93 ANNUAL REPORT 2010 business of AEGON Americas. AEGON believes that excluding  the earnings of these blocks of business enhances the  comparability from period to period of AEGON’s key earnings  measure, underlying earnings.  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. For segment reporting purposes underlying earnings before tax,  income before tax including associated companies and income  tax including associated companies are calculated by  consolidating on a proportionate basis the revenues and  expenses of our associated companies in Spain, India, Brazil and  Mexico. AEGON believes that the non-IFRS measures provide  meaningful information about the underlying operating results  of its business including insight into the financial measures that  senior management uses in managing AEGON’s business.  Among other things senior management is compensated based  in part on AEGON's results against targets using the non-IFRS  measures presented here. While 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 and readers are cautioned to consider carefully the  different ways in which AEGON and its peers present similar  information before comparing them. Proportionately  consolidated earnings from the Company’s associates in  insurance companies in Spain, India, Brazil and Mexico are  reported on an underlying earnings basis. AEGON has blocks of  businesses other than those characterized as run-off  businesses under IFRS for which sales have been discontinued  of which the earnings are included in underlying earnings. 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. 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, 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. 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. 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 policy alternatives that companies may select in  presenting their results (i.e. companies can use different local  GAAPs) and that can make the comparability from period to  period difficult. The reconciliation of this measure to the most  comparable IFRS measures is shown in the table Segment  reporting on page 150. Fair value items include the ‘over’ or ‘under’ performance of  investments and guarantees held at fair value for which the  expected long-term return is included in underlying earnings,  the gains (losses) on real estate and hedge ineffectiveness.  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. Includes realized gains and losses on available-for-sale  investments, as well as mortgage and loan portfolios. Certain assets held by AEGON Americas, AEGON The  Netherlands and AEGON UK are carried at fair value and  Realized gains or losses on investments Underlying earnings Fair value items Non-IFRS measures SHARPENING OUR FOCUS ■ Earnings from the Company’s associates in insurance  companies in Spain, India, Brazil and Mexico are reported  on an underlying earnings basis.