Edgar Filing: AEGON NV

6-K

Securities and Exchange Commission

Washington, D.C. 20549

Form 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d/16

of the Securities Exchange Act of 1934

May 2014

AEGON N.V.

Aegonplein 50

2591 TV THE HAGUE

The Netherlands

Aegon’s condensed consolidated interim financial statements Q1 2014, dated May 15, 2014, are included as appendix and incorporated herein by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		AEGON N.V.
		(Registrant)

Date: May 15, 2014	By	/s/ J. H. P. M. van Rossum
		J. H. P. M. van Rossum
		Senior Vice President and Corporate Controller

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Table of contents



Condensed consolidated income statement			2

Condensed consolidated statement of comprehensive income			3

Condensed consolidated statement of financial position			4

Condensed consolidated statement of changes in equity			5

Condensed consolidated cash flow statement			6

Notes to the condensed consolidated interim financial statements			7


Unaudited		1

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Condensed consolidated income statement

EUR millions	Notes	Q1 2014		Q1 2013

Premium income	4	5,265		6,267
Investment income	5	1,948		2,013
Fee and commission income		466		466
Other revenues		1		2
Total revenues		7,680		8,748
Income from reinsurance ceded		699		803
Results from financial transactions	6	2,228		7,731
Other income		8		87
Total income		10,614		17,369

Benefits and expenses	7	10,013		16,881
Impairment charges / (reversals)	8	8		25
Interest charges and related fees		116		103
Other charges		2		95
Total charges		10,140		17,104

Share in net result of joint ventures		5		(8	)
Share in net result of associates		8		5
Income before tax		488		262
Income tax (expense) / benefit		(96	)	(38	)
Net income		392		224

Net income attributable to:
Equity holders of Aegon N.V.		392		224
Non-controlling interests		-		-

Earnings per share (EUR per share)	15
Basic earnings per common share		0.16		0.09
Basic earnings per common share B		-		-
Diluted earnings per common share		0.16		0.09
Diluted earnings per common share B		-		-

Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.


2		Unaudited

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Condensed consolidated statement of comprehensive income
EUR millions	Q1 2014			Q1 2013

Net income		392			224

Other comprehensive income:
Items that will not be reclassified to profit or loss:
Changes in revaluation reserve real estate held for own use		-			1
Remeasurements of defined benefit plans		(234	)		122
Income tax relating to items that will not be reclassified		66			(50	)

Items that may be reclassified subsequently to profit or loss:
Gains / (losses) on revaluation of available-for-sale investments		1,819			(347	)
(Gains) / losses transferred to the income statement on disposal and impairment of available-for-sale investments		(112	)		(113	)
Changes in cash flow hedging reserve		198			(95	)
Movement in foreign currency translation and net foreign investment hedging reserve		(19	)		260
Equity movements of joint ventures		6			10
Equity movements of associates		(1	)		10
Income tax relating to items that may be reclassified		(580	)		169
Other		(1	)		3
Other comprehensive income for the period		1,142			(30	)
Total comprehensive income		1,534			194

Total comprehensive income attributable to:
Equity holders of Aegon N.V.		1,535			195
Non-controlling interests		(1	)		(1	)

Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.


Unaudited		3

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Condensed consolidated statement of financial position
		Mar. 31, 2014		Dec. 31, 2013
EUR millions	Notes

Assets
Intangible assets	9		2,192		2,272
Investments	10		138,567		135,409
Investments for account of policyholders	11		167,903		165,032
Derivatives	12		16,965		13,531
Investments in joint ventures			1,450		1,426
Investments in associates			482		470
Reinsurance assets			9,771		10,344
Deferred expenses	14		9,909		10,006
Other assets and receivables			6,958		7,586
Cash and cash equivalents			7,116		5,691
Total assets			361,314		351,767

Equity and liabilities
Shareholders’ equity			19,129		17,601
Other equity instruments	16		4,580		5,015
Issued capital and reserves attributable to equity holders of Aegon N.V.			23,709		22,616
Non-controlling interests			8		10
Group equity			23,718		22,626

Trust pass-through securities			123		135
Subordinated borrowings			45		44
Insurance contracts			102,630		101,769
Insurance contracts for account of policyholders			87,031		84,311
Investment contracts			13,742		14,545
Investment contracts for account of policyholders			83,025		82,608
Derivatives	12		14,765		11,838
Borrowings	17		13,033		12,020
Other liabilities			23,202		21,871
Total liabilities			337,596		329,141
Total equity and liabilities			361,314		351,767

Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.


4		Unaudited

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Condensed consolidated statement of changes in equity
EUR millions	Share capital ¹		Retained earnings			Revaluation reserves			Remeasurement of defined benefit plans			Other reserves			Other equity instruments			Issued capital and reserves ²			Non- controlling interests			Total

Three months ended March 31, 2014

At beginning of year		8,701		8,361			3,023			(706	)		(1,778	)		5,015			22,616			10			22,626

Net income recognized in the income statement		-		392			-			-			-			-			392			-			392

*Other comprehensive income:*
*Items that will not be reclassified to profit or loss:*
Remeasurements of defined benefit plans		-		-			-			(234	)		-			-			(234	)		-			(234	)
Income tax relating to items that will not be reclassified		-		-			-			66			-			-			66			-			66

*Items that may be reclassified subsequently to profit or loss:*
Gains / (losses) on revaluation of available-for-sale investments		-		-			1,819			-			-			-			1,819			-			1,819
(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments		-		-			(112	)		-			-			-			(112	)		-			(112	)
Changes in cash flow hedging reserve		-		-			198			-			-			-			198			-			198
Movement in foreign currency translation and net foreign investment hedging reserves		-		-			-			(1	)		(18	)		-			(19	)		-			(19	)
Equity movements of joint ventures		-		-			-			-			6			-			6			-			6
Equity movements of associates		-		-			-			-			(1	)		-			(1	)		-			(1	)
Income tax relating to items that may be reclassified		-		-			(577	)		-			(3	)		-			(580	)		-			(580	)
Other		-		-			-			-			-			-			-			(1	)		(1	)
Total other comprehensive income		-		-			1,328			(169	)		(16	)		-			1,143			(1	)		1,142
Total comprehensive income/ (loss) for 2014		-		392			1,328			(169	)		(16	)		-			1,535			(1	)		1,534

Treasury shares		-		1			-			-			-			-			1			-			1
Other equity instruments redeemed		-		35			-			-			-			(438	)		(403	)		-			(403	)
Coupons on non-cumulative subordinated notes		-		(6	)		-			-			-			-			(6	)		-			(6	)
Coupons on perpetual securities		-		(41	)		-			-			-			-			(41	)		-			(41	)
Share options and incentive plans		-		4			-			-			-			3			7			-			7
At end of period		8,701		8,748			4,351			(875	)		(1,795	)		4,580			23,709			8			23,718

Three months ended March 31, 2013

At beginning of year (as previously stated)		9,099		10,446			6,073			(1,085	)		(1,045	)		5,018			28,506			13			28,519

Changes in accounting policies relating to deferred policy acquisition costs		-		(1,472	)		43			-			(58	)		-			(1,487	)		-			(1,487	)
Changes in accounting policies relating to policy longevity methodology		-		(925	)		-			-			-			-			(925	)		-			(925	)

At beginning of year, restated		9,099		8,049			6,116			(1,085	)		(1,103	)		5,018			26,094			13			26,107

Net income recognized in the income statement		-		224			-			-			-			-			224			-			224

Other comprehensive income:
Items that will not be reclassified to profit or loss:
Changes in revaluation reserve real estate held for own use		-		-			1			-			-			-			1			-			1
Remeasurements of defined benefit plans		-		-			-			122			-			-			122			-			122
Income tax relating to items that will not be reclassified		-		-			-			(50	)		-			-			(50	)		-			(50	)

Items that may be reclassified subsequently to profit or loss:
Gains / (losses) on revaluation of available-for-sale investments		-		-			(347	)		-			-			-			(347	)		-			(347	)
(Gains) / losses transferred to income statement on disposal and impairment of available-for-sale investments		-		-			(113	)		-			-			-			(113	)		-			(113	)
Changes in cash flow hedging reserve		-		-			(95	)		-			-			-			(95	)		-			(95	)
Movement in foreign currency translation and net foreign investment hedging reserves		-		-			-			(7	)		267			-			260			-			260
Equity movements of joint ventures		-		-			-			-			10			-			10			-			10
Equity movements of associates		-		-			-			-			10			-			10			-			10
Income tax relating to items that may be reclassified		-		-			192			-			(23	)		-			169			-			169
Transfer from / to other headings		-		(2	)		2			-			-			-			-			-			-
Other		-		4			-			-			-			-			4			(1	)		3
Total other comprehensive income		-		2			(360	)		65			264			-			(29	)		(1	)		(30	)
Total comprehensive income / (loss) for 2013		-		226			(360	)		65			264			-			195			(1	)		194

Coupons on non-cumulative subordinated notes		-		(6	)		-			-			-			-			(6	)		-			(6	)
Coupons on perpetual securities		-		(43	)		-			-			-			-			(43	)		-			(43	)
Share options and incentive plans		-		3			-			-			-			12			15			-			15
At end of period		9,099		8,229			5,756			(1,020	)		(839	)		5,030			26,255			12			26,267

¹	For a breakdown of share capital please refer to note 15.

²	Issued capital and reserves attributable to equity holders of Aegon N.V.

Amounts for 2013 have been restated for the voluntary changes in accounting policies for deferred policy acquisition costs and longevity reserving. Refer to note 2.1 for details about these changes.


Unaudited		5

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Condensed consolidated cash flow statement
EUR millions	Q1 2014			Q1 2013

Cash flow from operating activities		907			(1,073	)

Purchases and disposals of intangible assets		(2	)		(1	)
Purchases and disposals of equipment and other assets		(15	)		(10	)
Purchases, disposals and dividends of subsidiaries, associates and joint ventures		(16	)		(21	)
Cash flow from investing activities		(32	)		(32	)

Issuances, repurchases and coupons of perpetuals		(451	)		(57	)
Issuances, repurchases and coupons of non-cumulative subordinated notes		(8	)		(8	)
Issuances and repayments of borrowings		923			58
Cash flow from financing activities		465			(7	)

Net increase / (decrease) in cash and cash equivalents		1,340			(1,112	)
Net cash and cash equivalents at January 1		5,652			9,497
Effects of changes in foreign exchange rates		6			(6	)
Net cash and cash equivalents at end of period		6,998			8,379

	Mar. 31, 2014			Mar. 31, 2013
Cash and cash equivalents		7,116			8,572
Bank overdrafts		(118	)		(193	)
Net cash and cash equivalents		6,998			8,379


6		Unaudited

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Notes to the Condensed Consolidated Interim Financial Statements

Amounts in EUR millions, unless otherwise stated

Aegon N.V., incorporated and domiciled in the Netherlands, is a public limited liability company organized under Dutch law and recorded in the Commercial Register of The Hague under number 27076669 and with its registered address at Aegonplein 50, 2591 TV, The Hague, the Netherlands. Aegon N.V. serves as the holding company for the Aegon Group and has listings of its common shares in Amsterdam and New York.

Aegon N.V. (or “the company”) and its consolidated subsidiaries (“Aegon” or “the Group”) have life insurance and pensions operations in over twenty countries in the Americas, Europe and Asia and are also active in savings and asset management operations, accident and health insurance, general insurance and to a limited extent banking operations. Its headquarters are located in The Hague, the Netherlands. The Group employs over 27,000 people worldwide.

1. Basis of presentation

The condensed consolidated interim financial statements as at, and for the first quarter ended, March 31, 2014, have been prepared in accordance with IAS 34 “Interim Financial Reporting”, as adopted by the European Union (hereafter “IFRS”). They do not include all of the information required for a full set of financial statements prepared in accordance with IFRS and should therefore be read together with the 2013 consolidated financial statements of Aegon N.V. as included in Aegon’s Annual Report for 2013 and the disclosures provided in note 2.1 and 2.2 of this report which disclose the impact of voluntary changes in accounting policies that were made by Aegon effective January 1, 2014. Aegon’s Annual Report for 2013 is available on its website (aegon.com).

The condensed consolidated interim financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of investment properties and those financial instruments (including derivatives) and financial liabilities that have been measured at fair value. Certain amounts in prior periods have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income, shareholders’ equity or earnings per share. The condensed consolidated interim financial statements as at, and for the first quarter ended, March 31, 2014, were approved by the Executive Board on May 14, 2014.

The condensed consolidated interim financial statements are presented in euro and all values are rounded to the nearest million unless otherwise stated. The consequence is that the rounded amounts may not add up to the rounded total in all cases.

The published figures in these condensed consolidated interim financial statements are unaudited.

2. Significant accounting policies

All accounting policies and methods of computation applied in the condensed consolidated interim financial statements are the same as those applied in the 2013 consolidated financial statements, except for the newly applied accounting policies as described in note 2.1 and 2.2.

New IFRS accounting standards effective

The following standards, interpretations, amendments to standards and interpretations became effective in 2014:

IFRS 10 Consolidated Financial Statements – Amendment Investment Entities;

IAS 36 Impairment of Assets – Recoverable Amounts Disclosures for Non-Financial Assets; and

IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting.

None of these new or revised standards and interpretations had a significant effect on the condensed consolidated interim financial statements for the period ended March 31, 2014.


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For a complete overview of IFRS standards, published before January 1, 2014, that will be applied in future years, but were not early adopted by the Group, please refer to Aegon’s Annual Report for 2013.

Taxes

Taxes on income for the Q1 2014 interim period are accrued using the tax rate that would be applicable to expected total annual earnings.

Judgments and critical accounting estimates

Preparing the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions, including the likelihood, timing or amount of future transactions or events, that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from the estimates made.

In preparing the condensed consolidated interim financial statements, significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended December 31, 2013.

Exchange rates

Assets and liabilities are translated at the closing rates on the balance sheet date. Income, expenses and capital transactions (such as dividends) are translated at average exchange rates or at the prevailing rates on the transaction date, if more appropriate. The following exchange rates are applied for the condensed consolidated interim financial statements:

Closing exchange rates


			USD	GBP
March 31, 2014	1	EUR	1.3783	0.8267
December 31, 2012	1	EUR	1.3780	0.8320

Weighted average exchange rates


			USD	GBP
Q1 2014	1	EUR	1.3695	0.8276
Q1 2013	1	EUR	1.3195	0.8506

Other

Aegon N.V. is subject to legal restrictions on the amount of dividends it can pay to its shareholders. Under Dutch law, the amount that is available to pay dividends consists of total shareholders’ equity less the issued and outstanding capital and less the reserves required by law. The revaluation account and legal reserves, foreign currency translation reserve and other reserves, cannot be freely distributed. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts.

In addition, Aegon’s subsidiaries, principally insurance companies, are subject to restrictions on the amounts of funds they may transfer in the form of cash dividends or otherwise to their parent companies. There can be no assurance that these restrictions will not limit or restrict Aegon in its ability to pay dividends in the future.


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2.1 Voluntary changes in accounting policies

Aegon adopted voluntary changes in accounting policies, effective January 1, 2014 which are applied retrospectively for all periods presented in this document, both in the main schedules and the associated footnotes. Changes to these policies relate to deferred policy acquisition costs and how Aegon accounts for longevity trends in The Netherlands. In the paragraphs below, details are provided for these changes in accounting policies.

Deferred policy acquisition costs

Aegon adopted one single group-wide accounting policy for deferred policy acquisition costs as of January 1, 2014. Upon initial adoption of IFRS, entities were permitted to continue existing accounting policies for insurance contracts even though such policies were often non-uniform between countries. Through adoption of a uniform, group-wide accounting policy, Aegon eliminates this lack of uniformity for the deferral of policy acquisition costs thereby providing the users of the financial statements with more meaningful information.

IFRS 4 neither prohibits nor requires the deferral of policy acquisition costs, nor does it prescribe what acquisition costs are deferrable. Thus, in developing the new policy, Aegon considered and sought alignment with the proposed description of deferrable policy acquisition costs within the IFRS Insurance Contracts Phase II exposure draft (Exposure Draft). In the absence of detailed guidance in the Exposure Draft, Aegon also considered the recently adopted guidance in U.S. GAAP (ASU 2010-26 “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts”), if not conflicting with IFRS 4 or the Exposure Draft. IFRS currently differs from US GAAP by not limiting the deferral to expenses from successful efforts only and in the detail of how that principle is applied. Under the new accounting policy, deferred policy acquisition costs include costs that are directly attributable to the acquisition or renewal of insurance contracts. The previous accounting policy was based on a broader definition of costs that could be deferred.

Details of the impact of applying this voluntary change to previous periods are provided in the tables presented in note 2.2.

Longevity reserving

As of January 1, 2014, Aegon amended its policy to determine the insurance contract liability of Aegon The Netherlands to account for longevity risk assumed by Aegon. This change will provide more current information about the financial effects of changes in life expectancy of the insured population. The change will also increase alignment with market pricing of longevity risk. It will supply users of the financial statements with more relevant decision making information on the insurance contract liability and will improve transparency on the longevity risks assumed by Aegon.

Mortality tables will be updated annually based on the prospective tables taking into account longevity trends. The new methodology will take into account the contractual cash flows related to the longevity risk assumed. Previously the methodology applied by Aegon The Netherlands considered realized mortalities based on retrospective mortality tables.

Details of the impact of applying this voluntary change to previous periods are provided in the tables presented in note 2.2.


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2.2 Impact of voluntary changes in accounting policies


Impact of voluntary changes in accounting policies on consolidated income statement
	Q1 2013 (previously reported)			Change in accounting policy						Q1 2013 (restated)

				Deferred policy acquisition costs			Longevity reserving
EUR millions

Benefits and expenses		16,909			(2	)		(26	)		16,881

Income tax (expense) / benefit		(30	)		(2	)		(6	)		(38	)

Net effect		-			-			20			-

Earnings per share (EUR per share)
Basic earnings per common share		0.08			-			0.01			0.09
Basic earnings per common share B		-			-			-			-
Diluted earnings per common share		0.08			-			0.01			0.09
Diluted earnings per common share B		-			-			-			-

Earnings per common share calculation
Net income attributable to equity holders of Aegon N.V.		204			-			20			224
Preferred dividend		-			-			-			-
Coupons on other equity instruments		(49	)		-			-			(49	)
Earnings attributable to common shareholders		155			-			20			175

Weighted average number of common shares outstanding (in million)		1,943			-			-			1,943


Impact of voluntary changes in accounting policies on condensed consolidated statement of comprehensive income
	Q1 2013 (previously reported)			Change in accounting policy					Q1 2013 (restated)

				Deferred policy acquisition costs			Longevity reserving
EUR millions

Net income		204			-			20		224

Gains / (losses) on revaluation of available-for-sale investments		(334	)		(13	)		-		(347	)
Movement in foreign currency translation and net foreign investment hedging reserves		235			25			-		260
Income tax relating to items that may be reclassified		164			5			-		169
Net effect other comprehensive income for the period					17			-
Net effect comprehensive income					17			20

Total comprehensive income attributable to:
Equity holders of Aegon N.V.		158			17			20		195
Non-controlling interests		(1	)		-			-		(1	)


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Impact of changes in accounting policies on the consolidated statement of financial position
	December 31, 2013¹⁾		Change in accounting policy						Reclassification ²⁾		December 31, 2013 (restated)

			Deferred policy acquisition costs			Longevity reserving
EUR millions

Assets
Intangible assets		2,246		26			-			-		2,272
Investments in joint ventures		1,427		(1	)		-			-		1,426
Reinsurance assets		10,345		(2	)		-			-		10,344
Other assets and receivables		7,429		2			-			156		7,586
Deferred expenses		12,040		(2,035	)		-			-		10,006

Equity and liabilities
Shareholders’ equity		19,966		(1,533	)		(832	)		-		17,601

Insurance contracts		100,642		54			1,073			-		101,769
Other liabilities		22,487		(531	)		(241	)		156		21,871

¹	As reported in Aegon’s Annual Report dated March 19, 2014.

²	As a result of the voluntary accounting changes the balance of the Dutch tax group as at December 31, 2013 changed from a deferred tax liability to a deferred tax asset.


Impact of voluntary changes in accounting policies on consolidated statement of changes in equity
	December 31, 2013¹⁾			Change in accounting policy						December 31, 2013 (restated)

				Deferred policy acquisition costs			Longevity reserving
EUR millions

Share capital		8,701			-			-			8,701
Retained earnings		10,750			(1,557	)		(832	)		8,361
Revaluation reserves		2,998			26			-			3,023
Remeasurement of defined benefit plans		(706	)		-			-			(706	)
Other reserves		(1,777	)		(1	)		-			(1,778	)
Shareholders’ equity		19,966			(1,533	)		(832	)		17,601

¹	As reported in Aegon’s Annual Report dated March 19, 2014.


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3. Segment information

3.1 Income statement


EUR millions	Americas			The Netherlands			United Kingdom			New Markets			Holding and other activities			Eliminations			Segment Total			Joint ventures and associates eliminations			Consolidated
*Three months ended March 31, 2014*

Underlying earnings before tax geographically		302			129			27			61			(21	)		-			498			(8	)		490
Fair value items		(49	)		(36	)		(3	)		7			(36	)		-			(116	)		5			(111	)
Realized gains / (losses) on investments		9			84			16			2			-			-			110			(1	)		109
Impairment charges		(6	)		(4	)		-			(9	)		-			-			(19	)		-			(19	)
Impairment reversals		10			2			-			-			-			-			12			-			12
Other income / (charges)		3			(3	)		(4	)		(2	)		-			-			(6	)		-			(6	)
Run-off businesses		14			-			-			-			-			-			14			-			14
Income before tax		282			172			37			59			(58	)		-			492			(4	)		488
Income tax (expense) / benefit		(63	)		(29	)		(9	)		(16	)		16			-			(100	)		4			(96	)
Net income		219			143			28			43			(42	)		-			392			-			392
Inter-segment underlying earnings		(41	)		(14	)		(14	)		65			5

Revenues
Life insurance gross premiums		1,488			1,499			1,220			373			2			(17	)		4,564			(85	)		4,479
Accident and health insurance		417			130			15			55			1			(1	)		618			(8	)		610
General insurance		-			135			-			58			-			-			194			(18	)		176
Total gross premiums		1,906			1,764			1,234			486			3			(19	)		5,375			(111	)		5,265
Investment income		803			636			465			54			78			(78	)		1,958			(10	)		1,948
Fee and commission income		313			78			10			142			-			(57	)		486			(20	)		466
Other revenues		-			-			-			1			-			-			2			(1	)		1
Total revenues		3,022			2,478			1,709			683			82			(153	)		7,821			(141	)		7,680
Inter-segment revenues		4			-			-			70			79


EUR millions	Americas			The Netherlands			United Kingdom			New Markets			Holding and other activities			Eliminations			Segment Total			Joint ventures and associates eliminations			Consolidated
*Three months ended March 31, 2013*

Underlying earnings before tax geographically		307			114			21			60			(38	)		-			464			(19	)		445
Fair value items		(225	)		(73	)		(3	)		(3	)		25			-			(279	)		16			(263	)
Realized gains / (losses) on investments		46			63			1			2			-			-			112			-			112
Impairment charges		(16	)		(8	)		-			(10	)		-			-			(34	)		-			(34	)
Impairment reversals		16			-			-			-			-			-			16			-			16
Other income / (charges)		(5	)		-			5			(4	)		-			-			(4	)		-			(4	)
Run-off businesses		(10	)		-			-			-			-			-			(10	)		-			(10	)
Income before tax		113			96			24			45			(13	)		-			265			(3	)		262
Income tax (expense) / benefit		(2	)		(15	)		(9	)		(16	)		1			-			(41	)		3			(38	)
Net income		111			81			15			29			(12	)		-			224			-			224
Inter-segment underlying earnings		(46	)		(14	)		(14	)		67			7

Revenues
Life insurance gross premiums		1,545			2,015			1,732			350			-			(19	)		5,623			(142	)		5,481
Accident and health insurance		444			123			-			58			2			(2	)		625			(7	)		618
General insurance		-			128			-			40			-			-			168			-			168
Total gross premiums		1,989			2,266			1,732			448			2			(21	)		6,416			(149	)		6,267
Investment income		841			548			580			65			84			(83	)		2,035			(22	)		2,013
Fee and commission income		297			82			26			134			-			(59	)		480			(14	)		466
Other revenues		1			-			-			1			1			-			3			(1	)		2
Total revenues		3,128			2,896			2,338			648			87			(163	)		8,934			(186	)		8,748
Inter-segment revenues		5			-			-			73			85

Non-IFRS measures

For segment reporting purposes the following non-IFRS financial measures are included: underlying earnings before tax, income tax and income before tax. These non-IFRS measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies. Aegon believes that its non-IFRS measures provide meaningful information about the underlying results of Aegon’s business, including insight into the financial measures that Aegon’s senior management uses in managing the business.


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Among other things, Aegon’s senior management is compensated based in part on Aegon’s results against targets using the non-IFRS measures presented here. While many other insurers in Aegon’s peer group present substantially similar non-IFRS measures, the non-IFRS measures presented in this document may nevertheless differ from the non-IFRS measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards. Readers are cautioned to consider carefully the different ways in which Aegon and its peers present similar information before comparing them.

Aegon believes the non-IFRS measures shown herein, when read together with Aegon’s reported IFRS financial statements, provide meaningful supplemental information for the investing public to evaluate Aegon’s business after eliminating the impact of current IFRS accounting policies for financial instruments and insurance contracts, which embed a number of accounting policies alternatives that companies may select in presenting their results (i.e. companies can use different local GAAPs to measure the insurance contract liability) and that can make the comparability from period to period difficult.

The reconciliation from underlying earnings before tax to income before tax, being the most comparable IFRS measure, is presented in the tables in this note.

Underlying earnings

Underlying earnings reflect our profit from underlying business operations and exlude components that relate to accounting mismatches that are dependent on market volatility or relate to events that are considered ouside the normal course of business. Below we describe items that are excluded from underlying earnings.

Fair value items

Fair value items include the over- or underperformance of investments and guarantees held at fair value for which the expected long-term return is included in underlying earnings. Changes to these long-term return assumptions are also included in the fair value items.

In addition, hedge ineffectiveness on hedge transactions, fair value changes on economic hedges without natural offset in earnings and for which no hedge accounting is applied and fair value movements on real estate are included under fair value items.

Certain assets held by Aegon Americas, Aegon The Netherlands and Aegon UK are carried at fair value and managed on a total return basis, with no offsetting changes in the valuation of related liabilities. These include assets such as investments in hedge funds, private equities, real estate (limited partnerships), convertible bonds and structured products. Underlying earnings exclude any over- or underperformance compared to management’s long-term expected return on assets.

Based on current holdings and asset returns, the long-term expected return on an annual basis is 8-10%, depending on asset class, including cash income and market value changes. The expected earnings from these asset classes are net of deferred policy acquisition costs (“DPAC”) where applicable.

In addition, certain products offered by Aegon Americas contain guarantees and are reported on a fair value basis, including the segregated funds offered by Aegon Canada and the total return annuities and guarantees on variable annuities of Aegon USA. The earnings on these products are impacted by movements in equity markets and risk-free interest rates. Short-term developments in the financial markets may therefore cause volatility in earnings. Included in underlying earnings is a long-term expected return on these products and excluded is any over- or underperformance compared to management’s expected return.


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The fair value movements of certain guarantees and the fair value change of derivatives that hedge certain risks on these guarantees of Aegon The Netherlands and Variable Annuities Europe (included in New Markets) are excluded from underlying earnings, and the long-term expected return for these guarantees is set at zero.

Holding and other activities include certain issued bonds that are held at fair value through profit or loss (“FVTPL”). The interest rate risk on these bonds is hedged using swaps. The fair value movement resulting from changes in Aegon’s credit spread used in the valuation of these bonds are excluded from underlying earnings and reported under fair value items.

Realized gains or losses on investments

Includes realized gains and losses on available-for-sale investments, mortgage loans and other loan portfolios.

Impairment charges/reversals

Includes impairments and reversals on available-for-sale debt securities and impairments on shares including the effect of deferred policyholder acquisition costs, mortgage loans and loan portfolios at amortized cost and associates respectively.

Other income or charges

Other income or charges is used to report any items which cannot be directly allocated to a specific line of business. Also items that are outside the normal course of business are reported under this heading.

Other charges include restructuring charges that are considered other charges for segment reporting purposes because they are outside the normal course of business. In the condensed consolidated interim financial statements, these charges are included in operating expenses.

Run-off businesses

Includes underlying results of business units where management has decided to exit the market and to run-off the existing block of business. Currently, this line includes the run-off of the institutional spread-based business, structured settlements blocks of business, Bank-Owned and Corporate-Owned Life Insurance (BOLI/COLI) business, and the sale of the life reinsurance business in the United States. Aegon has other blocks of business for which sales have been discontinued and of which the earnings are included in underlying earnings.

Share in earnings of joint ventures and associates

Earnings from Aegon’s joint ventures and Aegon’s associates are reported on an underlying earnings basis.


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3.2 Investments geographically

Amounts included in the tables on investments geographically are presented on an IFRS-basis.


									amounts in million EUR (unless otherwise stated)
Americas USD		United Kingdom GBP		March 31, 2014	Americas		The Netherlands		United Kingdom		New Markets		Holding & other activities		Eliminations			Total EUR
				Investments
	2,046		95	Shares		1,485		328		115		32		31		(1	)		1,990
	80,426		8,936	Debt securities		58,351		20,120		10,809		3,025		-		-			92,305
	11,056		1	Loans		8,021		25,080		1		514		-		-			33,616
	11,852		53	Other financial assets		8,599		323		64		32		104		-			9,121
	1,011		-	Investments in real estate		733		801		-		1		-		-			1,535
	106,391		9,084	Investments general account		77,190		46,652		10,989		3,603		135		(1	)		138,567
	1,737		13,012	Shares		1,260		8,555		15,740		324		-		(8	)		25,871
	6,523		9,422	Debt securities		4,733		17,607		11,398		291		-		-			34,028
	97,123		21,801	Unconsolidated investment funds		70,466		-		26,371		5,826		-		-			102,663
	376		2,992	Other financial assets		273		393		3,619		10		-		-			4,295
	-		864	Investments in real estate		-		-		1,045		-		-		-			1,045
	105,760		48,091	Investments for account of policyholders		76,732		26,555		58,172		6,450		-		(8	)		167,903

	212,150		57,176	Investments on balance sheet		153,922		73,207		69,161		10,054		135		(9	)		306,470
	159,808		277	Off balance sheet investments third parties		115,945		974		335		57,899		-		-			175,154
	371,958		57,453	Total revenue generating investments		269,867		74,182		69,496		67,953		135		(9	)		481,624

				Investments
	87,965		8,939	Available-for-sale		63,822		20,302		10,813		3,041		9		-			97,986
	11,056		1	Loans		8,021		25,080		1		514		-		-			33,616
	112,118		47,372	Financial assets at fair value through profit or loss		81,345		27,025		57,303		6,497		126		(9	)		172,287
	1,011		864	Investments in real estate		733		801		1,045		1		-		-			2,580
	212,150		57,176	Total investments on balance sheet		153,922		73,207		69,161		10,054		135		(9	)		306,470

	13		-	Investments in joint ventures		10		819		-		621		-		-			1,450
	117		17	Investments in associates		85		19		20		358		-		-			482
	29,767		4,412	Other assets		21,597		21,803		5,337		2,953		31,959		(30,742	)		52,912
	242,048		61,604	Consolidated total assets		175,614		95,848		74,518		13,986		32,094		(30,751	)		361,314


									amounts in million EUR (unless otherwise stated)
Americas USD		United Kingdom GBP		December 31, 2013	Americas		The Netherlands		United Kingdom		New Markets		Holding & other activities		Eliminations			Total EUR
				Investments
	2,007		46	Shares		1,456		447		55		45		36		(2	)		2,036
	78,719		8,719	Debt securities		57,125		19,095		10,479		2,812		-		-			89,511
	11,289		1	Loans		8,192		24,708		1		508		-		-			33,409
	11,418		173	Other financial assets		8,286		293		208		30		103		-			8,920
	993		-	Investments in real estate		721		810		-		1		-		-			1,532
	104,425		8,938	Investments general account		75,780		45,354		10,743		3,396		139		(2	)		135,409
	1,804		12,792	Shares		1,309		8,450		15,375		297		-		(8	)		25,423
	6,675		9,643	Debt securities		4,844		16,791		11,590		307		-		-			33,531
	94,950		21,776	Unconsolidated investment funds		68,905		-		26,173		5,744		-		-			100,822
	230		3,062	Other financial assets		167		405		3,680		9		-		-			4,261
	-		828	Investments in real estate		-		-		996		-		-		-			996
	103,659		48,101	Investments for account of policyholders		75,224		25,646		57,813		6,357		-		(8	)		165,032

	208,084		57,039	Investments on balance sheet		151,004		70,999		68,556		9,754		139		(10	)		300,441
	155,179		239	Off balance sheet investments third parties		112,611		994		287		60,951		-		-			174,843
	363,262		57,277	Total revenue generating investments		263,616		71,993		68,843		70,705		139		(10	)		475,285

				Investments
	86,347		8,892	Available-for-sale		62,661		19,452		10,687		2,827		8		-			95,635
	11,289		1	Loans		8,192		24,708		1		508		-		-			33,409
	109,455		47,318	Financial assets at fair value through profit or loss		79,430		26,029		56,872		6,418		131		(10	)		168,870
	993		828	Investments in real estate		721		810		996		1		-		-			2,528
	208,084		57,039	Total investments on balance sheet		151,004		70,999		68,556		9,754		139		(10	)		300,441

	-		-	Investments in joint ventures		-		819		-		607		-		-			1,426
	112		16	Investments in associates		81		19		20		350		1		-			470
	31,112		4,227	Other assets		22,577		17,067		5,080		2,936		32,327		(30,561	)		49,430
	239,307		61,282	Consolidated total assets		173,663		88,903		73,656		13,647		32,466		(30,571	)		351,767

4. Premium income and premium to reinsurers



EUR millions	Q1 2014	Q1 2013

Gross
Life	4,479	5,481
Non-Life	786	786
Total	5,265	6,267

Reinsurance
Life	645	671
Non-Life	78	90
Total	722	761


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5. Investment income



EUR millions	Q1 2014	Q1 2013

Interest income	1,697	1,691
Dividend income	220	292
Rental income	30	30
Total investment income	1,948	2,013

Investment income related to general account	1,394	1,384
Investment income for account of policyholders	553	629
Total	1,948	2,013

6. Results from financial transactions



EUR millions	Q1 2014		Q1 2013

Net fair value change of general account financial investments at FVTPL other than derivatives	69		144
Realized gains and (losses) on financial investments	110		113
Gains and (losses) on investments in real estate	(5	)	(15	)
Net fair value change of derivatives	89		(265	)
Net fair value change on for account of policyholder financial assets at FVTPL	1,946		7,743
Net fair value change on investments in real estate for account of policyholders	6		(10	)
Net foreign currency gains and (losses)	6		2
Net fair value change on borrowings and other financial liabilities	7		19
Total	2,228		7,731

Net fair value change on for accounts of policyholder financial assets at FVTPL is offset by amounts in the Claims and benefits line reported in note 7 - Benefits and expenses.

7. Benefits and expenses



EUR millions	Q1 2014		Q1 2013

Claims and benefits	9,332		16,193
Employee expenses	475		512
Administration expenses	276		249
Deferred expenses	(317	)	(314	)
Amortization charges	247		241
Total	10,013		16,881

Claims and benefits includes claims and benefits in excess of account value for products for which deposit accounting is applied and the change in valuation of liabilities for insurance and investment contracts. In addition, commissions and expenses and premium paid to reinsurers are included. Claims and benefits fluctuates mainly as a result of changes in technical provisions resulting from fair value changes on for account of policyholder financial assets included in Results from financial transactions (note 6).


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8. Impairment charges/(reversals)



EUR millions	Q1 2014		Q1 2013

Impairment charges / (reversals) comprise:
Impairment charges on financial assets, excluding receivables ¹	22		40
Impairment reversals on financial assets, excluding receivables ¹	(12	)	(16	)
Impairment charges / (reversals) on non-financial assets and receivables	(2	)	1
Total	8		25

Impairment charges on financial assets, excluding receivables, from:
Debt securities and money market instruments	5		13
Loans	16		27
Total	22		40

Impairment reversals on financial assets, excluding receivables, from:
Debt securities and money market instruments	(10	)	(14	)
Loans	(2	)	(2	)
Total	(12	)	(16	)

¹Impairment charges / (reversals) on financial assets, excluding receivables, are excluded from underlying earnings before tax for segment reporting (refer to note 3).

9. Intangible assets



EUR millions	Mar. 31, 2014	Dec. 31, 2013

Goodwill	210	211
VOBA	1,695	1,768
Future servicing rights	236	239
Software	47	50
Other	4	4
Total intangible assets	2,192	2,272

10. Investments



EUR millions	Mar. 31, 2014	Dec. 31, 2013

Available-for-sale (AFS)	97,986	95,635
Loans	33,616	33,409
Financial assets at fair value through profit or loss (FVTPL)	5,429	4,833
Financial assets, excluding derivatives	137,032	133,877
Investments in real estate	1,535	1,532
Total investments for general account, excluding derivatives	138,567	135,409


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Total financial assets, excluding derivatives
	AFS		FVTPL		Loans		Total

Shares		749		1,240		-		1,990
Debt securities		90,621		1,684		-		92,305
Money market and other short-term investments		5,449		700		-		6,149
Mortgages		-		-		29,638		29,638
Private loans		-		-		1,785		1,785
Deposits with financial institutions		-		-		149		149
Policy loans		-		-		1,911		1,911
Other		1,167		1,804		134		3,105
March 31, 2014		97,986		5,429		33,616		137,032

		AFS		FVTPL		Loans		Total

Shares		787		1,250		-		2,036
Debt securities		88,162		1,350		-		89,511
Money market and other short-term investments		5,524		449		-		5,974
Mortgages		-		-		29,245		29,245
Private loans		-		-		1,783		1,783
Deposits with financial institutions		-		-		292		292
Policy loans		-		-		1,955		1,955
Other		1,163		1,784		135		3,082
December 31, 2013		95,635		4,833		33,409		133,877

11. Investments for account of policyholders



EUR millions	Mar. 31, 2014	Dec. 31, 2013
Shares	25,871	25,423
Debt securities	34,028	33,531
Money market and short-term investments	967	850
Deposits with financial institutions	2,842	3,006
Unconsolidated investment funds	102,663	100,822
Other	487	404
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives	166,858	164,037
Investment in real estate	1,045	996
Total investments for account of policyholders	167,903	165,032

12. Derivatives

The movements in derivative balances mainly result from changes in interest rates and other market movements during the period.


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13. Fair value

The following tables provide an analysis of financial instruments recorded at fair value on a recurring basis by level of the fair value hierarchy:


Fair value hierarchy
EUR millions	Level I		Level II		Level III		Total
As at March 31, 2014

Financial assets carried at fair value
Available-for-sale investments
Shares		159		272		318		749
Debt securities		22,068		65,481		3,072		90,621
Money markets and other short-term instruments		-		5,449		-		5,449
Other investments at fair value		25		331		811		1,167
March 31, 2014		22,252		71,533		4,202		97,986

Fair value through profit or loss
Shares		1,064		177		-		1,240
Debt securities		72		1,603		9		1,684
Money markets and other short-term instruments		95		605		-		700
Other investments at fair value		1		574		1,230		1,804
Investments for account of policyholders ¹		100,481		64,450		1,927		166,858
Derivatives		32		16,650		283		16,965
March 31, 2014		101,744		84,058		3,449		189,251
Total financial assets at fair value		123,995		155,591		7,651		287,238

Financial liabilities carried at fair value
Investment contracts for account of policyholders ²		13,267		19,738		115		33,120
Borrowings ³		513		497		-		1,010
Derivatives		28		13,072		1,665		14,765
Total financial liabilities at fair value		13,807		33,308		1,780		48,895

As at December 31, 2013

Financial assets carried at fair value
Available-for-sale investments
Shares		202		262		322		787
Debt securities		20,815		64,184		3,162		88,162
Money markets and other short-term instruments		-		5,524		-		5,524
Other investments at fair value		25		312		826		1,163
December 31, 2013		21,043		70,282		4,310		95,635

Fair value through profit or loss
Shares		1,120		130		-		1,250
Debt securities		64		1,268		17		1,350
Money markets and other short-term instruments		95		354		-		449
Other investments at fair value		-		567		1,217		1,784
Investments for account of policyholders ¹		99,040		63,008		1,989		164,037
Derivatives		69		13,134		328		13,531
December 31, 2013		100,388		78,461		3,552		182,401
Total financial assets at fair value		121,431		148,744		7,862		278,036

Financial liabilities carried at fair value
Investment contracts for account of policyholders ²		12,872		19,641		114		32,628
Borrowings ³		517		500		-		1,017
Derivatives		24		10,383		1,431		11,838
Total financial liabilities at fair value		13,413		30,524		1,545		45,482

¹	The investments for account of policyholders included in the table above represents those investments carried at fair value through profit or loss.

²	The investment contracts for account of policyholders included in the table above represents those investment contracts carried at fair value.

³	Total borrowings on the statement of financial position contain borrowings carried at amortized cost that are not included in the above schedule.


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Significant transfers between Level I, Level II and Level III

Aegon’s policy is to record transfers of assets and liabilities between Level I, Level II and Level III at their fair values as of the beginning of each reporting period.

The table below shows transfers between Level I and II for financial assets and financial liabilities recorded at fair value on a recurring basis during the first quarter, ended March 31, 2014.


Fair value transfers
EUR millions	Q1 2014				Full Year 2013
	Transfers Level I to Level II		Transfers Level II to Level I		Transfers Level I to Level II		Transfers Level II to Level I
Financial assets carried at fair value available-for-sale investments
Shares		-		-		-		1
Debt securities		-		67		1		209
Total		-		67		2		210

Fair value through profit or loss
Investments for account of policyholders		324		-		-		263
Total		324		-		-		263
Total financial assets at fair value		324		67		2		473

Transfers are identified based on transaction volume and frequency, which are indicative of an active market.

Movements in Level III financial instruments measured at fair value

The following table summarizes the change of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level III), including realized and unrealized gains (losses) of all assets and liabilities and unrealized gains (losses) of all assets and liabilities still held at the end of the respective period.


Roll forward of Level III financial instruments
	January 1, 2014			Total gains / losses in income statement ¹			Total gains / losses in OCI ²			Purchases		Sales			Settlements			Net exchange differences			Reclass- ification			Transfers from Level I and Level II		Transfers to Level I and Level II			March 31, 2014			Total unrealized gains and losses for the period recorded in the P&L for instruments held at March 31, 2014 ³
Financial assets carried at fair value available-for-sale investments
Shares		322			6			(1	)		12		(20	)		-			-			-			-		(1	)		318			-
Debt securities		3,162			8			35			287		(88	)		(50	)		(2	)		-			81		(361	)		3,072			-
Other investments at fair value		826			(26	)		(7	)		27		(14	)		(1	)		-			-			7		-			811			-
		4,310			(13	)		28			326		(122	)		(52	)		(3	)		-			88		(361	)		4,202			-

Fair value through profit or loss
Debt securities		17			-			-			-		-			(8	)		-			-			-		-			9			1
Other investments at fair value		1,217			16			-			7		(54	)		-			-			-			45		-			1,230			16
Investments for account of policyholders		1,989			28			-			42		(65	)		-			1			-			77		(145	)		1,927			32
Derivatives		328			(69	)		-			-		-			-			1			23			-		-			283			(77	)
		3,552			(25	)		-			49		(119	)		(8	)		2			23			122		(145	)		3,449			(28	)

Financial liabilities carried at fair value
Investment contracts for account of policyholders		(114	)		(1	)		-			-		-			-			-			-			-		-			(115	)		(1	)
Derivatives		(1,431	)		(194	)		-			-		(18	)		-			1			(23	)		-		-			(1,665	)		(180	)
		(1,545	)		(196	)		-			-		(17	)		-			1			(23	)		-		-			(1,780	)		(181	)

¹ Includes impairments and movements related to fair value hedges. Gains and losses are recorded in the line item results from financial transactions of the income statement.

² Total gains and losses are recorded in line items Gains/ (losses) on revaluation of available-for-sale investments and (Gains)/ losses transferred to the income statement on disposal and impairment of available-for-sale investment of the statement of other comprehensive income.

³ Total gains / (losses) for the period during which the financial instrument was in Level III.

During the first quarter of 2014, Aegon transferred certain financial instruments from Level II to Level III of the fair value hierarchy. The reason for the change in level was that the market liquidity for these securities decreased, which led to a change in market observability of prices. Prior to transfer, the fair value for the Level II securities was determined using observable market transactions or corroborated broker quotes respectively for the same or similar instruments. The amount of assets and liabilities transferred to Level III was EUR 210 million (full year 2013: EUR 785 million). Since the transfer, all such assets have been valued using valuation models incorporating significant non market-observable inputs or uncorroborated broker quotes.


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Similarly, during the first quarter of 2014, Aegon transferred certain financial instruments from Level III to other levels of the fair value hierarchy. The change in level was mainly the result of a return of activity in the market for these securities and that for these securities the fair value could be determined using observable market transactions or corroborated broker quotes for the same or similar instruments. Transfers from Level III amounted to EUR 506 million (full year 2013: EUR 756 million).

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level III financial instruments.


Overview of significant unobservable inputs
EUR millions	Carrying amount March 31, 2014		Valuation technique ¹	Significant unobservable input ²	Range (weighted average)
Financial assets carried at fair value available-for-sale investments
Shares		193	Broker quote	n.a.	n.a.
		126	Other	n.a.	n.a.
		318

Debt securities
		2,513	Broker quote	n.a.	n.a.
		128	Discounted cash flow	Discount rate	3% - 8% (6.93%)
		218	Discounted cash flow	Credit spread	0.4% - 2.8% (2.01%)
		213	Other	n.a.	n.a.
		3,072
Other investments at fair value
Tax credit investments		676	Discounted cash flow	Discount rate	8.4%
Other		135	Other	n.a.	n.a.
		811
March 31, 2014		4,202

Fair value through profit or loss
Debt securities		9	Other	n.a.	n.a.
		9

Other investments at fair value
Investment funds		1,204	Net asset value	n.a.	n.a.
Other		26	Other	n.a.	n.a.
		1,230

Derivatives ³
Longevity swap		117	Discounted cash flow	Mortality	n.a.
Other		82	Other	n.a.	n.a.
		200
March 31, 2014		1,439

Total financial assets at fair value ³		5,641

Financial liabilities carried at fair value
Derivatives
Embedded derivatives in insurance contracts		1,496	Discounted cash flow	Credit spread	0.4%
Other		169	Other	n.a.	n.a.
Total financial liabilities at fair value		1,665

¹	Other in the table above (column Valuation technique) includes investments for which the fair value is uncorroborated and no broker quote is received.

²	Not applicable (n.a.) has been included when no significant unobservable assumption has been identified and used.

Investments for account of policyholders are excluded from the table above and from the disclosure regarding reasonably possible alternative assumptions. Policyholder assets, and their returns, belong to policyholders and do not impact Aegon’s net income or equity. The effect on total assets is offset by the effect on total liabilities. Derivatives exclude derivatives for account of policyholders amounting to EUR 83 million.

The description of Aegon’s methods of determining fair value is included in the consolidated financial statements 2013. For reference purposes, the valuation techniques included in the table above are described in more detail below:


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Shares

When available, Aegon uses quoted market prices in active markets to determine the fair value of its investments in shares. Fair values for unquoted shares are estimated using observations of the price/earnings or price/cash flow ratios of quoted companies considered comparable to the companies being valued. Valuations are adjusted to account for company-specific issues and the lack of liquidity inherent in an unquoted investment. Illiquidity adjustments are generally based on available market evidence. In addition, a variety of other factors are reviewed by management, including, but not limited to, current operating performance, changes in market outlook and the third-party financing environment.

Available-for-sale shares include shares in a Federal Home Loan Bank (“FHLB”) for an amount of EUR 94 million that are measured at par, which are reported as part of Other. A FHLB has implicit financial support from the United States government. The redemption value of the shares is fixed at par and they can only be redeemed by the FHLB.

Debt securities

Debt securities comprise of residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), asset-backed securities (ABS), corporate bonds and sovereign debt. Details on the fair value measurement for these specific types of debt securities are provided below.

Valuations of RMBS, CMBS and ABS are monitored and reviewed on a monthly basis. Valuations per asset type are based on a pricing hierarchy which uses a waterfall approach that starts with market prices from indices and follows with third-party pricing services or brokers. The pricing hierarchy is dependent on the possibilities of corroboration of the market prices. If no market prices are available, Aegon uses internal models to determine fair value. Significant inputs included in the internal models are generally determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles. Market standard models may be used to model the specific collateral composition and cash flow structure of each transaction. The most significant unobservable input is illiquidity premium which is embedded in the discount rate. The weighted average discount rate used in valuation of ABS has increased to 6.93% (December 31, 2013: 6.62%). Broker quoted debt securities include ABS for an amount of EUR 1,997 million (December 31, 2013: EUR 2,030).

Valuations of corporate bonds are monitored and reviewed on a monthly basis. The pricing hierarchy is dependent on the possibility of corroboration of market prices when available. If no market prices are available, valuations are determined by a discounted cash flow methodology using an internally calculated yield. The yield is comprised of a credit spread over a given benchmark. In all cases, the benchmark is an observable input. The credit spread contains both observable and unobservable inputs. Aegon starts by taking an observable credit spread from a similar bond of the given issuer, and then adjusts this spread based on unobservable inputs. These unobservable inputs may include subordination, liquidity and maturity differences. The weighted average credit spread used in valuation of corporate bonds has decreased to 2.01% (December 31, 2013: 2.33%).

When available, Aegon uses quoted market prices in active markets to determine the fair value of its sovereign debt investments. When Aegon cannot make use of quoted market prices, market prices from indices or quotes from third-party pricing services or brokers are used.

Tax credit investments

The fair value of tax credit investments is determined by using a discounted cash flow valuation technique. This valuation technique takes into consideration projections of future capital contributions and distributions, as well as future tax credits and the tax benefits of future operating losses. The present value of these cash flows is calculated by applying a discount rate. In general, the discount rate is determined based on the cash outflows for the investments and the cash inflows from the tax credits/tax benefits (and the timing of those cash flows). These inputs are unobservable in the market place. The discount rate used in valuation of tax credit investments has increased to 8.4% (December 31, 2013: 8.2%).


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Investment funds

Investment funds include real estate funds, private equity funds and hedge funds. The fair values of investments held in non-quoted investment funds are determined by management after taking into consideration information provided by the fund managers. Aegon reviews the valuations each month and performs analytical procedures and trending analyses to ensure the fair values are appropriate.

Derivatives

Where quoted market prices are not available, other valuation techniques, such as option pricing or stochastic modeling, are applied. The valuation techniques incorporate all factors that a typical market participant would consider and are based on observable market data when available. Models are validated before they are used and calibrated to ensure that outputs reflect actual experience and comparable market prices.

Fair values for exchange-traded derivatives, principally futures and certain options, are based on quoted market prices in active markets. Fair values for over-the-counter (“OTC”) derivatives represent amounts estimated to be received from or paid to a third party in settlement of these instruments. These derivatives are valued using pricing models based on the net present value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades, or external pricing services. Most valuations are derived from swap and volatility matrices, which are constructed for applicable indices and currencies using current market data from many industry standard sources. Option pricing is based on industry standard valuation models and current market levels, where applicable. The pricing of complex or illiquid instruments is based on internal models or an independent third party. For long-dated illiquid contracts, extrapolation methods are applied to observed market data in order to estimate inputs and assumptions that are not directly observable. To value OTC derivatives, management uses observed market information, other trades in the market and dealer prices.

Some OTC derivatives are so-called longevity derivatives. The payout of longevity derivatives is linked to publicly available mortality tables. The derivatives are measured using the present value of the best estimate of expected payouts of the derivative plus a risk margin. The best estimate of expected payouts is determined using best estimate of mortality developments. Aegon determined the risk margin by stressing the best estimate mortality developments to quantify the risk and applying a cost-of-capital methodology. The most significant unobservable input for these derivatives is the (projected) mortality development.

Aegon normally mitigates counterparty credit risk in derivative contracts by entering into collateral agreements where practical and in ISDA master netting agreements for each of the Group’s legal entities to facilitate Aegon’s right to offset credit risk exposure. Changes in the fair value of derivatives attributable to changes in counterparty credit risk were not significant.

Embedded derivatives in insurance contracts including guarantees

Certain bifurcated guarantees for minimum benefits in insurance and investment contracts are carried at fair value. These guarantees include guaranteed minimum withdrawal benefits (GMWB) in the United States, United Kingdom and Japan which are offered on some variable annuity products and are also assumed from a ceding company; minimum interest rate guarantees on insurance products offered in the Netherlands, including group pension and traditional products; and guaranteed minimum accumulation benefits on segregated funds sold in Canada.

Since the price of these guarantees is not quoted in any market, the fair values of these guarantees are calculated as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable to the guarantees. Given the complexity and long-term nature of these guarantees which are unlike instruments available in financial markets, their fair values are determined by using stochastic techniques under a variety of market return scenarios. A variety of factors are considered including credit spread, expected market rates of return, equity and interest rate volatility, correlations of market returns, discount rates and actuarial assumptions. The most significant unobservable factor is credit spread. The credit spread used in the valuations of embedded derivatives in insurance contracts remained stable at 0.4% .


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The expected returns are based on risk-free rates. Aegon added a premium to reflect the credit spread as required. The credit spread is set by using the credit default swap (CDS) spreads of a reference portfolio of life insurance companies (including Aegon), adjusted to reflect the subordination of senior debt holders at the holding company level to the position of policyholders at the operating company level (who have priority in payments to other creditors). Aegon’s assumptions are set by region to reflect differences in the valuation of the guarantee embedded in the insurance contracts.

Since many of the assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability included in future policy benefits has been reflected within Level III of the fair value hierarchy.

Effect of reasonably possible alternative assumptions

The effect of changes in unobservable inputs on fair value measurement as reported in the 2013 consolidated financial statements of Aegon has not changed significantly as per March 31, 2014.

Fair value information about financial instruments not measured at fair value

The following table presents the carrying values and estimated fair values of financial assets and liabilities, excluding financial instruments which are carried at fair value on a recurring basis.


Fair value information about financial instruments not measured at fair value
EUR millions	Carrying amount March 31, 2014		Total estimated fair value March 31, 2014		Carrying amount December 31, 2013		Total estimated fair value December 31, 2013

Assets
Mortgage loans - held at amortized cost		29,638		34,192		29,245		32,869
Private loans - held at amortized cost		1,785		1,940		1,783		1,888
Other loans - held at amortized cost		2,194		2,194		2,381		2,381

Liabilities
Trust pass-through securities - held at amortized cost		123		117		135		122
Subordinated borrowings - held at amortized cost		45		81		44		62
Borrowings – held at amortized cost		12,023		12,343		11,003		11,291
Investment contracts - held at amortized cost		13,322		13,636		14,079		14,387

Financial instruments for which carrying value approximates fair value

Certain financial instruments that are not carried at fair value are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and cash equivalents, short-term receivables and accrued interest receivable, short-term liabilities, and accrued liabilities. These instruments are not included in the table above.

14. Deferred expenses



EUR millions	Mar. 31, 2014	Dec. 31, 2013

DPAC for insurance contracts and investment contracts with discretionary participation features	9,138	9,229
Deferred cost of reinsurance	412	421
Deferred transaction costs for investment management services	359	356
Total deferred expenses	9,909	10,006


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15. Share capital



EUR millions	Mar. 31, 2014	Dec. 31, 2013

Share capital - par value	325	325
Share premium	8,375	8,375
Total share capital	8,701	8,701

Share capital - par value
Balance at January 1	325	319
Issuance	-	84
Withdrawal	-	(82	)
Share dividend	-	5
Balance	325	325

Share premium
Balance at January 1	8,375	8,780
Withdrawal	-	(400	)
Share dividend	-	(5	)
Balance	8,375	8,375

Basic and diluted earnings per share



EUR millions	Q1 2014		Q1 2013

Earnings per share (EUR per share)
Basic earnings per common share	0.16		0.09
Basic earnings per common share B	-		-
Diluted earnings per common share	0.16		0.09
Diluted earnings per common share B	-		-

Earnings per share calculation
Net income attributable to equity holders of Aegon N.V.	392		224
Preferred dividend	-		-
Coupons on other equity instruments	(46	)	(49	)
Earnings attributable to common shares and common shares B	345		175

Earnings attributable to common shareholders	343		175
Earnings attributable to common shareholders B	2		-

Weighted average number of common shares outstanding (in million)	2,090		1,943
Weighted average number of common shares B outstanding (in million)	579		-

Diluted earnings per share is calculated by adjusting the average number of shares outstanding for share options. During 2014 and 2013, the average share price did not exceed the exercise price of these options. As a result, diluted earnings per share do not differ from basic earnings per share.

Dividend

It will be proposed to the Annual General Meeting of Shareholders on May 21, 2014, absent unforeseen circumstances, to pay a dividend for the year 2013 of EUR 0.22 per common share and EUR 0.0055 per common share B. After taking into account the interim dividend 2013 of EUR 0.11 per common share and EUR 0.00275 per common share B, this will result in a final dividend of EUR 0.11 per common share and EUR 0.00275 per common share B.


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The interim dividend 2013 was paid in cash or stock at the election of the shareholder. Stock dividend amounted to one new Aegon common share for every 50 common shares held. The stock dividend and cash dividend were approximately equal in value. The interim dividend was payable as of September 13, 2013. The interim dividend 2013 for common shares B was fully paid in cash.

16. Other equity instruments

On March 15, 2014, Aegon redeemed junior perpetual capital securities with a coupon of 6.875% issued in 2006. The junior perpetual capital securities were originally issued at par with a carrying value of EUR 438 million. The principal amount of USD 550 million (EUR 396 million) was repaid with accrued interest. The cumulative foreign currency result at redemption was recorded directly in retained earnings.

17. Borrowings



EUR millions	Mar. 31, 2014		Dec. 31, 2013

Debentures and other loans		12,758		11,830
Commercial paper		144		135
Short-term deposits		12		16
Bank overdrafts		118		39
Total borrowings		13,033		12,020

Debentures and other loans

Included in Debentures and other loans is EUR 1,010 million relating to borrowings measured at fair value (2013: EUR 1,017 million).

On March 13, 2014, Aegon executed a transaction under the Dutch SAECURE program to sell Class A mortgage backed securities (RMBS) amounting to EUR 1.4 billion. “SAECURE 14 NHG” consists of 2 tranches:

EUR 343 million of class A1 notes with an expected weighted average life of 2 years and priced with a coupon of three month Euribor plus 0.40%; and

EUR 1,024 million of class A2 notes with an expected weighted average life of 5 years and priced with a coupon of three month Euribor plus 0.72% .

Commercial paper, Short-term deposits and Bank overdrafts vary with the normal course of business.


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18. Commitments and contingencies

In late March, consumer interest group Vereniging Woekerpolis.nl filed a new claim against Aegon in court. The claim relates to a range of unit-linked products of Aegon, challenging a variety of elements of these products on multiple legal grounds. At this time it is not practicable for Aegon to quantify a range or maximum liability, if any.

There have been no other material changes in contingent assets and liabilities as reported in the 2013 consolidated financial statements of Aegon.

19. Acquisitions / divestments

There were no significant acquisitions or divestments during the first quarter of 2014.

20. Events after the balance sheet date

Optas

Aegon and BPVH – a foundation representing Dutch harbor workers and employers – have reached an agreement on removing restrictions on the capital of the harbor workers’ former pension fund Optas. This agreement, announced on April 14, 2014, ends a dispute that began when the Optas pension fund was transformed into an insurance company, which was subsequently acquired by Aegon in 2007.

Aegon and BPVH have agreed to jointly file a request with the Dutch court to remove the restriction on the capital of Optas. Upon the court granting this request, Aegon will make a payment of EUR 80 million to BPVH, as well as offering harbor workers more favorable pension conditions. In addition, over the coming years Aegon will contribute up to EUR 20 million to help mitigate the effect of an announced reduction in the tax-free pension allowance in the Netherlands. The compensation is not recognized in these condensed consolidated interim financial statements.

Capital market transactions

On April 25, 2014, Aegon issued EUR 700 million of subordinated notes, first callable on April 25, 2024 and maturing on April 25, 2044. The coupon will be fixed at 4% until the first call date and floating thereafter.

On April 28, 2014, Aegon announced that it will call for the redemption of perpetual capital securities with a coupon of 7.25% issued in 2007. The redemption will be effective June 15, 2014, when the principal amount of USD 1,050 million will be repaid with accrued interest.


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Disclaimers

Cautionary note regarding non-IFRS measures

This document includes the non-IFRS financial measures: underlying earnings before tax, income tax and income before tax. These non-IFRS measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies. The reconciliation of these measures to the most comparable IFRS measures is provided in note 3 ‘Segment information’ of Aegon’s Condensed Consolidated Interim Financial Statements. Aegon believes that its non-IFRS measures, together with the IFRS information, provide meaningful information about the underlying operating results of Aegon’s business including insight into the financial measures that senior management uses in managing the business.

Local currencies and constant currency exchange rates

This document contains certain information about Aegon’s results and financial condition presented in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. None of this information is a substitute for or superior to financial information about Aegon presented in EUR, which is the currency of Aegon’s primary financial statements.

Forward-looking statements

The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to Aegon. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Aegon undertakes no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:

Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom;

Changes in the performance of financial markets, including emerging markets, such as with regard to:

–

The frequency and severity of defaults by issuers in Aegon’s fixed income investment portfolios;

–

The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities Aegon holds; and

–

The effects of declining creditworthiness of certain private sector securities and the resulting decline in the value of sovereign exposure that Aegon holds;

Changes in the performance of Aegon’s investment portfolio and decline in ratings of Aegon’s counterparties;

Consequences of a potential (partial) break-up of the euro;

The frequency and severity of insured loss events;

Changes affecting longevity, mortality, morbidity, persistence and other factors that may impact the profitability of Aegon’s insurance products;

Reinsurers to whom Aegon has ceded significant underwriting risks may fail to meet their obligations;

Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels;

Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates;

Changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general such as changes in borrower and counterparty creditworthiness;

Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets;

Changes in laws and regulations, particularly those affecting Aegon’s operations, ability to hire and retain key personnel, the products Aegon sells, and the attractiveness of certain products to its consumers;

Regulatory changes relating to the insurance industry in the jurisdictions in which Aegon operates;

Changes in customer behavior and public opinion in general related to, among other things, the type of products also Aegon sells, including legal, regulatory or commercial necessity to meet changing customer expectations;

Acts of God, acts of terrorism, acts of war and pandemics;

Changes in the policies of central banks and/or governments;

Lowering of one or more of Aegon’s debt ratings issued by recognized rating organizations and the adverse impact such action may have on Aegon’s ability to raise capital and on its liquidity and financial condition;

Lowering of one or more of insurer financial strength ratings of Aegon’s insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability and liquidity of its insurance subsidiaries;

The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital Aegon is required to maintain;

Litigation or regulatory action that could require Aegon to pay significant damages or change the way Aegon does business;

As Aegon’s operations support complex transactions and are highly dependent on the proper functioning of information technology, a computer system failure or security breach may disrupt Aegon’s business, damage its reputation and adversely affect its results of operations, financial condition and cash flows;

Customer responsiveness to both new products and distribution channels;

Competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for Aegon’s products;

Changes in accounting regulations and policies or a change by Aegon in applying such regulations and policies, voluntarily or otherwise, may affect Aegon’s reported results and shareholders’ equity;

The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including Aegon’s ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions;

Catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt Aegon’s business; and

Aegon’s failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives.

Further details of potential risks and uncertainties affecting Aegon are described in its filings with the Netherlands Authority for the Financial Markets and the US Securities and Exchange Commission, including the Annual Report. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, Aegon expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Aegon’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.


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Corporate and shareholder information


Headquarters
Aegon N.V.

P.O. Box 85

2501 CB The Hague

The Netherlands

Telephone		+31 (0) 70 344 32 10

aegon.com

Group Corporate Communications & Investor Relations


Media relations

Telephone		+31 (0) 70 344 89 56

E-mail		gcc@aegon.com

Investor relations

Telephone		+31 (0) 70 344 83 05

or		877 548 96 68 - toll free, USA only

E-mail		ir@aegon.com

Publication dates quarterly results



August 14, 2014		Results second quarter 2014

November 13, 2014		Results third quarter 2014

February 19, 2015		Results fourth quarter 2014

Aegon’s Q1 2014 press release and Financial Supplement are available on aegon.com.

About Aegon

Aegon’s roots go back more than 150 years – to the first half of the nineteenth century. Since then, Aegon has grown into an international company, with businesses in more than 25 countries in the Americas, Europe and Asia. Today, Aegon is one of the world’s leading financial services organizations, providing life insurance, pensions and asset management. Aegon’s purpose is to help people take responsibility for their financial future. More information: aegon.com.

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