of the insurance broker UMG in the Netherlands was the main driver behind Other income of EUR 336 million. Underlying earnings before tax in 2017 increased compared with 2016 to EUR 707 million. This was mainly the result of higher results in the United Kingdom, reflecting higher fee income.
Net income
Net income amounted to EUR 846 million in 2017 compared with EUR 127 million in 2016. Drivers of this improvement were Other income and a higher underlying earnings before tax.
Other income of EUR 336 million in 2017 included a gain on the sale of UMG in the Netherlands, while the sale of the majority of the UK annuity portfolio was the main driver behind Other charges of EUR 658 million in 2016.
Net income for the Netherlands
Net income from Aegon’s businesses in the Netherlands amounted to EUR 710 million in 2017, largely driven by underlying earnings before tax of EUR 520 million.
Results on fair value items declined compared with 2016 to a loss of EUR 112 million in 2017, as positive real estate revaluations were offset by losses on credit spread and interest rate hedges due to a mismatch on an IFRS basis between the valuation of hedges and liabilities. Realized gains of EUR 184 million in 2017 were the result of asset-liability management adjustments and normal trading activity in the investment portfolio. Impairments amounted to EUR 17 million in 2017 and were mostly driven by a loan loss provision related to growing consumer loan origination. Other income amounted to EUR 296 million in 2017. This reflects the EUR 208 million gain on the sale of UMG and EUR 101 million positive assumption changes and model updates mainly related to the guarantee provision in the Netherlands.
Net income for the United Kingdom
Net income from Aegon’s businesses in the United Kingdom amounted to EUR 81 million in 2017. The main driver was the underlying result before tax of EUR 116 million.
Losses from fair value items of EUR 82 million were mainly caused by losses on equity hedging programs as a result of increased equity markets where hedges have been set up to protect against a decline in equity markets. Realized gains amounted to EUR 62 million in 2017 and reflect rebalancing of the investment portfolio, and the sale of bonds to fund remittances to the Group. Other income amounted to EUR 40 million, mainly driven by the net release of provisions following the completion of the Part VII transfers of the
annuity portfolios sold to Rothesay and Legal & General.
This was partly offset by integration expenses for the acquired Cofunds and BlackRock's defined contribution business and the impairment of intangible assets related to the announced sales of Aegon Ireland.
Net income for Central & Eastern Europe
Net income from Aegon’s businesses in Central & Eastern Europe (CEE) amounted to EUR 57 million in 2017 and reflect underlying earnings before tax of EUR 67 million.
Net income for Spain & Portugal
Net income from Aegon’s businesses in Spain & Portugal amounted to a loss of EUR 2 million in 2017 as underlying earnings before tax of EUR 4 million were more than offset by income tax of EUR 6 million.
Underlying earnings before tax
Underlying earnings before tax in 2017 increased by 8%
compared with 2016 to EUR 707 million. This was driven by higher fee income in the United Kingdom and growth in CEE.
Underlying earnings before tax for the Netherlands Underlying earnings before tax for the Netherlands in 2017 decreased by 2% compared with 2016 to EUR 520 million.
Underlying earnings before tax from Life & Savings declined by 2% compared with 2016 to EUR 301 million, reflecting lower investment income in Life, partly offset by a higher interest margin in Savings.
Underlying earnings before tax from Pensions decreased by 12% compared with 2016 to EUR 172 million, mainly due to lower investment income.
The results from the Non-life business increased from EUR 1 million in 2016 to EUR 30 million in 2017. The main drivers were favorable claims experience, in part due to management actions, and one-time claims provision releases.
Underlying earnings before tax from the Distribution business decreased compared with 2016 to EUR 17 million.
The decrease was caused by the sale of UMG and pressure on fee income due to increased competition.
Underlying earnings before tax for the United Kingdom Underlying earnings before tax in the United Kingdom amounted to EUR 116 million in 2017.
Underlying earnings before tax from Life increased in 2017 compared with 2016 to EUR 65 million, reflecting higher results on inflation-linked bonds and growth in the protection business.
Underlying earnings before tax from Pensions improved from EUR 9 million in 2016 to EUR 51 million in 2017. This was driven by higher fee income from favorable equity markets and net inflows, as well as the inclusion of Cofunds in 2017.
Underlying earnings before tax for Central & Eastern Europe Underlying earnings before tax from Central & Eastern Europe increased to EUR 67 million in 2017, up from EUR 55 million in 2016. This increase was primarily driven by business growth, better underwriting results and the acquisition of a non-life portfolio in Hungary.
Underlying earnings before tax for Spain & Portugal Underlying earnings before tax from Spain & Portugal decreased compared with 2016 to EUR 4 million in 2017, mainly caused by higher operating expenses due to the write-down of an IT system, governance costs and project related expenses.
Commissions and expenses
Commissions and expenses increased by 4% compared with 2016 to EUR 2,141 million in 2017. Operating expenses increased by 11% compared with 2016 and amounted to EUR 1,610 million in 2017.
Commissions and expenses for the Netherlands Commissions and expenses decreased compared with 2016 to EUR 930 million in 2017. Operating expenses were down compared with 2016 to EUR 818 million in 2017, reflecting the sale of UMG. Expense savings in the insurance businesses were more than offset by investments in growth.
Commissions and expenses for the United Kingdom Commissions and expenses decreased by 14% in 2017 to EUR 757 million compared with 2017. Operating expenses increased by 39% in 2017 to EUR 546 million compared with 2016, mainly due to the inclusion of Cofunds and BlackRock's defined contribution business and integration of related activities.
Commissions and expenses for Central & Eastern Europe Commissions and expenses increased compared with 2016 to EUR 262 million in 2017. Operating expenses increased compared with 2016 to EUR 152 million in 2017, reflecting the growth of the business and higher variable personnel expenses.
Commissions and expenses for Spain & Portugal Commissions and expenses increased compared with 2016 to EUR 192 million in 2017. Operating expenses increased compared with 2016 to EUR 94 million in 2017, mainly resulting from the growth of Aegon’s joint ventures with Santander and project-related expenses, severance costs and the write-down of an IT system.
Production
Gross deposits increased from EUR 12.8 billion in 2016 to EUR 44.3 billion in 2017. The increase compared with 2016 was primarily driven by the higher platform sales in the United Kingdom.
New life sales declined by 9% compared with 2016
to EUR 273 million in 2017. The decline compared with 2016 was mainly the result of the sale of the annuity business in the United Kingdom. New premium production for general and accident & health insurance increased compared with 2016 to EUR 148 million in 2017.
Production for the Netherlands
Gross deposits increased by 21% compared with 2016 to EUR 8.1 billion in 2017, mainly driven by the growth of Knab, Aegon’s online bank. New life sales declined compared with 2016 to EUR 99 million in 2017, caused by lower DB pension sales and individual life sales. Premium production for accident & health increased compared with 2016 to EUR 16 million in 2017, while general insurance production decreased compared with 2016 to EUR 15 million in 2017.
Production for the United Kingdom
Gross deposits increased from EUR 5.8 billion in 2016 to EUR 35.9 billion in 2017 as a result of higher platform sales, reflecting the inclusion of Cofunds. New life sales decreased compared with 2016 to EUR 37 million in 2017, mainly due to the sale of the majority of the annuity business in the second half of 2016.
Production for Central & Eastern Europe
In Central & Eastern Europe, new life sales in 2017 increased compared with 2016 to EUR 88 million, driven by sales growth in Turkey. For the general insurance business, there were higher sales compared with 2016 amounting to EUR 64 million in 2017, reflecting the acquisition of a portfolio in Hungary.
Production for Spain & Portugal
New life sales in Spain & Portugal in 2017 increased by 23%
compared with 2016 and amounted to EUR 48 million, driven by increasing sales through the joint venture with Banco Santander. General insurance and accident & health insurance sales increased compared with 2016 to EUR 53 million in 2017, also as a result of higher sales from the joint ventures with Santander.
Amounts in EUR millions 2016 2015 %
Net underlying earnings 548 482 14
Tax on underlying earnings 107 77 38
Underlying earnings before tax by business / country
The Netherlands 534 537 (1)
United Kingdom 59 (27) n.m.
Central & Eastern Europe 55 37 51
Spain & Portugal 8 12 (38)
Underlying earnings before tax 655 559 17
Fair value items (41) (18) (121)
Gains / (losses) on investments 342 411 (17)
Net impairments (10) (22) 53
Other income / (charges) (658) (1,205) 45
Income before tax (excluding income tax from certain proportionately consolidated joint
ventures and associates) 288 (275) n.m.
Income tax from certain proportionately consolidated joint ventures and associates included in
income before tax 7 6 19
Income tax (161) 54 n.m.
Of which Income tax from certain proportionately consolidated joint ventures and associates
included in income before tax (7) (6) (19)
Net income / (loss) 127 (221) n.m.
Life insurance gross premiums 12,493 11,356 10
Accident and health insurance premiums 320 345 (8)
General insurance premiums 536 717 (25)
Total gross premiums 13,348 12,419 7
Investment income 3,886 4,693 (17)
Fees and commission income 495 501 (1)
Other revenues 2 2 47
Total revenues 17,732 17,615 1
Commissions and expenses 2,058 2,368 (13)
of which operating expenses 1,445 1,442
-New life sales
Amounts in EUR millions 2016 2015 %
The Netherlands 111 130 (15)
United Kingdom 66 72 (8)
Central & Eastern Europe 83 91 (9)
Spain & Portugal 39 39 1
Total recurring plus 1/10 single 299 332 (10)
Amounts in EUR million 2016 2015 %
New premium production accident and health insurance 34 28 22
New premium production general insurance 94 84 12
Gross deposits (on and off balance) 2016 2015 %
The Netherlands 6,686 5,137 30
United Kingdom 5,791 6,096 (5)
Central & Eastern Europe 265 227 17
Spain & Portugal 31 29 8
Total gross deposits 12,773 11,489 11
Net deposits (on and off balance) 2016 2015 %
The Netherlands 1,909 1,885 1
United Kingdom (846) (1,096) 23
Central & Eastern Europe 176 63 180
Spain & Portugal 20 17 20
Total net deposits / (outflows) 1,260 869 45
Weighted average rate Exchange rates
Per 1 EUR 2016 2015
Pound sterling 0.8187 0.7256
Czech koruna 27.0184 27.2662
Hungarian forint 310.9128 309.3147
Polish zloty 4.3616 4.1819
Romanian leu 4.4889 4.4428
Turkish Lira 3.3426 3.0206
Ukrainian Hryvnia 28.3029 24.1414