think I can make a general remark on that, but ...

But it is in our general account.

It is in our general account.

So it is for the shareholder?

No. That is not sure, because if you would sell it we would have to reinvest in bonds that have a lower directory term and if you have any liabilities outstanding with and that is guarantees start at a higher, then you lose it at the other end.

So that calculation is too simple. It's not all for the shareholder. Part will be for the shareholder, but I cannot say which part.

, give us some fuel on the EU minimum solvency calculation. The required minimum margin, it's close to eight billion and the liability capital on the same measures as described in the EU directive is close to 17 billion. Which should end up at around more than two times .

OK. Thanks.

The next question comes from . Please state your company name followed by your question, sir.

Hi. It's , CIBC. I've just got one question. I'm sure the presentation part of the schedule answered my question, but the line was just to crackly. I missed it all.

What are the sensitivities to A, the fall in the mean reversion interest rate? And then the long term - and then the long term nine and a half, nine percent? What was the cost of each of those?

Hang on just a minute.

We did not give the picture in the presentation, so you did not miss anything. I am trying to find it.

Well, it was about ...

, you're asking what the additional charge was ...

Essentially I want to know if you were to bring over 12 percent down to nine percent, and then if you were to bring the nine percent down at some later stage what the aggregate cost would be? So I just want to know the component parts to be able to make that calculation.

Hang with us a minute.

OK. For the estimation for a complete elimination of the mean reversion assumption, that would impact pre tax earnings by approximately $230 million.

, that would be both for and for guaranteed minimum benefits.

Sure. And then the next is, for every one point reduction for the nine percent, say eight percent, how much would that cost?

That would take 110 million.

And that is assuming that you'd already eliminated the mean reversion?

It wouldn't make any difference.

OK.

Again, , that number again includes embedded options.

Sure.

OK.

Thank you very much.

And , that also assumes that there are no other changes in any other assumptions going forward.

Great. Yes. Thank you very much.

The next question comes from Mr. . Please state your company name followed by your question, sir.

Hi. It's here of Bank. Just three questions.

First on the balance sheet, it was quite a significant increase in the debts in the nine-month stage to the year-end. I was just wondering whether you'd give some reason for that? Sort of following through that, you're obviously - you're equity capital ratio is now pretty close to your minimum level, and given the sort of recent deterioration how do you see that developing in 2003?

Secondly, on the U.S., default actually was quite a lot higher in the fourth quarter and the third quarter but you were, you know, putting forward a view that you seem to see some slightly more encouraging signs there. And just wondered what the background for that was?

And finally, on the annuity products, looks as if you sort of add back the exceptional charges that the margins were quite a lot higher in 2002 and 2003, was that indeed the case and if so what would preclude you from selling the products with these additional guarantees?

, to answer your first question. That increase in Q4, right, as we had already indicated in December, because part of the proceeds of - initially the proceeds of the per share investment went to decrease that. But in the fourth quarter we made capital injections in our operating company, which made the debt go up again.

And going forward we are very cautious because there is lots of things that we cannot control that effects our capital position. That's one of the reasons for taking our final dividends shares rather than offering them.

This is . I'll take your second two questions. With respect to defaults and with respect to improving outlook, let me make this clear. When we looked at the companies within our existing portfolio, what we saw was a greater proportion. Balance sheets were looking better and the coverage ratios were looking better. That does not mean that those that were troubled are still not shaking themselves out. They are.

And in the fourth quarter, defaults were a little bit higher for us. Some of the losses from the merchant energy sector were coming through, and then also some of the CBO portfolio which lagged a little bit rather than owning directly were starting to come through.

I think that reflected some of the CBO's related to the telecom sector. On the variable annuities, your third question, I think the answer to that is yes, that we were charging more for some of these embedded options, the equity guarantees. And you were seeing that, however, the desired internal rate of return that we expect to get over a long period of time remained at about 12 percent internal rate of return.

OK. Thanks.

Yes.

The next question comes from Mr. . Please state your company name followed by your question, sir.

? Are you there?

Hello?

Hello?

Hello?

Yes, ?

Yes. You can hear me now?

Yes.

Oh. OK. Sorry. I have a few questions. First of all, you mention in your press release that you're looking to corporate governance changes which you are going to announce. I expect that concerns your relationship to the association Aegon. Could you give a bit more background on that?

And following up on that, Mr. just said that the interest coverage of the association is sufficient. It's governed by the preferred dividend. Does the outstanding debt at the association, is it also related to the gearing of the association? Because I assume that if your own share price drops further, the gearing increases and is there a risk that the association has to sell its remaining shares?

OK. I'll take some of those. We made our remark on corporate governance as a follow up on what we said in September. In September, as you remember, the association sold a lot of the shares. We owned at that time 37 percent. We are now owning only 12 percent in the , and the rest in shares, preferred shares.

And at the time we said that we would reconsider the position of the , I think. In combination with the total review of corporate governance. What we announced in our press release is that in time for the shareholder's meeting, the shareholder's meeting will be at 17th of April, count back three weeks back.

We will together get all the information that we send to shareholders, new proposal for corporate governance changes within Aegon. We are preparing that just right now. The supervisory board is involved. The association is involved. The works is involved, and we will take that decision right in time to inform you at the 20th of March.

OK. And concerning the hearing?

The association, the association has bankrolled 1.7 billion. Interest coverage is sufficient for preferred dividends that they have to show the association owns 12 percent of the shares and they own 440 million preferred shares. Dividends on the preferred shares are sufficient to carry the bank loan.

So the preferred shares do not go down together with the shares. So the association will not run into trouble when the stock price of the A bond is above five.

OK. Then one other question regarding your pension costs. Could you tell us what the development was in 2002 and what it will be in 2003? And next to that, you assume a long-term asset return of nine percent, if I'm not mistaken the FCC is looking to companies which use relatively high return assumptions.

Have you already decided to lower that return assumption, and what would be the impact?

Well, let's first take the pension question. Of course the unstable financial markets has influenced on our stock pension as well, but we're happy enough to say that on the first 87 calculation Aegon as a whole has almost no shortage at all.

So that's all covered. It does mean, however, that especially in the UK and in the Netherlands, that premium holidays are over. So we start being there.

OK.

As far as the returns are concerned, we have lowered our asset return from 9.5 to nine and if you look what is common in the life insurance industry and these are current figures so we did not deduct any or something like that.

We think we are in the insurance industry at this moment of time at the low side.

OK. But also for the assumed return on your pension assets, because that's nine percent, if I'm correct.

No that's 87 compared to fair value of your assets due to fair value of your liabilities, but it's not an issue here.

Oh. OK. Thanks.

And if I may, I think the answer was given for the UK and the Netherlands. In the U.S., we are going to be reducing the long term rate of assumption from nine to eight and a quarter, as well as the discount obligation rate has been reduced from seven and a quarter to six and three quarters. And at the end of the year, we were still over funded by $223 billion.

OK. Thank you. And if I may, one final question. I'm surprised to see no modernization on your UK activities or on your UK related acquisition costs. Could you give us an idea of the sensitivity of that asset concerning related to the equity markets?

, why don't you - .

Yes. In the UK we have a different process than we do in the U.S., in the UK we do not charge off additional acquisition costs unless there is a coverability issue. We would still have the additional room to move in terms of the afternoon markets shutting down before we'd have any acquisitions costs our job.

Yes. It's a bit . You said you had some additional room?

Yes.

For a market decline?

Yes we do.

OK. Which you get from United Air, what size the room is?

Just say that if we had a 20 percent more decline we would have a modest charge.

OK. Thank you.

We have time for two more quick questions, then we all have to catch planes to go to other analyst meetings. So, two questions.

The next question comes from Mr. . Please state your company name followed by a question, sir.

It's from . , I had a couple of questions on the thing. Will they hold onto the shares that they get out of your dividend given what you've said on their financial position, or is it likely that they come to the markets?

My related question is on the preference shares that they hold, the dividend is linked to the short-term, right, and that's coming down that must affect there interest coverage unless their paid interest is also coming down as rapidly as the preference dividends. Can you give some clarification there?

And my final question is on your final dividend, do I read this correctly that it is not an optional dividend that it is mandatory in shares and that you get on every 25 shares, one new share. If so, why do you call it a dividend because on the fresh accounting guidelines I think you should call this a bonus share and that's not a dividend.

First on the association, we did not ask the association that at least you do not have to take the position to sell the shares. What you are then will do is they have to make up their own minds, but they are not forced to do that.

So I think it's pretty safe to expect that they are not going to sell. The preference shares have a short-term interest rate linkage, that's true. But that's also the case as you already thought for the banking credit facility. And dividend and shares, you call it mandatory and therefore a bonus. That's worthy.

But you have to have to his lane and so it's not only worthy, I'm pretty serious here. Because normally if you have a stock dividend and optional dividends, you have the possibility to take a dip in cash and then you can call it a dividend. So you just get one share for 25 new shares. That's a bonus. That's a bonus. Well, just wording it's in the language.

OK. But if you looked to our dividend, you have a dividend of 74 cents for the year and there was an option in the first half-year.

Yes, but nothing - I'm talking about your final dividend, .

Legally only one dividend. In the interim it's just something you get after half a year. If it's only one dividend legally.

Next. We gotta get. I mean, if you want to wrestle with on that, call him back. Because we've got to get moving.

Well, I definitely think you should talk to your accountants because I definitely think you've got ...

I promise you I'll come back to it. I promise you I'll talk to my accountant.

Thank you.

OK.

Next question, last question.

The next question comes from Mr. . Please state your company name followed by your question, sir.

Hi. from National. I just wanted to ask a follow up question on the issue.

Could you remind us what of the total at the year-end, what proportion of that is related to fixed annuities as opposed to equity related products? And how of the six part changes of it all with movements in equity markets?

Good question, . The - I think there's only a - there's a 1.5 billion in outstanding on about 34 billion of variable assets.

Billion five on 31.

Thirty one billion. I'm sorry. And the fixed is ...

We're looking it up.

I have it. No.

Oh, you have it?

, this is . On the fixed annuity portfolio we've got billion nine fifty of both and on 41 billion of contract balance or 4.6 percent.

And if you want more on life business, we have 777 million of . We have 57 million of on our and funding agreement business and 107 million on our fee business.

And in general whether this is in the U.S. or elsewhere in the Aegon group, nothing much happens to the fixed product related ?

That's right.

So you don't impair it along side the variable stuff?

Not with equity market movement. We're being pared on the fixed side of there's an assumption that the returns you originally assumed are going to be effected because of interest rates or because of default charges and there it can be effected on the fixed side.

Great. Thank you.

OK. , we're going to thank you all for participating. We have concluded the cautionary notes regarding forward-looking statements. Statements made in this presentation that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995.

Words such as belief, estimates, intent, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, should, would, is confident and will or similar expressions as they relate to us are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict.

We undertake no obligations to publicly update or revise any forward-looking statements. This centers our caution not to place undue reliance on these forward looking statements, which only as of their dates. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations including, but not limited to the following: changes in general economic conditions particularly in the United States and the United Kingdom, changes in the performance of the financial markets including emerging markets, including the frequency and severity of defaults by issuers in our fixed income investment portfolios, and the effects of corporate bankruptcies and or accounting restatements such as ENRON and WorldCom on the financial markets and the resulting decline in values of equity and debt securities we hold.

The frequency and severity of insured loss of events, changes effecting mortality, morbidity and other factors that may effect the profitability of our insurance products, changes effecting interest rate levels, changes effecting currency exchange rates including the Euro dollar and the Euro bound exchange rates, increasing levels of competition in the U.S, the Netherlands and the UK and emerging markets, changes in laws and regulations particularly those effecting our operations to products we sell, and the effectiveness of certain products to our customers, regulatory changes related to the insurance industry and the jurisdictions in which we operate, acts of God, acts of terrorism, acts of war, changes in the policies of central banks in our foreign government, customer responsiveness in both new product and distribution channels, contested legal regulatory or text changes that effect distribution costs of demand for our product and our failure to achieve anticipated levels of earnings or operational efficiencies, as well as other cost saving initiatives.

Thank you all for joining our conference call.