Intangible assets

12 Months Ended

Dec. 31, 2019

29 Intangible assets


Net book value	Goodwill		VOBA			Future servicing rights		Software			Other		Total
At December 31, 2019		392		952			84		69			61		1,559

At December 31, 2018		384		1,123			91		64			64		1,727

At January 1, 2018		293		1,153			99		51			36		1,633

Cost
At January 1, 2019		554		6,858			361		327			166		8,265
Additions		-		-			-		35			4		39
Capitalized subsequent expenditure		-		-			-		7			-		7
Disposals		-		-			-		(9	)		-		(9	)
Net exchange differences		13		145			5		11			3		178
At December 31, 2019		567		7,003			366		371			173		8,479
Accumulated amortization, depreciation and impairment losses
At January 1, 2019		169		5,735			270		263			101		6,538
Amortization through income statement		-		112			8		16			7		143
Shadow accounting adjustments		-		72			-		-			-		72
Disposals		-		-			-		(7	)		-		(7	)
Impairment losses		3		11			-		20			-		34
Net exchange differences		3		121			4		9			3		140
At December 31, 2019		175		6,051			282		301			111		6,920

Cost
At January 1, 2018		462		6,565			359		294			128		7,808
Additions		-		-			-		45			2		47
Acquisitions through business combinations		85		-			-		7			33		126
Capitalized subsequent expenditure		-		-			-		5			-		5
Disposals		-		-			-		(19	)		-		(19	)
Net exchange differences		6		293			2		(6	)		2		298
At December 31, 2018		554		6,858			361		327			166		8,265
Accumulated amortization, depreciation and impairment losses
At January 1, 2018		169		5,412			260		243			92		6,176
Amortization through income statement		-		135			8		16			6		165
Shadow accounting adjustments		-		(56	)		-		-			-		(56	)
Disposals		-		-			-		(6	)		-		(6	)
Impairment losses		-		-			-		15			-		15
Net exchange differences		-		244			2		(5	)		3		243
At December 31, 2018		169		5,735			270		263			101		6,538

Amortization and depreciation through income statement is included in Commissions and expenses. None of the intangible assets have titles that are restricted or have been pledged as security for liabilities.

With the exception of goodwill, all intangible assets have a finite useful life and are amortized accordingly. VOBA and future servicing rights are amortized over the term of the related insurance contracts, which can vary significantly depending on the maturity of the acquired portfolio. The amortization is based on either the expected future premiums, revenues or the expected gross profit margins, which for the most significant blocks of business ranges between 50 and 80 years. Future servicing rights are amortized over a period of 10 to 30 years of which 15 years remain at December 31, 2019 (2018: 13 years). Software is generally depreciated over an average period of 3 to 5 years of which 4 years remain at December 31, 2019 (2018: 4 years).

In 2018, Goodwill and Other increased by EUR 85 million and EUR 33 million respectively following the acquisition of Robidus in September 2018. For details of the acquisition, refer to note 48 Business combinations.

Goodwill

The goodwill balance has been allocated across the cash-generating units which are expected to benefit from the synergies inherent in the goodwill. Goodwill is tested for impairment both annually and when there are specific indicators of a potential impairment. The recoverable amount is the higher of the value in use and fair value less costs of disposal for a cash-generating unit. The operating assumptions used in all the calculations are best estimate assumptions and based on historical data where available.

The economic assumptions used in all the calculations are based on observable market data and projections of future trends. All the cash-generating units tested showed that the recoverable amounts were higher than their carrying values, including goodwill. A reasonably possible change in any key assumption is not expected to cause the carrying value of the cash-generating units to exceed its recoverable amount.

A geographical summary of the cash-generating units to which the goodwill is allocated is as follows:



Goodwill	2019		2018
Americas		183		182
Southern & Eastern Europe		29		30
Asset Management		34		33
United Kingdom		57		54
The Netherlands		89		85
At December 31		392		384

Goodwill in Aegon Americas is allocated to groups of cash-generating units including variable annuities, fixed annuities and the retirement plans cash-generating unit. Value in use calculations of Aegon Americas have been actuarially determined based on business plans covering a period of typically three years and

pre-tax

risk adjusted discount rates. Based on the value in use tests, goodwill in the Americas for the group of annuities cash-generating units (2019: EUR 127 million: 2018: EUR 127 million) and the retirement plans cash-generating unit (2019: EUR 56 million: 2018: EUR 55 million) remain unchanged from prior year except for the impact of currency translation adjustments. The value in use tests assume business plans covering a period of three years further extrapolated to ten years, where the new business levels for years

4-10

assumed a 0% growth rate (2018: 0%). The

pre-tax

adjusted discount rate was 17% for annuities and 18% for retirement plans.

To determine the recoverable amounts of the cash generating units of Aegon Southern and Eastern Europe (SEE), value in use was calculated, and compared to the carrying amounts. Value in use has been determined based on a business plan covering a period of typically 3 years, that, in certain instances was further extrapolated to 20 years where the new business levels for years

4-20

assumed a growth rate based on the business plan of the third year, prudentially decreased by 20% (2018: 20%). Other key assumptions used for the calculation were

pre-tax

risk adjusted discount rate of ranging between

8.6%-25.2%

(2018:

9.1%-28.5%),

new business contribution, renewals, asset fees, investment return, persistency and expenses. Operating assumptions are best estimate assumptions and based on historical data where available. Economic assumptions are based on observable market data and projections of future trends.

As of 2018, goodwill that was provisionally allocated to the cash-generating unit – Cofunds Ltd., is allocated to Aegon UK, whose value in use exceeded its carrying value. Assessment of value in use at this level is considered to reflect the expected benefit flowing to Aegon UK from the synergies arising from the acquisition of Cofunds. The value in use of Scottish Equitable plc (SE plc) is the most material part of the Aegon UK value in use calculation, and it is determined using SE plc’s Solvency II own funds value with adjustments for contract boundaries, risk margin and SE plc’s share of the defined benefit pension scheme liability. An allowance has also been made for the present value of the next 3 years profits, from expected new business. This is considered a key assumption which if it does not arise would reduce the value in use, however a headroom would still remain.

For Aegon the Netherlands, goodwill was allocated to Robidus - a cash generating unit whose value in use exceeds its carrying value. The value in use calculations were based on business plans covering a period of five years,

pre-tax

discount rate of 8.2%,

post-tax

discount rate of 8.1%, and terminal growth rate at 2%. The goodwill arises mainly from new customers, future software platform developments, synergies, and assembled workforce.

VOBA

The movement in VOBA over 2019 can be summarized and compared to 2018 as follows:



	2019			2018
At January 1		1,123			1,153
Amortization / depreciation through income statement		(112	)		(135	)
Shadow accounting adjustments		(72	)		56
Impairment losses		(11	)		-
Net exchange differences		24			49
At December 31		952			1,123