• jan nooitgedagt on solvency ii

	New rules on solvency will bring changes to the way European insurers manage their risk and capital. Chief Financial Officer, Jan Nooitgedagt, explains why he believes Solvency II will benefit the insurance industry over the long term, and talks about his first year as AEGON’s CFO – a year that saw the company further strengthen its financial position.
	“This is a period of change for the insurance industry. If we manage this period well, there are opportunities not only to improve the way we run our companies, which will benefit our shareholders, but also to strengthen what we can do for our customers.”

“There’s no doubt the insurance industry is going through a period of change. It’s not just the effects of the financial crisis. Proposed changes in rules governing capital will also have far-reaching consequences. However, if we manage these changes well, I’m convinced they’ll be of enormous benefit not just to the industry, but also to our customers and shareholders as well.

Over the past year, we’ve seen a considerable improvement in market conditions. Through the year, our quarterly earnings have steadily increased, and for 2009 we returned to a net profit. More importantly perhaps, our revenues have also held up well – an indication of continued customer confidence in AEGON.

We’ve also pressed ahead with measures to reduce risk, particularly related to equity and credit markets, and to free up more capital from our businesses. These measures have significantly strengthened our overall financial position, and we were able last November to repay a first installment of the EUR 3 billion the Dutch State provided to AEGON at the end of 2008.

There are lessons to be learned from the global financial crisis. The importance of strong risk management. The importance of customer loyalty and trust. And the paramount importance of capital. This, of course, is where Solvency II comes in.

“The measures we have taken have significantly strengthened our overall financial position, and we were able last November to repay a first installment of the EUR 3 billion the Dutch State provided to AEGON at the end of 2008.”

We’ve known for some time that Europe’s rules on capital haven’t been adequate. They produced a very arbitrary system of regulation. What the European Commission is now doing is developing a much more modern approach, where the amount of capital an insurance company has to hold at any one time is linked directly to the risks it has, and the nature of those risks.

This is a very important principle. It should mean a more efficient system for insurers – one that will reward strong risk management. We believe that Solvency II will lead to greater transparency and enable customers, shareholders and other stakeholders to compare insurers more easily. Ultimately, it should also result in greater security for customers and policyholders who invest their money with us. That’s very important, particularly at a time of such economic uncertainty.

For AEGON, Solvency II is very much a step in the right direction. We are already managing our business within a risk-based framework. In effect, Solvency II will change the regulatory framework in Europe into a system based consistently on risk and insurance companies’ appetite for risk. In turn, this should lead to fewer constraints when it comes to managing our combined risk and capital position.

Of course, Solvency II won’t come into effect for a while – not until October 2012 at the earliest. At the moment, there is broad agreement on the basic principles behind the system, but a lot still has to be ironed out. In particular, how you treat businesses in countries outside the European Union is still an area of substantial uncertainty both for regulators and companies.

This is a crucial moment for the insurance industry. We’re only just emerging from the financial crisis, and still digesting some of the lessons that have to be learned from the past two years. Here we have an opportunity in Europe to increase public trust, and put in place a modern, effective system of regulation, which will help improve the way we run our companies, benefit our shareholders, and strengthen what we can do for our customers.”

Jan Nooitgedagt

Chief Financial Officer and member of AEGON’s Executive Board