Aegon Ltd (AEG) 2003 Q1 法說會逐字稿

Welcome to the Aegon Q1 2003 Results Conference Call on 6 May 2003. Throughout today's recorded resentations all participants will be in a listen-only mode. After the Presentation there will be an opportunity to ask questions. Any participant who has difficulty hearing the presentation please press the star followed by the zero on your telephone for operator assistance. I'll now hand the Conference to Mr. Van Katwijk, please go-ahead sir.

Thank you and welcome to Aegon's Conference Call on our Q1 Results. I'm Michiel van Katwijk, before we begin I need to make you aware of our Cautionary Notes regarding any forward-looking statements. The legal Counsel has requested that we read it in full at the end of this call.

Now let's get started and let me turn the call over to Don Shepard.

Thank you Michiel. I hope you can all hear well, from here it sounds like there's a bit of an echo. So I hope somebody will push star and let them know if that's the case.

Good afternoon here in Europe and good morning in the US thank you for joining us today. With me are my Executive Board Colleagues, Jos Streppel, Johan van der Werf, Paul van de Gine and our new colleague Alex Vinarts. Also joining us today are Pat Baird, Chief Executive Officer of Aegon USA and David Henderson, Chief Executive Officer in the UK. Of course Michiel van Katwijk is on the line as well. After a few remarks by myself and Jos Streppel, we'll be happy to take your questions.

Before I discuss our results and new business for the Q1 this year, let's have a brief look at the financial markets, which have affected our business. In the US the DOW and S&P 500 declined by 4% while the NASDAQ remained stable in the Q1. In Europe the FTSE and the AX index showed declines of 8% and 23% respectively. Since quarter end however, US equity markets have improved [inaudible] US dollar earnings measured in euros is minus [inaudible].

After quarter end the US dollar slipped further against the euro to a four year low. Interest rates in our major markets remain stable although at historically low levels. A somewhat positive development is that the all corporate default rate in the US is trending lower and the effects of this are slowly filtering through our results. Slide four.

For Q1 net income was €393m and net income was €0.26. In comparison with the prior year income before tax, was primarily affected by higher additions to the bond default provision of $67m in the US. Lower in direct return of $81m in the US, higher DAK amortization of €40m, higher additions to guarantees provision of €28m. Higher pension expense of €42m. Currency exchange rates had a negative impact on income of approximately €112m. Lower fees on unit length and variable business as well as spread compression on our general account business also contributed to the lower pre tax earnings.

Net income benefited from a lower effective tax rate and a higher profit contribution from Trans America Finance Corporation.

Cost Management remains an integral part of our long-term strategy of profitable growth. With our on-going cost reduction initiatives in the UK and the US we are on the right track for good long-term profitability.

Shareholders equity decreased 5% to €13,522,000 during the Q1. The decrease of €709m is largely due to negative currency exchange rate differences of €539m, a reduction in the revaluation reserve of €428m and €105m decrease from the pure value of the total return swaps with Aegon Association. These decreases of shareholders equity are partially offset by net income of €393m.

Total Assets remained stable in euros despite the weaker dollar and lower fund values of variable and unit linked accounts. Adjusted for currency influences, total assets would have shown an increase of 3%.

Overall - Slide 5 - I'm sorry. Overall, and measured in euros, new production declined. However, standardized life protection in the Americas and the UK was up by 10% and 4% respectively. Production in the US was up primarily because of strong sales and traditional Universal Life in the Agency Channel.

In the Netherlands standard life production decreased by 42% reflecting the lumpy nature of the Group Pension Business. A year ago in the Netherlands they had a very large Group Pension contract in the first quarter and they didn't have any large contracts in the first quarter of this year. A number of prospects for Group Pension Plans have not yet materialized but we still expect a pretty good year in that business here in the Netherlands. Without the influence of currencies standardized life production would have increased 10%.

Slide 6. Total deposits in the Americas increased almost 2% to approximately $7b in Q1. Variable annuities increased 49% in the Americas and 57% in the US compared to the same quarter last year. This reflects the expansion of our distribution network and the guarantee features of certain products.

In January of this year we discontinued selling variable annuity products with a guaranteed minimum income benefit rider. As a result we experienced strong sales prior to the discontinuation of this benefit rider and a reduction in sales in February and March. Overall we are expecting a reduction in sales of variable annuities in 2003.

Fixed Annuities Deposits decreased 20% for the quarter as we lowered new business crediting rates below the levels offered by some of our principal competitors. Guaranteed investment contracts and funding agreement deposits were 10% lower than Q1 last year, due in part to maintaining our discipline in a very competitive market. Savings Deposits were 13% lower for the same reason.

Off balance sheet production, which is mostly in the Americas showed a 32% increase in US dollars for the quarter with equally strong increases in Mutual Fund and Managed Asset sales and the synthetic guaranteed investment contract sales.

Slide 7. In view of uncertain financial markets we remain cautious in our outlook for 2003 and are not providing an earnings forecast. What is certain though is that we'll continue to pursue and implement cost reduction initiatives, continue to expand distribution and strengthen our partnering relationships, and we will continue to maintain pricing and risk management discipline.

I'll now turn the program over to Jos Streppel who will further discuss our results in investments.

Thank you Don.

Slide 8. Don has already discussed the main items affecting earnings in the first three months of this year. I'll bring you up to date on deferred policy acquisition costs. After that I will briefly update you on the changes in our investment portfolio and provide some further detail on the [indiscernible] quality of the US Bond Portfolio as well as our sector allocation into US Corporate Bonds for you. I will conclude with our capital position [and rating].

Slide 9. This slide shows the exact balances for the products in the various countries at March 31st. As you can see variable annuities DAK is approximately €1.5b and although the relevant equity markets were down by approximately 3% during the first three months this year, they have recovered considerably since then.

We have maintained our assumptions for growth annual equity market returns at 12% for the 5 year and 9% thereafter and have not therefore accelerated DAK amortization on variable annuities.

Our DAK assets related to variable annuities in the Americas is less than 5% of our variable annuity account values, which are US $33.6b.

Slide 10. Total revenue generating investments measured in euros declined by €1b to a total of €276b. Excluding the influence of the lower dollar exchange rate, total revenue generating investments would have increased 2%. The equity and real estate portfolios have the largest percentage changes. The general and separate account equities and real estate portfolio decreased 5%. The total equity portfolio is now €5.9b which includes almost €700m in preferred private placement shares.

Fixed income [indiscernible] for the general account rose by 2% and were stable in the separate account during Q1. Nearly 90% of our general account fixed income portfolio, $110b, is invested in bonds and mortgages in the Americas. In the US fixed income portfolio, we have gross unrealized gains of $6.7b and net unrealized gains of $4.6b at the end of Q1.

Slide 11. Bonds in the US represent $92b of our $110b fixed income portfolio in the Americas. The increase in the bond portfolio during the first three months compared to 2002 largely reflects the increase in new deposits and good persistency in the fixed annuity and [indiscernible] businesses. Our US bond portfolio is up constant [indiscernible] quality which has remained relatively unchanged during the Q1. The overall weighted average loan portfolio quality remained at single A. The bond default provision was strengthened by an additional $149m during the Q1 and a like amount was charged against [income].

Slide 12. On this slide you see our update of corporate bonds holding by sector representing approximately 64% of our total bond portfolio. No significant movement in allocations occurred during the Q1.

Slide 13. During Q1 2003 shareholders equity total capital was influenced by the weaker dollar and unrealized investment losses. At the end of Q1 shareholders accounted for 71% of the capital base being above our stated targets of 70% we continue to have good financial flexibility and our operating subsidiaries continue to have strong financial strength readings. At the same time our capital needs increased due largely to acquisition costs and solvency requirements on new business production. As well as additional default provisions in the United States.

Slide 14. [indiscernible] During the Q1 as a result of their actual review Standard and Poors lowered our insurance financial strength ratings from double AA plus with a negative outlook to double AA with a stable outlook. Aegon remains committed to supporting very strong insurance financial strength ratings for its operating companies. [We’ll be happy to take questions].

Hello Operator?

Thank you. If any participant would like to ask a question please press the star followed by the one on your telephone. If you wish to cancel this request please press the star followed by the two. Your questions will be polled in the order they are received. One moment for the first question.

Thank you. The first question comes from Mr. Jason Zucker, please go ahead sir.

Great, thank you and good morning or good afternoon everybody.

Hi Jason.

I had a few questions, they're quick questions so let me just list them out. One, I was hoping you could talk about average crediting rates in fixed annuities and where they are. Then you said you had lowered them during the quarter sales slow down. I was hoping you could talk about whether or not you're at risk of losing any bank agreements because you have been bringing crediting rates down. Next I was hoping you could comment on spreads in your fixed annuity business. New business versus your booker business. With higher equity markets in the second quarter, if they stay with us, do we see DAK and GNBB unlocking for the second quarter. Lastly, did you make any capital contributions from Corporate to the US subs during the quarter?

Jason I'll take the last two. We didn't make any contributions during the second quarter to the US subs.

Okay.

If the markets improve significantly beyond our expectations during the year it would be unlikely that there would be at this time any positive unlocking, but it would increase our fee basis on the balances in our equity funds. I think on the fixed annuity spreads, Pat Baird's here and I'll ask him to answer that question.

Jason I'll just tick these off as you gave them to me. If I miss something let me know. The weighted average crediting rate for Q1 was 4.4%. The minimum guaranteed rate on the existing book is 3.2% and as the year continues we would expect the 4.4% to drop down considerably. As far as, are we in danger of losing any of our bank relationships? I think that those that we have really good strong partnerships with, I think the answer right now is no. In fact we continue to treat the bank channel as a distribution channel with all of our products, not just fixed annuities, so we're touching them now in other areas, pension plans, work side marketing and so forth. So while we are clearly not chasing volume right now I'm trying to focus on still getting a return in the fixed annuity business. I don't think we're in danger of losing the key relationships that we have.

As far as spreads. We are at approximately 160 basis points. I think I mentioned at the end of the year that we expected the spreads on our existing book of fixed annuities to flatten out and we do. As far as spreads on the new business we're actually getting our supportable rate, that means we're only crediting about 2%, anywhere from 2%-2.25% but with that we are getting our 200-250 basis points that we need to get a return.

Great, Pat, on 160 basis points, what is that equivalent return on equity?

On an internal rate of return that is in the neighborhood of 8%-9%.

Great. Thanks everybody.

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

Hello it's Rob Proctor here, good afternoon.

Hi Rob.

I've got a few questions as well. Apology, there was an echo but that appears to have gone. The first question is on Trans America Finance Corporation. I was surprised by the strength of the result in this business €73m I think net. I think you've explained €31m of this with an exceptional tax charge, sorry tax credit. Can you just say what that is and maybe just give a little more flavor as to why this appears to be the best quarter that you've had in some time. That's the first question.

The second question is relatively quick I think. The interest charge for the Group as a whole also was materially higher than I'd expected in the quarter and I think higher than any quarter in the past year or so. I wonder if there's anything particular that explains that situation.

The third question is just on the cost and the outlook for expenses. I notice in the text of the release you mentioned that expenses were up 2% I think, like-for-like in the US life business. I'm just wondering why that is. It strikes me as perhaps slightly disappointing and I'm just trying to figure out if there's any particular explanation for that. Thanks.

Rob with respect to Trans Americas Finance Companies I take it you understood or would you like a little bit more color commentary on the Canadian Foreign Tax Credit?

I think that would be useful, yes.

I don't think there's any magic there other than it was somewhat of a timing difference. There was substantial taxes paid on our Canadian business and a tax credit came through in the first quarter of 2003. Other than that, with respect to why it was such a strong quarter. There continues to be a substantial amount of refinancing activity, which benefits our tax service business. What we're finding is that customers are now refinancing for the second and third time the same mortgage loan and I think that was not expected. At the same time we also got our act together in that business, got our system working and we're much more efficient than we used to be. We continue to have better credit performance in our commercial lending sector that was worth about $9m after tax, improvement in credit losses.

Okay.

The extent that there is risk in the airlines portfolio and the finance companies that we've dealt with in Q4 2002. Other than that it was just a general improvement across the board. It is well managed, it has been conservatively managed and in Q1 we're starting to see the benefits from that.

Should we expect this refinancing activity to tail-off or would you consider it reasonable to expect some more of this as we go through the year?

Rob if you'd asked me that a year ago I would have said yes we expect to see a tail-off and it hasn't. We never expected existing customers to continue to refinance the same mortgage loan as rates dropped so that's somewhat of a new phenomenon. Though we would expect it to continue at least into the first half of the year and then beyond that we're not sure.

Okay.

The expenses Pat?

Rob you said you were concerned about operating expenses being up 2% from.

Yes I thought you - there were various initiatives to reduce expenses in the US business and I just wondered why we would have expected on a like-for-like basis that increase?

Well as you know the revenues continue to increase for the most part in the US and our actual to allowable continues to drop. We are now at 100% in Q1. We have had a head count reduction in Q1; there continue to be other expense initiatives. I would suggest to you that the expense initiatives going forward are going to be, I hate to use this word because it's already been used, but they're going to be lumpy. We took a lot out last year, I think this year will be more moderate and then as we pursue these other initiatives there will be quarters where they will be somewhat significant.

Okay. Can you remind me what the actual to allowable was for the full year 2002?

It was, it was for the full year 2002, and it was 101%. It was 105% for the full year 2001 and we're right at 100% now.

Okay.

On the interest expenses Rob. I think interest expenses; interest charges and other are approximately at the same level as Q1 last year. I think what you will see in the later quarters, that they get somewhat distorted by [indiscernible] provision and other items in there, lowering them towards the end of the year. If you look at actual interest expense in the Q1 of this year was 90 and other items in there like expenses, small currency differences and miscellaneous items were $29m. Compared to the Q1 of last year interest charges of $102m so they have come down.

Would we expect the subsequent quarters this year to be more like the quarters, the corresponding quarters of last year then, is that what you're saying?

No. The remaining quarters during this year would be more like the first quarter of this year.

Okay fair enough.

With currency rates at the levels where they are right now.

Right okay. Thanks very much.

Thank you. The next question comes from Mr. Patrick Russon, please state your company name followed by your question.

Yes hello very Patrick Russon here from [indiscernible] Securities. I was also [indiscernible] on the interest charges and we aren't given this, it's not satisfactory for me to understand but I thought net debt came down interest rates are lower so,

[[[ *** phone transcript cut off at this point *** ]]]

why don't we see lower financial charges? Can you explain what's what?

Interest expense included in interest charges and other was €90m in the first quarter of last year that was [€102m] so on a comparable basis that's more than [10%] lower. Whereas the total interest charges and other in the first quarter last year was [€115m], the first quarter of this year €119m. The difference is expenses, currency difference and some other miscellaneous item. During the year we would expect interest expenses to run approximately at the same level as the first quarter of this year.

Last year there was a substantial drop during the year why is that not happening again then?

Because that's where release of provisions and run-off of - general dividends we received from our run-off in the UK of our general insurance operations.

Okay.

So those would not be non-recurring.

Okay. Thanks.

Thank you. The next question comes from Mr Fred Nanto please state your company name followed by your question.

Good afternoon this is Fred Nanto at Execution Limited(ph.). Just going through the results I have a question on what your target for fixed annuity spreads between [200-250] basis points. Firstly what you commented about the absence of indirect investment income. I guess I just want to have an understanding on your target spreads. What do you factor in as a realized gain field inside of those target spreads because it looks as though you're not putting through any indirect investment income in 2003? I just want to get a feel for if that's going to be the trend that continues for the rest of the year and how we should understand what you target as your price sale on the spreads?

I think the answer is, in the bond portfolio, we're not including gains in the bond portfolio in the spread. That specifically is the answer. Michiel go ahead.

I think Fred [indiscernible] in direct return from equity portfolio last year, still in there this year. There is no equity in direct return, that is because we allocate out, you know, where we invest our capital we allocate earnings on that out through the business line. But generally we would not allocate equity investments to fixed annuity investments. So that is not included in spread we targeted in our fixed annuity business.

But that is I guess as far as what you record in terms of this segment or the product segment's profit. If we try and measure that as a ratio the assets which it [indiscernible] I always think of that as whatever the spread was plus your cost income and then any earnings that are achieved on the capital and [indiscernible] business.

Yes.

Thanks.

Thank you. The next question comes from Mr Yak Myer please state your company name followed by your question.

Yes this is Yak Myer [indiscernible]. You gave some comments about the internal rate of return on fixed annuities. Can you give it also indicative for the new production of the total production because I thought you highlighted it last time after the Q4 results at almost [9%], is that true?

On the existing [indiscernible] the question asked previously was at [160] basis point spread or thereabouts, what would the return on equity be? My answer was and still is between [8% and 9%]. On new production at the higher spreads that we try to achieve over longer periods of time, we try to obtain at least an 11% internal rate of return.

Right. Could we see some more emphasis on [indiscernible] the non-core assets, certainly now it's improving the performance, how do you see?

Naturally we're always looking at that possibility but we wouldn't comment on anything today.

Okay. Maybe you could shed some light on the [indiscernible] and the DAK and the guarantees and the capital gains. We see a deteriorating trend over the quarter sequentially, it is kind of worrying. Perhaps you could comment on that, this is really related to the spreads coming down and fee income coming down. What do you see in the next quarters?

I think just as a very general rule since a lot of, although we continue to have mortality earnings, a lot of our earnings come from the fees on the equity portfolio and investment income in our fixed products and our of course our spread in the spread type products. All of which are under some pressure. Just as an example, in the home service business that we have a relatively large block of business, the lower fixed income returns come right out at the bottom line. Now if returns start back up and interest rates start back up that drops right through the bottom line as well. So as we said earlier last year, none of the things that have happened in the financial markets have been good for our business today. But we continue to believe in the long run that works out and that most of our products are priced to make our return levels in more level financial times.

It's just when you strip out the exceptional and special items the underlying trend is so much worse than your peers. I think um?

I can't comment on our peers because there's different, if you're talking about a peer that has a banking business or a peer that has other types of business on the short-run that's kind of difficult to talk about. One of the things that has impacted our earnings of course is higher pension costs. In the US where we still have an over funded pension, a significantly over funded pension, but under the accounting rules we had income from that over funded pension and that income probably will decrease by, I'm taking a guess at [$80m] this year. A decrease in pension income. Plus in the Netherlands and in the UK we're off pension holidaying and we're back making pension contributions. Let me see if I can, can somebody give me an annualized pension cost change? So for the quarter it was [€42m] additional pension costs.

But the real question is you failed to offset the decline in spreads and fees through lower costs. I think that's the key if you get [indiscernible]?

Keep in mind that, again I can't comment on peers and I cannot comment on the way other companies account for things, all I can say is that as an example in the fixed annuity business the majority of the fixed annuity business in the US was written at [3%] minimum guarantees. When rates come down you've got margin compression. Now we have refilled and the new business, or a large part of the new business written in the last, I don't know Pat six months, five months, has been at a [2%] guarantee, which is why on new business we're getting a little bit better margin.

I think that that's true. With rates coming down and pushing up against the underlying guarantees there is margin compression.

All right, thanks for that.

Thank you. The next question comes from Mr Nick Holmes, please state your company name followed by your question.

Yes hello. Nick Holmes from Lehman Brothers. I have just a couple of questions. The first one is on the guarantees within the Dutch mixed fund, the Dutch unit link business. I just wanted to ask, you took a charge of [€31m] in Q1 how did you calculate this? Is this against the Dutch market decline in Q1, which was around about [23%] or, as of today, which is around about [11%]? That was my first question. My second question is, looking at the solvency, you've said previously that your solvency is [200%] of the EU requirements but you won't give us breakdown of that calculation. I wanted to ask, does that calculation, could you tell us, in spite of your lack of disclosure on this, just one thing which is does it include DAK or not? Because I find it very hard to reconcile.

As far as the guarantees on the Dutch mixed funds are concerned the calculation is made on the basis of [indiscernible] model. I think in the US [indiscernible] GMBBs. No it's not a [indiscernible] development of the Dutch equity markets since the so-called mixed funds and in the Netherlands is investing [indiscernible]. So you have to look more at the FTSE [indiscernible] and S&P 500 to take a right estimate.

Can I just ask. You didn't take significant charges for GMBB and RD in America and yet you did for the Dutch mixed fund, or at least relatively so, I mean, why is there such a difference?

Because we did a new analysis in the Dutch organization. In Q1 we drew the conclusion that there was a slight deviation from the calculation that we made at the end of last year, you know [indiscernible].

Okay thank you.

On your second question Nick. The charges are calculated based on gross technical provisions instead of net technical provision. The charges are calculated over technical provisions before subtraction of DAK.

I'm sorry. So does that mean that DAK is going into your solvency capital?

Well what I said is, we take the charges over the gross technical provisions, so that is before subtracting DAK from the technical provisions.

So the translation is that yes DAK is in the solvency capital effectively?

Yes.

But isn't that against what the EU Regulations say about DAK?

[indiscernible] in the amounts that we identify as to EU solvency is as [indiscernible] CAPEX says is an amount that is based on the technical provisions before deduction of DAK. The amount that you compare with which is the Aegon consolidated equity amount, that is based on the Aegon accounting principles and includes the DAK of course.

Yes. I was just thinking of your reference, I thought it was to the EU Solvency Regulations and my understand of those was that DAK is not permitted as an asset.

That is correct. That is why we have used the technical provision numbers.

Yes.

Before we deduct the DAK.

But doesn't that you are then including it in capital? Before you deduct the DAK.

The Solvency is based on percentages that you apply against the technical provisions and those are the gross numbers and does not include deduction for the DAK. The DAK is a liability in our balance sheet; it's deducted from the technical provisions rather than an asset.

Nick I'll be happy to continue this discussion tonight or tomorrow.

Okay. That's great. Thank you very much indeed.

Thank you. The next question comes from Mr. Bart van Devine please state your company name followed by your question.

Bart van Devine, Amber(ph.) Securities, Amsterdam. I have four questions. My first question is about your indirect income on equities. You expect for the full year [€450] do you still expect that because Q1 is somewhat higher than the one before?

My second question is about your US Bond Portfolio. The below investment grade part has increased from [7% to 8%], perhaps you can explain this?

My third question is about your [€42m] higher pension costs. Can we also expect this higher pension costs in the next few quarters?

My last question is about DAK locking, for the full year you expect [12%] return on equities so what will happen with the DAK locking if at the end of the year the market will stay at the same level as next year? Do you expect [indiscernible] DAK unlocking and what is the size this DAK unlocking?

Well on the DAK unlocking are you, I'm not sure, are you saying if the equity markets stay the same as they are today for the balance of the year, is that the question?

Yes.

I would say if they stayed where they're at today in the US the DAK unlocking and the additions to the embedded options would be about [$40m] if they didn't increase anything from today.

Okay.

Pre-tax, approximately.

The pension costs issue, if the markets stay where they're at today you can expect that pension cost to be about the same for the rest of the year. If the markets improve of course that pension cost could go down. If it gets worse it could go up.

So we can expect also around [€40m] in the next few quarters.

I think that's a good guess. Yes.

Okay.

On indirect return Bart I think it is not too far off one quarter what we realized in the first quarter. So we're still expecting about [€450] for full year.

Okay clear.

Bart this is Pat Baird on the question about the high yield bonds as a percentage of total [inaudible]

Compared to the average of 2002 it was nearly what we did in the four quarters. The main reason for our Canada production going down is in our Group Life Business. Well you can talk about lumpy business and we are quite sure that we will be one of the contracts in the course of the year to meet our standard life ambition.

If you look at the pension market, the Group Pension Market, it's quite normal that every now and then in the last five years [indiscernible] do a contract of [300-400] million and we are working on those. We simply didn't close one in the first quarter.

On the solvency in the UK, the focus here is on the with profit funds. We have two Scottish Equitable and Guardian. We don't actually disclose at the end of the quarter the pre-asset [indiscernible] at that time. Just to remind you at the year-end Scottish Equitable on the same basis of most of the published competitors was about [10.3%], which was pretty well in line with most of the market. For Guardian it was about [7.7%]. So we're pretty comfortable with those numbers.

Thank you.

Thank you. There are no further questions at this time. Please continue.

I would like to remind you of our cautionary note that I will read in full. Thank you all for listening and then asking questions.

Our cautionary note regarding our forward-looking statements is that the statements made in this presentation that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995 words such as believe, estimate, intent, may, expect, anticipate, predict, project, [indiscernible] plan, continue, want, forecast, should, would, is confident and will are similar expressions as they relate to words and 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 obligation to publicly update or revise any forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak 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 the general economic conditions particular in the United States, the Netherlands and the United Kingdom. Changes in the performance of financial markets including [indiscernible] market, including the frequency and the severity of default by [indiscernible] in our fixed income investment portfolios and the effect of corporate bankruptcy and/or accounting restatements such as ENRON and WorldCom on financial markets and the result in decline in value of equity and debt securities we hold.

The frequency and severity of insured loss events, changes effecting mortality, morbidity and other factors that may affect the profitability of our insurance products. Changes effecting interest rates levels, changes effecting currency exchange rates, including the euro, US dollar and euro/UK pound exchange rate, increasing levels of competition in the United States, The Netherlands, the United Kingdom and emerging markets. Changes in laws and regulations particularly those affecting our operations, the products we sell and the attractiveness of certain products to our customers. Regulatory changes relating to the insurance industry and the jurisdictions in which we operate. Acts of God, acts of terrorism and acts of war. Changes in the policies of central banks or foreign governments. Customer responsiveness in both new products and distribution channels. [indiscernible] legal regulatory or text changes that effect distribution costs of our demand for our products and our failure to achieve anticipated level of earnings or operational efficiencies as well as other costs saving initiatives.

Thank you all very much for participating.

This concludes the Aegon Q1 2003 Results Conference Call. Thank you for participating.