NOTES TO THE CONSOLIDATED INCOME STATEMENTS Amounts in EUR millions DETERMINATION OF RESULTS GROSS PREMIUMS INVESTMENT INCOME AND INCOME FROM BANKING ACTIVITIES REINSURANCE The principles for the determination of results are described in the notes to the balance sheets. Additionally, certain principles for specific income statement items are described in this section. Gross premiums, including recurring and single premiums, from all types of life insurance, both general account and with investments for account of policyholders, incoming life reinsurance and non-life insurance are recognized as revenues when they become receivable. Premium to reinsurers have not been deducted. Not reflected as premium revenues are deposits from certain products that are sold in the United States and Canada such as deferred annuities, immediate annuities without life contingency and GICs and funding agreements. For these products the surrender charges and charges assessed have been included in gross premium life insurance. Investment income is recognized as revenue on an accrued basis for all interest bearing assets. Investment income includes changes in the amortized cost basis of investments and amortization of deferred gains and losses on fixed rate investments. It also includes net earnings from group companies and participations (excluding Transamerica Finance Corporation), actual dividends received and rental income due. Also the indirect income on shares and real estate is recognized as investment income. Income from banking activities includes investment income and other income from banking operations. Fees and commissions from asset management services and mutual funds and from sales activities are recognized as revenue over the period in which the services are performed or the sales have been closed. In the income statement the structural total return on investments in shares and real estate is recognized. This total return includes the direct income (rents and dividends) of the reporting period and an amount of indirect income. The total return is calculated by determining the average of the total return yield over the last 30 years and multiplying this average yield by the average value of these investments over the last seven years, adjusted for investment purchases and sales. The indirect income from these investments is then calculated as the difference between the total return and the direct income. AEGON is involved in both ceded and assumed reinsurance. This includes separate life reinsurance operations as well as within the life and non-life operations ceded and assumed reinsurance agreements to spread risk and to limit exposure on large risks. Premiums for reinsurance assumed are included in premium revenues, premiums for reinsurance ceded are shown separately as a charge on the face of the income statement. The effects of reinsurance on premiums are: 2003 2002 2001 Life Non-life Total Life Non-life Total Life Non-life Total Direct premiums 14,956 3,061 18,017 16,581 3,320 19,901 16,730 3,069 19,799 Incoming reinsurance premiums 1,253 198 1,451 1,160 295 1,455 1,551 228 1,779 TOTAL GROSS PREMIUMS 16,209 3,259 19,468 17,741 3,615 21,356 18,281 3,297 21,578 Reinsurance ceded 1,763 500 2,263 1,977 555 2,532 1,257 602 1,859 14,446 2,759 17,205 15,764 3,060 18,824 17,024 2,695 19,719