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The following table provides information on the liabilities for guarantees that are included in the valuation of the host contracts, net of the present value of the expected future premiums that are received to cover these guarantees: 

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Guaranteed minimum investment return in the Netherlands. 2 

Balances are included in the insurance liabilities on the face of the statement of financial position; refer to note 37. 3 

Incurred guarantee benefits mainly comprise the effect of guarantees from new contracts, releases related to expired out-of-the-money guarantees and fair value movvements during the reporting year. 4 

Account value reflects the liability value of the insurance contracts as a whole. 5 

The net amount at risk represents the sum of the differences between the guaranteed and actual amount that is credited to the policyholders. For Individual policies only positive differences are included, for Group pensions contracts carry forwards of negative differences are recognize. 

## Fair value measurement of guarantees in insurance contracts 

The fair values of guarantees mentioned above (with the exception of life contingent guarantees in the United States) are calculated as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable to the guarantees. For further details refer to note 3. 

For equity volatility, Aegon uses a term structure assumption with market-based implied volatility inputs for the first five years and a long-term forward rate assumption of 25% thereafter. The volume of observable option trading from which volatilities are derived generally declines as the contracts’ term increases, therefore, the volatility curve grades from implied volatilities for five years to the ultimate rate. The resulting volatility assumption in year 20 for the S&P 500 index (expressed as a spot rate) was 23.9% at December 31, 2013 and 24.4% at December 31, 2012. Correlations of market returns across underlying indices are based on historical market returns and their inter-relationships over a number of years preceding the valuation date. Assumptions regarding policyholder behavior, such as lapses, included in the models are derived in the same way as the assumptions used to measure insurance liabilities. 

Had Aegon used a long-term equity implied volatility assumption that was five volatility points higher or lower, the impact on income before tax would have been a decrease of EUR 117 million or an increase of EUR 115 million, respectively, in 2013 IFRS income before tax (2012: EUR 118 million decrease and EUR 104 million increase). 

These assumptions are reviewed at each valuation date, and updated based on historical experience and observable market data, including market transactions such as acquisitions and reinsurance transactions. 

Aegon utilizes different risk management strategies to mitigate the financial impact of the valuation of these guarantees on the results including asset and liability management and derivative hedging strategies to hedge certain aspects of the market risks embedded in these guarantees. Guarantees valued at fair value contributed a net loss before tax of EUR 188 million (2012: gain of EUR 289 million) to earnings. The main drivers of this loss before tax are positive results related to increases in risk free rates of EUR 2,014 million (2012: EUR 714 million loss), EUR 514 million related to an increase in equity markets (2012: EUR 491 million loss), EUR 67 million related to decreases in equity volatilities (2012: EUR 124 million loss) offset by EUR 302 million related to decreasing own credit spread (2012: EUR 465 million loss). Hedges related to these guarantee reserves contributed fair value losses of EUR 2,525 million to income before tax (2012: EUR 407 million gains) and DPAC offset and other contributed a gain of EUR 44 million (2012: EUR 446 million gain). 

Guarantee reserves decreased EUR 2,341 million in 2013 (2012: increase of EUR 381 million). 

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