THE HAGUE, The Netherlands, Aug. 13 /PRNewswire-FirstCall/ -- Capital Position Strengthened - EUR 1.6 billion in capital freed up in first half 2009, above full year target - Excess capital(a) of EUR 3.5 billion by end June - Revaluation reserves improve by EUR 3.4 billion, or 40%, a result of narrowing credit spreads - IGD(b) solvency ratio increases to 202% - No interim dividend payment for 2009 - dividend policy remains unchanged Improved earnings - Underlying earnings before tax of EUR 404 million, substantial improvement compared with the past two quarters - Underlying earnings include lower investment income as result of de-risking measures - Fair value items of EUR (31) million include EUR 202 million net gain from higher equity markets, offset by a loss on interest rate hedges - Net loss of EUR 161 million, including one-time EUR 385 million loss from sale of Taiwanese life activities - Impairments of EUR 393 million, approximately half from US housing market related assets - Cost savings well on track to achieve EUR 150 million target Continued profitable sales, despite difficult environment - New life sales of EUR 469 million, helped by an increase in US retail sales - Net deposits(c) of EUR 857 million, due to strong sales of annuities and pensions, and improved persistency - Value of new business of EUR 181 million, with overall increase in rates of return Statement Alex Wynaendts, CEO "Ensuring that AEGON maintains a strong capital position continues to be front and center in our actions. In the first half of the year, we have exceeded our full-year capital release target. We are also pleased with the further improvement, quarter over quarter, to our underlying earnings, despite the impact of our de-risking measures on investment income. Our strong capital position has allowed us to begin reversing in part the impact of these measures by investing cash in higher yielding, quality assets. We have not declared an interim dividend, however our dividend policy remains unchanged. Our decision to pay a full-year dividend will continue to depend on cash flows and AEGON's capital position at the end of the year. "We are well on track to achieve our cost savings target for 2009. At the same time, we are working to identify additional cost saving measures with the determination not to undermine the high level of service our customers have come to expect. We are especially pleased by the continued confidence of our customers, as demonstrated by solid retail sales in the United States and net deposits for the quarter. "We remain convinced that our strategic objectives to strengthen AEGON's capital position, reduce costs and implement actions to safeguard customer trust are the right ones in the current environment and for the long term. AEGON has weathered the turmoil of the past year and is committed to being in a strong position to maximize the opportunities ahead." KEY PERFORMANCE INDICATORS Notes Q2 Q1 % Q2 amounts in EUR millions 2009 2009 2008 Underlying earnings before tax 1 404 (22) N.M. 596 Net income 2 (161) (173) 7 276 New life sales 3 469 543 (14) 729 Gross deposits excluding Institutional Guaranteed Products 4 5,647 6,393 (12) 5,650 Value of new business (VNB) 181 201 (10) 212 Return on equity 5 10.3% (3.3%) N.M. 11.2% - TABLE CONTINUED - % Ytd Ytd % amounts in EUR millions 2009 2008 Underlying earnings before tax (32) 382 1,254 (70) Net income N.M. (334) 429 N.M. New life sales (36) 1,012 1,415 (28) Gross deposits excluding Institutional Guaranteed Products - 12,040 11,037 9 Value of new business (VNB) (15) 382 398 (4) Return on equity (8) 3.5% 12.2% (71) a) Excess capital over S&P AA capital adequacy requirements b) The calculation of the IGD (Insurance Group Directive) capital surplus and ratio are based on Solvency I capital requirements on IFRS for entities within the EU (Pillar I for AEGON UK), and local regulatory solvency measurements for non-EU entities. Specifically, required capital for the life insurance companies in the US is calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance Commissioners in the US. The methodology to calculate the ratio for the Netherlands has been adjusted to include the excess value above the technical provisions, calculated according to the local regulatory liability adequacy test, as of Q2 2009. The comparable IGD ratio as per end of Q1 2009 would have been 193%. c) Excluding institutional guaranteed products Last year, AEGON set out three long-term strategic priorities: 1. To reallocate capital toward businesses with higher growth and return prospects; 2. To improve growth and returns from existing businesses; 3. To manage AEGON as an international company. Subsequently, AEGON identified and announced three priorities to counter the challenges of the current global financial crisis and position the company for future growth: - Focus on capital preservation and accelerate the capital release program; - EUR 150 million in cost saving measures for 2009; - Develop contingency plans for possible deterioration in financial markets. AEGON further aims to reduce its earnings sensitivity to financial markets to realize more stable earnings. Portfolio review AEGON is continuing to review its portfolio of businesses to ensure they meet the criteria outlined in the company's strategy. Recent developments: - Sale of life business in Taiwan, decreasing AEGON's long-term interest rate exposure and substantially lowering required economic capital; - Withdrawal from Group Risk market in the UK, releasing EUR 55 million in capital over next three years. Consistent with its strategy to allocate capital to businesses and geographies that offer attractive growth and higher return prospects, AEGON completed its acquisition of a 50% stake in Mongeral, Brazil's sixth largest independent life insurer, and the acquisition of Banca Transilvania's 50% share in BT AEGON, a Romanian pension business the two companies set up in 2008. Cost measures - Cost saving measures well on track to achieve the full-year EUR150 million target; - Operating expenses down 5% in the first half of 2009, excluding impact from restructuring charges, increased employee benefit plan expenses and currency effects. Capital preservation - A total of EUR 1.6 billion in capital released from AEGON's businesses in H1, above target of EUR 1.5 billion for full year; - AEGON started to invest cash in higher yielding quality assets, which will in part reverse earnings impact from de-risking measures; - AEGON aims to maintain an amount of excess capital substantially above AA capital adequacy requirements. Capital management Excess capital - Excess capital at the end of June 2009 totaled EUR 3.5 billion over AA capital adequacy requirements, up EUR 0.8 billion from the end of Q1 2009; - The positive impact from improved capital markets, the company's capital release program and statutory earnings were partly offset by impairments and rating migration in the Americas. At the end of Q2 2009, AEGON had an IGD solvency ratio of 202%; - Because of uncertain economic conditions, AEGON still expects an elevated level of asset impairments in its investment portfolio in 2009 compared with its long-term assumptions. Impairments negatively impacted the company's capital position in Q2 2009, reducing excess capital by approximately EUR 0.3 billion. In addition, rating migration in the Americas' asset portfolio was limited to a EUR 0.1 billion increase in capital requirements. IFRS core capital - At the end of June 2009, core capital, excluding the revaluation reserves, totaled EUR 15.8 billion, 75% of the total capital base, well above AEGON's minimum target of 70%7,8). Core capital, including the revaluation reserves, was EUR 10.6 billion, consisting of EUR 7.6 billion in shareholders' equity and a further EUR 3 billion in convertible core capital securities. AEGON's revaluation reserves improved by 40% during Q2 2009, or EUR 3.4 billion, to a negative EUR 5.1 billion. The improved revaluation reserves were the main driver behind an increase in shareholders' equity. The revaluation reserves improved primarily due to the impact of narrowing credit spreads on bond values. Dividend - AEGON has not declared an interim dividend to common shareholders for 2009. The company's dividend policy, however, remains unchanged, i.e. the payment of a dividend depends on the capital position and cash flows of the company. A decision on a final dividend will be announced with the Q4 2009 results. Risk management Equity market sensitivities - During Q2 2009, AEGON implemented a macro hedge program for equity exposure related to its retail variable annuity portfolio to reduce the sensitivity of AEGON's capital position to equity market movements. This program, a combination of out-of-the-money put options and linear hedge instruments, is in place for twelve months, but can be extended for a longer period. The hedge instruments will be carried at fair value through profit or loss and will be reported under fair value items. FINANCIAL OVERVIEW EUR millions Q2 2009 Q1 2009 % Q2 2008 Underlying earnings before tax by line of business Life and protection 266 239 11 252 Individual savings and retirement products 62 (313) N.M. 115 Pensions and asset management 83 42 98 129 Institutional products 29 89 (67) 99 Life reinsurance 13 (23) N.M. - Distribution 1 6 (83) 8 General insurance 12 (1) N.M. 20 Interest charges and other (72) (63) (14) (38) Share in net results of associates 10 2 N.M. 11 Underlying earnings before tax 404 (22) N.M. 596 Over/(under) performance of fair value items (31) (197) 84 48 Operating earnings before tax 373 (219) N.M. 644 Operating earnings before tax by line of business Life and protection 270 179 51 264 Individual savings and retirement products 88 (306) N.M. 139 Pensions and asset management 35 (135) N.M. 97 Institutional products 131 13 N.M. 155 Life reinsurance 61 59 3 3 Distribution 1 6 (83) 8 General insurance 12 (1) N.M. 20 Interest charges and other (235) (36) N.M. (53) Share in net results of associates 10 2 N.M. 11 Operating earnings before tax 373 (219) N.M. 644 Gains/(losses) on investments 35 173 (80) (212) Impairment charges (393) (386) (2) (98) Other income/(charges) (353) (23) N.M. 9 Income before tax (338) (455) 26 343 Income tax 177 282 (37) (67) Net income (161) (173) 7 276 Net underlying earnings 357 (14) N.M. 437 Net operating earnings 331 (163) N.M. 479 Underlying earnings geographically Americas 280 (68) N.M. 441 The Netherlands 129 72 79 116 United Kingdom 20 7 186 48 Other countries 47 30 57 29 Holding and other (72) (63) (14) (38) Underlying earnings before tax 404 (22) N.M. 596 Operating earnings geographically Americas 461 (100) N.M. 541 The Netherlands 76 (118) N.M. 79 United Kingdom 22 4 N.M. 48 Other countries 49 31 58 29 Holding and other (235) (36) N.M. (53) Operating earnings before tax 373 (219) N.M. 644 Commissions and expenses 1,504 1,618 (7) 1,515 of which operating expenses 814 842 (3) 772 - TABLE CONTINUED - Ytd Ytd EUR millions % 2009 2008 % Underlying earnings before tax by line of business Life and protection 6 505 504 - Individual savings and retirement products (46) (251) 231 N.M. Pensions and asset management (36) 125 250 (50) Institutional products (71) 118 207 (43) Life reinsurance N.M. (10) 43 N.M. Distribution (88) 7 17 (59) General insurance (40) 11 37 (70) Interest charges and other (89) (135) (55) (145) Share in net results of associates (9) 12 20 (40) Underlying earnings before tax (32) 382 1,254 (70) Over/(under) performance of fair value items (165) (228) (393) 42 Operating earnings before tax (42) 154 861 (82) Operating earnings before tax by line of business Life and protection 2 449 477 (6) Individual savings and retirement products (37) (218) 81 N.M. Pensions and asset management (64) (100) 78 N.M. Institutional products (15) 144 100 44 Life reinsurance N.M. 120 34 N.M. Distribution (88) 7 17 (59) General insurance (40) 11 37 (70) Interest charges and other N.M. (271) 17 N.M. Share in net results of associates (9) 12 20 (40) Operating earnings before tax (42) 154 861 (82) Gains/(losses) on investments N.M. 208 (126) N.M. Impairment charges N.M. (779) (130) N.M. Other income/(charges) N.M. (376) (45) N.M. Income before tax N.M. (793) 560 N.M. Income tax N.M. 459 (131) N.M. Net income N.M. (334) 429 N.M. Net underlying earnings (18) 343 940 (64) Net operating earnings (31) 168 654 (74) Underlying earnings geographically Americas (37) 212 919 (77) The Netherlands 11 201 229 (12) United Kingdom (58) 27 93 (71) Other countries 62 77 68 13 Holding and other (89) (135) (55)(145) Underlying earnings before tax (32) 382 1,254 (70) Operating earnings geographically Americas (15) 361 645 (44) The Netherlands (4) (42) 38 N.M. United Kingdom (54) 26 93 (72) Other countries 69 80 68 18 Holding and other N.M. (271) 17 N.M. Operating earnings before tax (42) 154 861 (82) Commissions and expenses (1) 3,122 2,931 7 of which operating expenses 5 1,656 1,555 6 Overview AEGON reported a net loss of EUR 161 million for Q2 2009, including a one- time EUR 385 million loss from the sale of the company's Taiwanese life insurance business. Excluding this one-time loss, net income was EUR 224 million, a strong improvement compared with previous quarters. Underlying earnings before tax amounted to EUR 404 million, a substantial increase from the first quarter of 2009. Fair value items contributed a negative EUR 31 million to earnings in Q2 2009, again a strong improvement compared with recent quarters. Net income during the second quarter of 2009 was negatively impacted by impairment charges of EUR 393 million, associated in part with investments in structured residential mortgage assets in the Americas. Impairments of EUR 330 million in the Americas would have amounted EUR 255 million under US GAAP. Net income in the second quarter of 2009 also included a tax gain of EUR 228 million related to cross border intercompany reinsurance transactions between Ireland and the United States. This gain was a partial reversal of previous tax charges from these internal transactions during 2008. Underlying earnings before tax In Q2 2009, underlying earnings before tax for the company totaled EUR 404 million, a substantial improvement compared with recent quarters. Underlying earnings were impacted by a few exceptional items totaling EUR 36 million. Excluding these exceptional items, underlying earnings would have been EUR 440 million. Underlying earnings were also impacted by de-risking measures in the first half of 2009, which affected earnings by EUR 45 million. The main exceptional items were: - US employee benefit plan accounting mismatch of EUR (15) million: - Restructuring charges of EUR (18) million; - Accelerated amortization of DPAC related to universal life in Canada of EUR (23) million; - Reserve adjustments of EUR 20 million. Underlying earnings in the Americas improved significantly compared with Q1 2009 when lower equity markets led to a strengthening in minimum guarantee reserves and accelerated amortization of deferred policy acquisition costs (DPAC). Compared with Q2 2008 however, earnings from the Americas decreased to USD 371 million, a result of lower investment spreads, reduced fees from lower asset balances, increased employee benefit plan expenses (USD 60 million), accelerated amortization of DPAC in the Life and Protection line (USD 30 million), and one-time restructuring costs (USD 14 million) related to cost saving initiatives. In Q2 2008, earnings from the Americas had included a one- off reserve strengthening of USD 49 million in the life reinsurance business. In the Netherlands, underlying earnings totaled EUR 129 million, including a one-time EUR 20 million release of provisions. Underlying earnings in the United Kingdom, meanwhile, totaled GBP 17 million, lower than Q2 2008, due primarily to the impact of lower equity and corporate bond markets on fund related charges in the pension business. Underlying earnings from Other countries, which exclude earnings from the Taiwanese life business this quarter, amounted to EUR 47 million, up from EUR 29 million in Q2 2008. Earnings for the second quarter 2008 had included a EUR 6 million underlying loss in Taiwan. The increase in earnings in Other Countries was the result of a strong earnings performance from AEGON's operations in Central & Eastern Europe and the company's bancassurance joint ventures in Spain. Net income Net income for the second quarter of 2009 included a total underperformance of fair value items of EUR 31 million. Fair value items primarily include certain (alternative) investment classes, as well as a number of products containing financial guarantees. In the Americas, fair value items showed an overperformance of USD 240 million, a result primarily of increased market values for credit derivatives, as well as a positive contribution from both total return annuities and the impact of lower implied equity market volatilities on the fair value of GMWB guarantees. The results of AEGON's macro equity hedge program are reported under fair value items and amounted to a gain of USD 26 million in the second quarter 2009. Alternative assets in the Americas, such as real estate partnerships and private equity, however, showed an underperformance. In Q2 2009, fair value items included a EUR 54 million charge related to fair value movements of guarantees and related hedges in the Netherlands. During the second quarter of 2009, a EUR 186 million gain from higher equity markets, as well as the benefit from lower equity market volatility, were more than offset by losses from the company's program for managing guarantee related interest exposures. Three bonds issued by AEGON N.V. and their hedge instruments are held at fair value through profit or loss. In previous quarters, the widening of AEGON's credit spread had a positive contribution to earnings. In Q2 2009 however, AEGON's credit spread narrowed substantially, leading to a loss of EUR 163 million. Gains on investments Gains on investments during the second quarter of 2009 amounted to EUR 35 million, including gains on economic hedges. These gains were partly offset by losses from the revaluation of direct residential real estate investments in the Netherlands. Impairment charges Impairments during the second quarter of 2009 totaled EUR 393 million. This included EUR 123 million relating to subprime mortgage asset backed securities and a further EUR 85 million to residential mortgage backed securities, both in the Americas. The remainder was mainly related to corporate credits in the Americas, the United Kingdom and the Netherlands. Impairments of EUR 330 million in the Americas would have amounted to EUR 255 million under US GAAP. Tax Net income in the second quarter of 2009 included a tax gain of EUR 228 million related to cross border intercompany reinsurance transactions between Ireland and the United States. These reinsurance transactions are accounted for at fair value in both tax jurisdictions. While losses in the United States were taxed at 35%, gains in Ireland were taxed at 12.5%. The gain was a partial reversal of previous tax charges on these internal transactions in 2008. The loss from the sale of AEGON's Taiwanese life activities did not lead to tax relief on earnings for the second quarter of 2009. Commissions and expenses Compared with Q1 2009, commissions and expenses decreased by 7% to EUR 1.5 billion. Operating expenses were down 3% to EUR 814 million as a result of cost saving initiatives, partly offset by restructuring charges and higher employee benefit plan expenses. Excluding the impact from restructuring charges, increased employee benefit plan expenses and currencies, operating expenses were down 5% in the first half of 2009 compared with the same period last year. Compared with Q2 2008, commissions and expenses were down 5% on a constant currency basis. On the same basis, operating expenses were up 1% as an increase in employee benefit plan expenses and restructuring charges offset further cost savings. Operating expenses also increased as a result of acquisitions in Central & Eastern Europe in 2008 and the inclusion of new joint ventures in Spain. Sales EUR millions Q2 2009 Q1 2009 % Q2 2008 New life sales Life single premiums 1,504 2,025 (26) 2,880 Life recurring premiums annualized 318 341 (7) 441 Total recurring plus 1/10 single 469 543 (14) 729 New premium production accident and health insurance 146 164 (11) 141 New premium production general insurance 11 12 (8) 16 Gross deposits (on and off balance) by line of business Fixed annuities 928 1,628 (43) 875 Variable annuities 949 714 33 717 Saving deposits 779 580 34 688 Retail mutual funds 671 642 5 908 Pensions and asset management 2,319 2,829 (18) 2,461 Institutional guaranteed products 1,115 1,848 (40) 3,481 Life reinsurance 1 - N.M. 1 Total gross deposits 6,762 8,241 (18) 9,131 Total gross deposits excl. institutional guaranteed products 5,647 6,393 (12) 5,650 Net deposits (on and off balance) by line of business Fixed annuities 145 688 (79) (24) Variable annuities 412 78 N.M. (102) Saving deposits 43 (67) N.M. 114 Retail mutual funds 23 (98) N.M. 416 Pensions and asset management 246 506 (51) 180 Institutional guaranteed products (1,432) (2,354) 39 401 Life reinsurance (12) (16) 25 (14) Total net deposits (575) (1,263) 54 971 Total net deposits excl. institutional guaranteed products 857 1,091 (21) 570 - TABLE CONTINUED - Ytd Ytd EUR millions % 2009 2008 % New life sales Life single premiums (48) 3,529 5,637 (37) Life recurring premiums annualized (28) 659 851 (23) Total recurring plus 1/10 single (36) 1,012 1,415 (28) New premium production accident and health insurance 4 310 307 1 New premium production general insurance (31) 23 32 (28) Gross deposits (on and off balance) by line of business Fixed annuities 6 2,556 1,181 116 Variable annuities 32 1,663 1,402 19 Saving deposits 13 1,359 1,336 2 Retail mutual funds (26) 1,313 1,472 (11) Pensions and asset management (6) 5,148 5,644 (9) Institutional guaranteed products (68) 2,963 6,730 (56) Life reinsurance - 1 2 (50) Total gross deposits (26) 15,003 17,767 (16) Total gross deposits excl. institutional guaranteed products - 12,040 11,037 9 Net deposits (on and off balance) by line of business Fixed annuities N.M. 833 (819) N.M. Variable annuities N.M. 490 (254) N.M. Saving deposits (62) (24) 42 N.M. Retail mutual funds (94) (75) 587 N.M. Pensions and asset management 37 752 1,350 (44) Institutional guaranteed products N.M. (3,786) (794) N.M. Life reinsurance 14 (28) (29) 3 Total net deposits N.M. (1,838) 83 N.M. Total net deposits excl. institutional guaranteed products 50 1,948 877 122 REVENUE GENERATING INVESTMENTS June 30, Mar. 31, 2009 2009 % Revenue generating investments (total) 341,815 334,280 2 Investments general account 131,533 133,130 (1) Investments for account of policyholders 112,107 103,312 9 Off balance sheet investments third parties 98,175 97,838 - Sales Total new life sales in Q2 2009, excluding Taiwan, were down 13% compared with Q1 2009. Total new life sales in the Americas were in line with Q1 2009. Retail life sales increased 7% from Q1 2009 reflecting expanded distribution, particularly in the term life insurance market, offset by lower sales of both BOLI/COLI and life reinsurance. In the Netherlands, pension sales slowed significantly during the second quarter of 2009 and proved volatile after the standstill in the group pension market during the third and fourth quarters of last year. The first quarter of 2009 had seen strong group pension sales. New life sales in the United Kingdom in the second quarter of the year were down 16% compared with Q1 2009, due primarily to a decline in sales of annuities. In Other countries new life sales, excluding Taiwan, increased by 9% compared with Q1 2009. New life sales in Spain rose to EUR 24 million, a reflection of higher sales at AEGON's bancassurance joint ventures. Sales through Caja de Ahorros del Mediterraneo (CAM), AEGON's largest bank partner in Spain, remained strong at EUR 57 million (on a 100% basis) in Q2 2009. It should be noted that CAM is an associate of AEGON and its results are therefore not consolidated. In Central & Eastern Europe, new life sales totaled EUR 18 million, up 13% compared with Q1 2009, due to higher recurring premium sales. With the exception of Spain, all country units showed a decline in sales compared with Q2 2008. In Other countries, sales were down year-on-year primarily as a result of the sale of AEGON's Taiwanese life business and lower unit-linked sales in Central & Eastern Europe. Sales were also affected by a decline in certain parts of the retail market in the Americas, as well as lower life reinsurance sales and the impact of the financial crisis on sales of BOLI/COLI contracts. In the United Kingdom, sales declined year-on-year across most lines of business. Q2 2008 had been a record sales quarter in the United Kingdom. Sales in the Netherlands were also down year-on-year, primarily because of a slowdown in the Dutch group pension market and lower demand for unit-linked products, as well as lower annuity sales due to conservative pricing. Deposits Total gross deposits of EUR 5.6 billion in Q2 2009, both on and off balance, excluding institutional guaranteed products, were down 12% compared with Q1 2009. The decline was due mainly to lower fixed annuity deposits in the Americas - the result of a reduction in AEGON's crediting rates since the end of Q1 2009. Pension deposits in the Americas remained strong, but were down compared with the previous quarter, a reflection of seasonal factors. Sales of variable annuities were up by 33% compared with Q1 2009 due to improved markets. Gross deposits in Other countries amounted to EUR 653 million, down from the previous quarter as a result of a decline in sales from AEGON's asset management joint venture in China. Gross deposits in Central & Eastern Europe were up 7% compared with Q1 2009. Despite an adverse economic environment, pension deposits remained strong, reflecting the overall growth of the business. In Q2 2009, deposits in Other countries also included sales of European variable annuities, amounting to EUR 162 million. Net deposits, excluding institutional guaranteed products, totaled EUR 0.9 billion, an increase compared with Q2 2008, but a decrease compared with Q1 2009. Compared with the first quarter of 2009, net inflows in fixed annuities and the pension and asset management business in the Americas declined. The variable annuities and mutual fund businesses both saw strong sales and lower outflows, leading to net inflows during Q2 2009. Net deposits in Other countries declined compared with Q1 2009, primarily as a result of outflows from AEGON's Chinese asset management joint venture. Value of new business Value of new business (VNB) amounted to EUR 181 million in the Q2 2009. Declines in VNB compared with Q1 2009 in the Americas, the United Kingdom and Central & Eastern Europe were partly offset by increases in the Netherlands and Spain. AEGON's internal rate of return amounted to 21.9%, higher than Q1 2009, a result of improved returns in most country units, and a change in the geographical mix of new business. FINANCIAL OVERVIEW, Q2 2009 GEOGRAPHICALLY United Americas Kingdom The USD GBP Americas Netherlands Underlying earnings before tax by line of business 217 11 Life and protection 159 75 Individual savings and 79 - retirement products 66 (10) Pensions and asset 17 8 management 13 57 41 - Institutional products 29 - 17 - Life reinsurance 13 - - (2) Distribution - 3 - - General insurance - 4 Interest charges and other Share in net results of - - associates - - Underlying earnings before 371 17 tax 280 129 Over/(under) performance 240 2 of fair value items 181 (53) Operating earnings 611 19 before tax 461 76 Operating earnings before tax by line of business 228 11 Life and protection 167 71 110 - Individual savings and retirement products 90 (10) 15 10 Pensions and asset management 12 8 174 - Institutional products 131 - 84 - Life reinsurance 61 - - (2) Distribution - 3 - - General insurance - 4 Interest charges and other Share in net results of - - associates - - Operating earnings before 611 19 tax 461 76 (4) 25 Gains/(losses) on investments (3) (42) (449) (31) Impairment charges (330) (28) - 30 Other income/(charges) (1) - 158 43 Income before tax 127 6 214 (25) Income tax 155 (2) 372 18 Net income 282 4 343 21 Net underlying earnings 259 93 505 22 Net operating earnings 380 54 - TABLE CONTINUED - Holding, other United Other activities & Total Kingdom countries eliminations EUR Underlying earnings before tax by line of business Life and protection 14 18 - 266 Individual savings and retirement products - 6 - 62 Pensions and asset management 8 5 - 83 Institutional products - - - 29 Life reinsurance - - - 13 Distribution (2) - - 1 General insurance - 8 - 12 Interest charges and other (72) (72) Share in net results of associates - 10 - 10 Underlying earnings before tax 20 47 (72) 404 Over/(under) performance of fair value items 2 2 (163) (31) Operating earnings before tax 22 49 (235) 373 Operating earnings before tax by line of business Life and protection 14 18 - 270 Individual savings and retirement products - 8 - 88 Pensions and asset management 10 5 - 35 Institutional products - - - 131 Life reinsurance - - - 61 Distribution (2) - - 1 General insurance - 8 - 12 Interest charges and other (235) (235) Share in net results of associates - 10 - 10 Operating earnings before tax 22 49 (235) 373 Gains/(losses) on investments 28 2 50 35 Impairment charges (35) - - (393) Other income/(charges) 33 (385) - (353) Income before tax 48 (334) (185) (338) Income tax (28) (9) 61 177 Net income 20 (343) (124) (161) Net underlying earnings 24 38 (57) 357 Net operating earnings 25 40 (168) 331 - Underlying earnings before tax of USD 371 million, a substantial improvement on recent quarters - Net income includes USD 240 million contribution from fair value items driven by tightening credit spreads and lower equity market volatilities - Impairments of USD 449 million, primarily on mortgage-backed assets and corporate bonds - Retail life sales up compared to Q1 2009; net deposits of USD 1.0 billion (excluding institutional guaranteed products) Overview Earnings from the Americas in Q2 2009 were up significantly compared to Q1 2009 as financial markets improved during the quarter. Compared with last year however, earnings from the Americas decreased to USD 371 million, mainly due to lower investment spreads, reduced fees from lower asset balances, increased employee benefit plan expenses (USD 60 million), accelerated amortization of DPAC in the Life and Protection line (USD 30 million), and one-time restructuring costs (USD 14 million) related to cost savings initiatives. In Q2 2008, earnings from the Americas had included a one-off reserve strengthening of USD 49 million in the life reinsurance business. Net impairments amounted to USD 449 million, of which USD 284 million was related to structured residential mortgage asset impairments. Impairments would have amounted to USD 340 million under US GAAP. Net income also included a tax gain related to cross border intercompany reinsurance transactions between Ireland and the United States (USD 305 million). Retail life sales increased 7% over Q1 2009 reflecting expanded distribution, particularly in the term life insurance market. Underlying earnings before tax AEGON reported underlying earnings before tax in the Americas for Q2 2009 of USD 371 million, a strong improvement compared to an underlying loss of USD 88 million in Q1 2009. However, underlying earnings declined compared to Q2 2008; Earnings from Life & Protection amounted to USD 217 million and included several one-off items; USD 30 million DPAC charge in the Canadian life business, USD 18 million in reserve strengthening in the US life business and USD 8 million of restructuring charges, partially offset by USD 21 million of reserve releases in accident and health. Earnings also include USD 33 million in increased employee benefit plan expenses and the impact of lower investment spreads and reduced fee income; - Individual Savings & Retirement earnings totaled USD 79 million. The decline in earnings compared to Q2 2008 was the result primarily of lower fee income in the variable annuity and mutual fund business, as well as a narrowing of spreads. Earnings in Q2 2009 included USD 10 million from increased employee benefit plan expenses; - Pensions & Asset Management earnings decreased to USD 17 million from USD 50 million in Q2 2008, a result mainly of lower fees from reduced asset balances and increased employee benefit plan expenses (USD 10 million); - Earnings from the Institutional business amounted to USD 41 million, down from USD 155 million in Q2 2008. Earnings last year had benefited from a widening in spreads due to a decline in short-term rates. In Q2 2009, earnings were severely impacted by narrowing in spreads as a result of a higher asset allocation to cash following the decision to scale down AEGON's institutional spread business; - In the Life Reinsurance business underlying earnings amounted to USD 17 million. Earnings in Q2 2008 included a USD 49 million reserve strengthening charge. Earnings in Q2 2009 were affected by adverse mortality experience (USD 10 million), as well as lower investment spreads. Net income AEGON reported net income in the Americas for Q2 2009 of USD 372 million. Fair value items showed an overperformance of USD 240 million, a result primarily of increased market values for credit derivatives, as well as a positive contribution from total return annuities and the positive impact of lower implied equity market volatilities on the fair value of GMWB guarantees and GMWB related hedges. The gain from AEGON's macro equity hedge program amounted to USD 26 million in the second quarter of 2009. Alternative assets, like real estate partnerships, as well as private equity, underperformed. Net income in the Americas included USD 449 million in net impairments, of which the majority (USD 284 million) was related to structured asset impairments, including securities backed by subprime mortgages (USD 169 million). Impairments would have amounted to USD 340 million under US GAAP. Net income included a tax gain related to cross border intercompany reinsurance transactions (USD 305 million) between Ireland and the United States. These reinsurance transactions were accounted for at fair value in both tax jurisdictions, while losses in the United States were taxed at 35% and gains in Ireland were taxed at 12.5%. The gain was a partial reversal of previous tax charges on these internal transactions in 2008. Commissions and expenses Total commissions and expenses were down 5% in Q2 2009 compared to the same period last year. Q2 2009 operating expenses were up 4% due to an increase in employee benefit plan expenses of USD 60 million as well as restructuring expenses of USD 14 million. Sales and deposits Total new life sales in the Americas were in line with Q1 2009. Retail life sales increased 7% over Q1 2009 reflecting expanded distribution, particularly in the term life insurance market, offset by lower sales of both BOLI/COLI and life reinsurance. Sales of accident and health products were down 10% compared with Q2 2008, the result partly of a decision to discontinue the auto credit business. Total gross deposits, excluding institutional guaranteed products, were down 14% compared to Q1 2009. Net deposits, excluding institutional guaranteed products, totaled USD 1.0 billion in Q2 2009. Following the reduction in AEGON's crediting rates since the end of Q1 2009, fixed annuities sales were down, in line with expectations. Sales of variable annuities rose by 37% due to improved market conditions. Retail mutual fund sales recovered from the low levels seen during the previous quarters, a result of higher equity markets. Sales of retirement plans in the pension business continued to be strong, particularly taking into account the impact of lower financial markets. Institutional guaranteed products sales were low, following AEGON's decision early 2009 to scale down its institutional spread based business. Value of new business Value of new business in the Americas amounted to USD 90 million, down from Q1 2009. The internal rate of return (IRR) was 11.1%, an improvement compared to Q1 2009. The decline in VNB is primarily the result of lower fixed annuity sales, offset by higher volumes and a more profitable product mix in the retail life business. Please refer to page 30 for more detailed information on VNB. Revenue-generating investments AEGON's total revenue-generating investments in the Americas at the end of June 2009 totaled USD 295 billion, up 6% from three months earlier. AMERICAS - EARNINGS USD millions Q2 Q1 % Q2 % Ytd Ytd % 2009 2009 2008 2009 2008 Underlying earnings before tax by line of business Life 118 153 (23) 214 (45) 271 373 (27) Accident and health 99 68 46 94 5 167 209 (20) Life and protection 217 221 (2) 308 (30) 438 582 (25) Fixed annuities 60 86 (30) 105 (43) 146 200 (27) Variable annuities 29 (480) N.M. 68 (57) (451) 138 N.M. Retail mutual funds (10) (9) (11) 3 N.M. (19) 7 N.M. Individual savings and retirement products 79 (403) N.M. 176 (55) (324) 345 N.M. Pensions and asset Management 17 10 70 50 (66) 27 95 (72) Institutional guaranteed products 30 105 (71) 141 (79) 135 282 (52) BOLI/COLI 11 12 (8) 14 (21) 23 35 (34) Institutional products 41 117 (65) 155 (74) 158 317 (50) Life reinsurance 17 (30) N.M. 1 N.M. (13) 66 N.M. Share in net results of Associates - (3) N.M. 1 N.M. (3) 2 N.M. Underlying earnings before tax 371 (88) N.M. 691 (46) 283 1,407 (80) Over/(under) performance of fair value items 240 (42) N.M. 141 70 198 (419) N.M. Operating earnings before tax 611 (130) N.M. 832 (27) 481 988 (51) Operating earnings before tax by line of business Life 132 120 10 232 (43) 252 367 (31) Accident and health 96 56 71 98 (2) 152 207 (27) Life and protection 228 176 30 330 (31) 404 574 (30) Fixed annuities 81 41 98 133 (39) 122 141 (13) Variable annuities 39 (426) N.M. 69 (43) (387) (34) N.M. Retail mutual funds (10) (9) (11) 3 N.M. (19) 7 N.M. Individual savings and retirement products 110 (394) N.M. 205 (46) (284) 114 N.M. Pensions and asset Management 15 (3) N.M. 54 (72) 12 92 (87) Institutional 166 8 N.M. 218 (24) 174 119 46 guaranteed products BOLI/COLI 8 10 (20) 17 (53) 18 34 (47) Institutional products 174 18 N.M. 235 (26) 192 153 25 Life reinsurance 84 76 11 7 N.M. 160 53 N.M. Share in net results of Associates - (3) N.M. 1 N.M. (3) 2 N.M. Operating earnings before tax 611 (130) N.M. 832 (27) 481 988 (51) Gains/(losses) on Investments (4) 36 N.M. (73) 95 32 (144) N.M. Impairment charges (449) (370) (21) (126) N.M. (819) (147) N.M. Other income/(charges) - 1 N.M. - N.M. 1 - N.M. Income before tax 158 (463) N.M. 633 (75) (305) 697 N.M. Income tax 214 290 (26) (179) N.M. 504 (282) N.M. Net income 372 (173) N.M. 454 (18) 199 415 (52) Net underlying earnings 343 (57) N.M. 502 (32) 286 1,024 (72) Net operating earnings 505 (90) N.M. 616 (18) 415 727 (43) Commissions and 1,262 1,311 (4) 1,328 (5) 2,573 2,497 3 Expenses of which operating expenses 577 562 3 555 4 1,139 1,102 3 For the amounts in euro see the Financial Supplement. AMERICAS - SALES USD millions Q2 2009 Q1 2009 % Q2 % Ytd Ytd % 2008 2009 2008 New life sales Life single premiums 138 91 52 218 (37) 229 459 (50) Life recurring premiums annualized 170 173 (2) 240 (29) 343 478 (28) Total recurring plus 1/10 single 184 182 1 262 (30) 366 524 (30) Life 137 128 7 184 (26) 265 371 (29) BOLI/COLI - 2 N.M. 6 N.M. 2 20 (90) Life Reinsurance 47 52 (10) 72 (35) 99 133 (26) Total recurring plus 1/10 single 184 182 1 262 (30) 366 524 (30) New premium production accident and health insurance 193 203 (5) 215 (10) 396 452 (12) Gross deposits (on and off balance) by line of business Fixed annuities 1,292 2,120 (39) 1,349 (4) 3,412 1,808 89 Variable annuities 1,071 780 37 1,047 2 1,851 2,021 (8) Retail mutual Funds 513 307 67 886 (42) 820 1,659 (51) Pensions and asset management 2,623 3,169 (17) 3,130 (16) 5,792 7,382 (22) Institutional guaranteed products 1,548 2,407 (36) 5,433 (72) 3,955 10,303 (62) Life Reinsurance 1 - N.M. 1 - 1 3 (67) Total gross 7,048 8,783 (20) 11,846 (41)15,831 23,176 (32) deposits Total gross deposits excl. institutional guaranteed products 5,500 6,376 (14) 6,413 (14)11,876 12,873 (8) Net deposits (on and off balance) by line of business Fixed annuities 216 896 (76) (62) N.M. 1,112 (1,254) N.M. Variable annuities 353 (40) N.M. (228) N.M. 313 (507) N.M. Retail mutual funds 104 (256) N.M. 474 (78) (152) 721 N.M. Pensions and asset management 331 1,053 (69) 489 (32) 1,384 2,133 (35) Institutional guaranteed products (1,989)(3,065) 35 576 N.M.(5,054) (1,216) N.M. Life reinsurance (18) (20) 10 (21) 14 (38) (44) 14 Total net (1,003)(1,432) 30 1,228 N.M.(2,435) (167) N.M. deposits Total net deposits excl. institutional guaranteed products 986 1,633 (40) 652 51 2,619 1,049 150 REVENUE GENERATING INVESTMENTS June Mar. 30, 31, 2009 2009 % Revenue generating investments (total) 295,325 279,399 6 Investments general account 123,131 117,934 4 Investments for account of policyholders 62,000 55,791 11 Off balance sheet investments third parties 110,194 105,674 4 For the amounts in euro see the Financial Supplement. - Underlying earnings before tax increase to EUR 129 million - Life sales of EUR 32 million; decline from Q1 due to volatility in group pension market - Value of new business rises to EUR 36 million, a result of high margins on mortgage sales Overview AEGON reported underlying earnings of EUR 129 million in the Netherlands in Q2 2009. Earnings in Q2 2009 included a one-time EUR 20 million release of provisions. Fair value items underperformed long-term expectations. Impairments, primarily on bonds, totaled EUR 28 million, while investment losses, largely due to the revaluation of investments in residential real estate in the Netherlands, amounted to EUR 42 million. Underlying earnings before tax - Earnings from Life & Protection amounted to EUR 75 million, up from Q2 2008 primarily because of a EUR 20 million one-time release of provisions and higher investment income in the Life business; - The Savings business reported a loss of EUR 10 million, due to continued pressure on margins and volumes from fierce competition in the savings market; - Earnings from Pensions & Asset Management amounted to EUR 57 million, slightly down from earnings in Q2 2008, which had included a one-time release of accruals. Technical results improved compared to Q2 2008, but lower asset balances resulted in lower fee income; - Earnings from Distribution amounted to EUR 3 million, down from Q2 2008 because of a slowdown in the real estate market; - General insurance earnings totaled EUR 4 million, lower than Q2 2008 due to higher claims. Net income Fair value items in Q2 2009 included a EUR 54 million charge from the net impact of movements in the fair value of guarantees and related hedges. The significant benefits of higher equity markets and lower equity market volatility were more than offset by losses from the company's program for managing guarantee-related interest exposures. Impairments of EUR 28 million were related primarily to corporate credit investments. Net losses on investments in Q2 2009 amounted to EUR 42 million, mainly the result of a revaluation of direct residential real estate investments (EUR 29 million). AEGON has a direct real estate portfolio of EUR 2.1 billion, mainly invested in residential housing in the Netherlands. Commissions and expenses Commissions and expenses were down 8%, while operating expenses decreased by 7%, both compared to Q2 2008. Operating expenses were down as a result of cost initiatives taken during the quarter, e.g. a reduction in staff and in project-related expenses. Sales and deposits Pension sales slowed significantly during the second quarter of 2009 and proved volatile after the standstill in the Dutch group pension market during the third and fourth quarters of last year. The first quarter of 2009 had seen strong group pension sales. Sales of single premium individual life products were down compared to Q1 2009, following increased pricing competition in the immediate annuity market. Net mortgage production in the second quarter of 2009 amounted to EUR 537 million. AEGON sells mainly mortgages with a national mortgage guarantee (NHG). Gross deposits were up 42% compared with Q1 2009. Net deposits in the savings business showed an improvement from the previous quarter, because of seasonal factors. Value of new business The value of new business increased to EUR 36 million, while the internal rate of return improved to 29%. The IRR benefited from both high margins and low capital requirements on the mortgage production. Please refer to page 30 for more detailed information on VNB. Revenue-generating investments By the end of June 2009, AEGON's revenue-generating investments in the Netherlands increased 4% to EUR 65.8 billion. THE NETHERLANDS - EARNINGS EUR millions Q2 Q1 % Q2 % Ytd Ytd % 2009 2009 2008 2009 2008 Underlying earnings before tax by line of business Life 68 44 55 29 134 112 61 84 Accident and health 7 11 (36) 4 75 18 12 50 Life and protection 75 55 36 33 127 130 73 78 Saving products (10) (9) (11) - N.M. (19) 1 N.M. Individual savings and retirement products (10) (9) (11) - N.M. (19) 1 N.M. Pensions and asset management 57 26 119 60 (5) 83 111 (25) Distribution 3 9 (67) 8 (63) 12 19 (37) General insurance 4 (9) N.M. 9 (56) (5) 19 N.M. Share in net results of associates - - N.M. 6 N.M. - 6 N.M. Underlying earnings before tax 129 72 79 116 11 201 229 (12) Over/(under) performance of fair value items (53) (190) 72 (37) (43) (243) (191) (27) Operating earnings before tax 76 (118) N.M. 79 (4) (42) 38 N.M. Operating earnings before tax by line of business Life 64 18 N.M. 27 137 82 40 105 Accident and health 7 11 (36) 4 75 18 12 50 Life and protection 71 29 145 31 129 100 52 92 Saving products (10) (9) (11) - N.M. (19) 1 N.M. Individual savings and retirement products (10) (9) (11) - N.M. (19) 1 N.M. Pensions and asset Management 8 (138) N.M. 25 (68) (130) (59) (120) Distribution 3 9 (67) 8 (63) 12 19 (37) General insurance 4 (9) N.M. 9 (56) (5) 19 N.M. Share in net results of associates - - N.M. 6 N.M. - 6 N.M. Operating earnings 76 (118) N.M. 79 (4) (42) 38 N.M. before tax Gains/(losses) on Investments (42) 110 N.M. (115) 63 68 (39) N.M. Impairment charges (28) (78) 64 (4) N.M. (106) (21) N.M. Income before tax 6 (86) N.M. (40) N.M. (80) (22) N.M. Income tax (2) 45 N.M. 45 N.M. 43 46 (7) Net income 4 (41) N.M. 5 (20) (37) 24 N.M. Net underlying Earnings 93 55 69 92 1 148 184 (20) Net operating Earnings 54 (87) N.M. 64 (16) (33) 42 N.M. Commissions and 274 307 (11) 299 (8) 581 609 (5) expenses of which operating expenses 192 217 (12) 207 (7) 409 426 (4) THE NETHERLANDS - SALES EUR millions Q2 2009 Q1 2009 % Q2 2008 % New life sales Life single premiums 145 391 (63) 443 (67) Life recurring premiums annualized 17 23 (26) 24 (29) Total recurring plus 1/10 single 32 62 (48) 68 (53) Life 19 23 (17) 23 (17) Pensions 13 39 (67) 45 (71) Total recurring plus 1/10 single 32 62 (48) 68 (53) New premium production accident and health insurance 3 7 (57) 3 - New premium production general insurance 6 7 (14) 7 (14) Gross deposits (on and off balance) by line of business Saving deposits 779 580 34 688 13 Pensions and asset management 62 11 N.M. 80 (23) Total gross deposits 841 591 42 768 10 Net deposits (on and off balance) by line of business Saving deposits 43 (67) N.M. 114 (62) Pensions and asset management (73) (113) 35 68 N.M. Total net deposits (30) (180) 83 182 N.M. - TABLE CONTINUED - EUR millions Ytd 2009 Ytd 2008 % New life sales Life single premiums 536 888 (40) Life recurring premiums annualized 40 50 (20) Total recurring plus 1/10 single 94 139 (32) Life 42 54 (22) Pensions 52 85 (39) Total recurring plus 1/10 single 94 139 (32) New premium production accident and health insurance 10 9 11 New premium production general insurance 13 15 (13) Gross deposits (on and off balance) by line of business Saving deposits 1,359 1,336 2 Pensions and asset management 73 127 (43) Total gross deposits 1,432 1,463 (2) Net deposits (on and off balance) by line of business Saving deposits (24) 42 N.M. Pensions and asset management (186) 104 N.M. Total net deposits (210) 146 N.M. REVENUE GENERATING INVESTMENTS June 30, Mar. 31, 2009 2009 % Revenue generating investments (total) 65,772 63,427 4 Investments general account 33,907 32,875 3 Investments for account of policyholders 20,065 19,357 4 Off balance sheet investments third parties 11,800 11,195 5 - Underlying earnings before tax of GBP 17 million, down primarily due to lower fund related charges in the pension business - New life sales decline 16% compared to Q1 2009, driven by annuities - VNB down compared to Q1 2009 following change in product mix DATASOURCE: AEGON N.V. CONTACT: Group Corporate Communications & Investor Relations: Media, +31-(0)70-344-8956, , or Investors: +31-(0)70-344-8305 or 1-877-548-9668 - toll free USA only, Web site: http://www.aegon.com/

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