- Strong Business Performance Results in a 9% Rise in Underlying
Earnings Before Tax - Operating Earnings and Net Income Affected by
Recent Turmoil in World Financial Markets - AEGON Reports no
Significant Impairments, Reflecting High Quality of Investment
Portfolio - AEGON Confident it Will Meet 2010 Value of New Business
Target Despite Decline in First Quarter Chairman's Statement
AEGON's Chairman of the Executive Board and CEO Alexander Wynaendts
stated: "AEGON's businesses continued to demonstrate strong
underlying performance, despite the turbulent environment. Retail
sales progressed well during the quarter, in particular in the US
and the Netherlands. The downturn in financial markets and a weak
US dollar resulted in AEGON reporting considerably lower operating
earnings and net income for the first quarter. Since the end of the
quarter we have seen a reversal of the widening of credit spreads,
which would have reduced significantly the negative impact of fair
value assets on AEGON's operating earnings and net income. The
quality of our investment portfolio is again demonstrated by the
fact that AEGON experienced no material impairments in the first
quarter. In addition, our capital position and cash flows remain
strong. We also remain confident in our progress toward our 2010
VNB target. Finally, in line with our international growth
strategy, we successfully continued our international expansion in
Central and Eastern Europe and Turkey." PERFORMANCE INDICATORS
amounts in EUR millions Notes 1Q 2008 1Q 2007 % At (except per
share data) constant currency % 1 Underlying earnings before tax 2
658 602 9 22 Net operating earnings 267 484 (45) (38) Net income 3
153 707 (78) (75) Net income per share 0.07 0.42 (83) (79) New life
sales 4 686 826 (17) (8) Total deposits 5 8,636 12,976 (33) (25)
Value of new business (VNB) 186 232 (20) (12) Return on equity -
underlying 6 13% 11% 18 earnings For notes see Explanatory Notes.
AEGON has a focused strategy, aimed at creating long-term value for
all its stakeholders. The Group's objectives are to expand its
international presence, further strengthen its distribution
networks and invest in its growing pension businesses. AEGON took a
number of specific steps to meet these objectives: - AEGON
strengthened its position in the developing pension and asset
management markets in Central and Eastern Europe (CEE) by signing
an agreement to acquire the UNIQA Asset Management Company and the
Heller-Saldo 2000 Pension Fund Management Company in Hungary, with
a total number of pension fund members of 140,000. Following the
acquisition, AEGON Hungary's pension revenue generating investments
will amount to EUR 1.9 billion. - As part of its ongoing efforts to
expand in rapidly developing markets, AEGON also announced the
acquisition of Turkish life and pension company Ankara Emeklilik.
Turkey, with its population of 74 million people, has a low life
insurance penetration and the private pensions market has
significant growth potential. In addition, Ankara Emeklilik has a
well-established presence in the Turkish life insurance and private
pensions market, with more than 54,000 pension fund members and EUR
35 million in revenue generating investments. Ankara Emeklilik
sells through a variety of different channels and has an agreement
with Sekerbank to distribute products and services through a
nationwide network of 236 branches. - In April, AEGON and
Industrial Securities, one of China's leading securities firms,
announced the establishment of a new asset management joint venture
following final approval from the country's regulatory authorities.
The joint venture will be named AEGON Industrial Fund Management
Company. Under the agreement, AEGON will acquire a 49% interest in
Industrial Fund Management Company (IFMC), a subsidiary of
Industrial Securities. IFMC is a Chinese mutual fund manager with
approximately EUR 3 billion in revenue generating investments.
Industrial Securities will retain the remaining 51% of IFMC.
AEGON's value of new business (VNB) decreased to EUR 186 million.
The decline was due primarily to the impact of a weaker US dollar
and British pound and a lower contribution from the Group's life
reinsurance and institutional businesses in the Americas. There was
a decline in VNB from both Taiwan and the Netherlands, because of a
recent change in business mix and the effect of markets on
unit-linked sales in Taiwan, while in Spain new business volumes
were also lower. AEGON's operations in CEE again reported strong
growth in VNB, helped by the launch of a new mandatory pension fund
in Romania at the start of 2008. Internal rates of return,
meanwhile, improved, rising to 18.4% as the Group continued to
focus on writing profitable new business. FINANCIAL OVERVIEW EUR
millions Notes 1Q 2008 1Q 2007 % At constant currency % 1
Underlying earnings before tax by line of business Life and
protection 252 260 (3) 7 Individual savings and retirement 116 125
(7) 5 products Pensions and asset management 121 132 (8) (1)
Institutional products 108 87 24 41 Reinsurance 43 36 19 34
Distribution 9 10 (10) (13) General insurance 17 3 N.M. N.M.
Interest charges and other (17) (58) (71) (61) Share in net results
of associates 9 7 29 36 Underlying earnings before tax 658 602 9 22
Over / (under) performance of fair (316) 39 N.M. N.M. value items
Operating earnings before tax 342 641 (47) (40) Operating earnings
before tax by line of business Life and protection 232 262 (11) (2)
Individual savings and retirement (58) 136 N.M. N.M. products
Pensions and asset management 87 146 (40) (34) Institutional
products (55) 100 N.M. N.M. Reinsurance 31 36 (14) (3) Distribution
9 10 (10) (13) General insurance 17 2 N.M. N.M. Interest charges
and other 70 (58) N.M. N.M. Share in net results of associates 9 7
29 36 Operating earnings before tax 342 641 (47) (40)
Gains/(losses) on investments (39) 283 N.M. N.M. Impairment charges
(32) 7 N.M. N.M. Other income/(charges) (54) 15 N.M. N.M. Income
before tax 217 946 (77) (73) Income tax (64) (239) (73) (68) Net
income 153 707 (78) (75) Net underlying earnings 503 455 11 23 Net
operating earnings 267 484 (45) (38) Underlying earnings
geographically Americas 478 478 0 14 The Netherlands 113 87 30 30
United Kingdom 45 66 (32) (23) Other countries 39 29 34 37 Holding
and other (17) (58) (71) (61) Underlying earnings before tax 658
602 9 22 Operating earnings geographically Americas 104 505 (79)
(76) The Netherlands 84 99 (15) (15) United Kingdom 45 66 (32) (23)
Other countries 39 29 34 37 Holding and other 70 (58) N.M. N.M.
Operating earnings before tax 342 641 (47) (40) Commissions and
expenses 1,416 1,515 (7) 2 of which operating expenses 783 795 (2)
7 Overview AEGON's businesses delivered a strong underlying
performance in the first quarter of 2008 despite the impact of
recent turmoil in world financial markets and weaker currencies in
both the United States and the United Kingdom. Underlying earnings,
which exclude the effect of market fluctuations on fair value
items, were up 9% (or 22% on a constant currency basis). This
increase was primarily the result of business growth as well as
more favorable investment spreads in the Americas, strong life
insurance earnings in CEE, and higher investment income in the
Netherlands. Extremely volatile financial markets, characterized by
an unparalleled spike in credit spreads, declining risk free
interest rates and lower equity markets had a significant impact on
the Group's operating earnings. Operating earnings include the fair
value movements of certain investment classes in the Netherlands
and the Americas, as well as a number of products containing
financial guarantees. These items considerably underperformed their
long-term expected returns. As a result, AEGON's operating earnings
before tax declined to EUR 342 million. Net income was down to EUR
153 million, a result of lower operating earnings and a decline in
realized investment gains. Despite unfavorable market conditions,
net impairments totaled just EUR 32 million (3 bps of general
account investments) during the quarter. AEGON's subprime portfolio
experienced no impairments this quarter. Underlying earnings before
tax Underlying earnings before tax increased by 9% (or 22% in
constant currencies). Underlying earnings from the Americas, the
Netherlands and Other countries all showed strong growth compared
with the same period in 2007. In the Americas, earnings benefited
from higher spreads and continued underlying growth. In the
Netherlands, earnings were positively impacted by higher investment
income and the inclusion of a Dutch life insurance company acquired
in 2007. The United Kingdom reported a decrease in its underlying
earnings, due primarily to the impact of lower financial markets on
fund-related fees. Earnings from Other countries were mainly driven
by growth of the life insurance business in CEE. Operating earnings
before tax Operating earnings before tax decreased to EUR 342
million. The weakening of the US dollar and the British pound
impacted operating earnings. Operating earnings in the Americas and
The Netherlands showed a decline as a result of the impact of
financial markets on the performance of fair value items. The first
quarter saw an unprecedented widening in credit spreads. This had a
negative impact on the market value of AEGON's EUR 4.2 billion
synthetic CDO (collateralized debt obligation) program and other
credit-related financial instruments. Lower interest rates,
meanwhile, affected the fair value of guarantees in AEGON's
segregated fund business in Canada, as well as the Group's total
return annuities and its GMWB (guaranteed minimum withdrawal
benefits) variable annuity riders. AEGON's hedge funds portfolio
experienced an underperformance, after outperforming expected
long-term returns for ten consecutive quarters. As a result of
widening credit spreads, AEGON's operating earnings included a EUR
87 million gain from bonds issued by the Group. These bonds are
held in the Group's accounts at fair value and are hedged using
swaps. Movements in the fair value of these swaps usually offset
any gains or losses from the bonds themselves. Net income Net
income was down to EUR 153 million, primarily the result of lower
operating earnings and lower realized investment gains in the
Americas and the Netherlands. A negative tax impact from
intercompany reinsurance transactions largely explains the increase
in the effective tax rate. Commissions and expenses Commissions and
expenses declined 7% in the first quarter. Operating expenses were
2% lower, due to the recent strengthening of the euro. In constant
currency, operating expenses increased 7%, due to further
investments in the business. SALES EUR millions Notes 1Q 2008 1Q
2007 % At constant currency % New life sales Life single premiums
2,757 3,875 (29) (22) Life recurring premiums annualized 410 438
(6) 4 Total recurring plus 1/10 single 686 826 (17) (8) New premium
production accident 166 176 (6) 7 and health insurance New premium
production general 16 12 33 30 insurance Gross deposits (on and off
balance) by line of business Fixed annuities 306 193 59 81 Variable
annuities 685 683 0 13 Saving deposits 648 569 14 14 Retail mutual
funds 564 584 (3) 10 Pensions and asset management 3,183 3,161 1 14
Institutional guaranteed products 3,249 7,786 (58) (52) Reinsurance
1 0 N.M. N.M. Total gross deposits 8,636 12,976 (33) (25) Net
deposits (on and off balance) by line of business Fixed annuities
(795) (1,316) 40 31 Variable annuities (152) (175) 13 6 Saving
deposits (72) (65) (11) (11) Retail mutual funds 171 192 (11) 1
Pensions and asset management 1,170 (264) N.M. N.M. Institutional
guaranteed products (1,195) 1,946 N.M. N.M. Reinsurance (15) 0 N.M.
N.M. Total net deposits (888) 318 N.M. N.M. REVENUE GENERATING
INVESTMENTS At Mar. 31 At Dec. 31 2008 2007 Revenue generating
investments 7 339,833 370,470 (8) (3) (total) Investments general
account 125,359 132,861 (6) Investments for account of 126,273
142,384 (11) policyholders Off balance sheet investments 88,201
95,225 (7) third parties Sales Overall new life sales were down to
EUR 686 million, due mainly to lower sales of both life reinsurance
and bank- and corporate-owned life insurance in the Americas.
Retail life sales in the Americas were up 9% and immediate annuity
sales in the Netherlands also showed strong growth. New life sales
in Asia decreased significantly as a result of the ongoing shift
from traditional to unit-linked products and variable annuity
deposits, as well as the negative effect from markets on
unit-linked sales in Taiwan. Unit-linked sales in CEE were impacted
by equity market volatility. In the United Kingdom, declines in
sales of individual pensions were offset by increases in group
business and higher sales of individual protection and annuity
products. Deposits In the Americas, Pensions & asset management
experienced continued strong growth in deposits. Fixed annuities
sales benefited from a steepening of the yield curve. Variable
annuity deposits increased primarily as a result of continued
strong sales through banks, broker/dealers, fee planners and the
inclusion of Merrill Lynch's life insurance companies. Retail
mutual funds continued to experience positive net inflows despite
negative market sentiment. The decline in net deposits is mainly a
result of the decline in institutional guaranteed products as no
deals were possible at acceptable spreads. CEE again showed a solid
increase in total gross deposits, as did Asia where a new variable
annuity product was launched in Taiwan. AEGON's investment
portfolio During the first quarter this year, there was a further
deterioration in international credit markets. AEGON's credit risks
are concentrated primarily in the United States. The Group has
structured its US investment portfolio defensively to weather a
stressed credit environment. As a result, net impairments on
investments totaled just EUR 32 million for the Group in the first
quarter, evidence of the continued high quality of the Group's
investment portfolio. Lower financial markets have, however, led to
revaluation of credit related assets. Unlike impairments, these
revaluations have no impact on the Group's earnings. Under IFRS,
for the 'available for sale' investment portfolio, any changes in
the fair value are reflected in the revaluation reserve as part of
the Group's shareholders' equity. Since the beginning of this year,
AEGON's revaluation reserve has declined by EUR 1.5 billion as a
consequence of significantly wider credit spreads and lower equity
markets, partly offset by lower interest rates. Revaluations
reflect movements in financial markets. Assets are only impaired if
AEGON intends to sell at a loss or otherwise does not expect to
receive full principal and interest on a particular investment.
AEGON is a long-term investor and generally intends to retain large
parts of the portfolio until maturity. Moreover, as a result of the
Group's effective asset and liability management, AEGON has ample
liquidity in its investment portfolio. AEGON continues to have
limited exposure to the US subprime market. However, the credit
risk is concentrated primarily in a certain segment, floating rate
subprime assets, with over 85% rated AAA and AA. The value of these
securities has been affected by the recent deterioration in the US
financial markets. At the end of March, these investments, totaling
EUR 1,098 million, showed an unrealized net loss of EUR 334
million. While there is clearly a risk of future impairments in
this area, AEGON believes this exposure is of manageable size.
Revenue generating investments Revenue generating investments
totaled EUR 340 billion at the end of March 2008, down 8% from
year-end 2007 and down 3% on a constant currency basis. The decline
on a constant currency basis was due primarily to lower financial
markets during the first quarter. Capital management At the end of
March, shareholders' equity totalled EUR 12.6 billion, a decrease
of EUR 2.6 billion compared with the end of December 2007. AEGON's
revaluation reserve declined by EUR 1.5 billion. Foreign currency
translation effects had an impact of EUR 1.1 billion, primarily due
to a decline in the value of the US dollar and UK pound since
year-end 2007 (of 7% and 9% respectively). The positive impact of
net income (EUR 153 million) was partly offset by paid coupons on
perpetuals (EUR 46 million) and the cost of repurchasing AEGON
shares to hedge the Group's 2008 employee stock option program (EUR
73 million). AEGON applies leverage tolerances to its capital base,
which reflects the capital employed in its core activities. This
capital base consists of three elements: shareholders' equity,
capital securities and subordinated and senior debt. AEGON aims to
ensure that shareholders' equity accounts for at least 70% of its
overall capital base, capital securities8 25% and subordinated and
senior debt a maximum of 5%. AEGON manages its economic exposure to
currency revaluations in its capital base. AEGON has raised the
majority of its perpetual securities denominated in US dollars.
These securities are part of Group equity and as a result are
carried in the balance sheet at the original EUR/USD exchange rate.
At the end of March 2008, shareholders' equity represented 72% of
AEGON's total capital base. Group equity, which includes other
equity instruments (such as perpetual capital securities) and
minority interests, represented 93% of total capital (8, 9). In
January, AEGON launched a 30-year USD 1.5 billion AXXX innovative
capital management transaction. This financing transaction provides
the company with flexible solutions that will help manage the
Group's reserves and capital in a cost efficient manner. The
initial size of this transaction is USD 300 million. AEGON will
continue to explore further opportunities for securitizations and
other innovative capital market transactions as part of an ongoing
commitment to manage capital and reserve requirements efficiently
and effectively. AMERICAS - EARNINGS USD millions Notes 1Q 2008 1Q
2007 % 1 Underlying earnings before tax by line of business Life
159 153 4 Accident and health 115 116 (1) Life and protection 274
269 2 Fixed annuities 95 86 10 Variable annuities 70 66 6 Retail
mutual funds 4 4 0 Individual savings and retirement 169 156 8
products Pensions and asset management 45 41 10 Institutional
guaranteed products 141 94 50 BOLI/COLI 21 21 0 Institutional
products 162 115 41 Reinsurance 65 47 38 Share in net results of
associates 1 (1) N.M. Underlying earnings before tax 716 627 14
Over / (under) performance of fair value (560) 35 N.M. items
Operating earnings before tax 156 662 (76) Operating earnings
before tax by line of business Life 135 155 (13) Accident and
health 109 117 (7) Life and protection 244 272 (10) Fixed annuities
8 98 (92) Variable annuities (103) 69 N.M. Retail mutual funds 4 4
0 Individual savings and retirement (91) 171 N.M. products Pensions
and asset management 38 42 (10) Institutional guaranteed products
(99) 110 N.M. BOLI/COLI 17 21 (19) Institutional products (82) 131
N.M. Reinsurance 46 47 (2) Share in net results of associates 1 (1)
N.M. Operating earnings before tax 156 662 (76) Gains/(losses) on
investments (71) 174 N.M. Impairment charges (21) 16 N.M. Income
before tax 64 852 (92) Income tax (103) (227) (55) Net income (39)
625 N.M. Net underlying earnings 522 476 10 Net operating earnings
111 500 (78) Commissions and expenses 1,169 1,192 (2) of which
operating expenses 547 532 3 AMERICAS - SALES USD millions Notes 1Q
2008 1Q 2007 % New life sales Life single premiums 241 650 (63)
Life recurring premiums annualized 238 248 (4) Total recurring plus
1/10 single 262 313 (16) Life 187 172 9 BOLI/COLI 14 60 (77)
Reinsurance 61 81 (25) Total recurring plus 1/10 single 262 313
(16) New premium production accident and 237 219 8 health insurance
Gross deposits (on and off balance) by line of business Fixed
annuities 459 253 81 Variable annuities 974 892 9 Retail mutual
funds 773 741 4 Pensions and asset management 4,252 3,470 23
Institutional guaranteed products 4,870 10,198 (52) Reinsurance 2 0
N.M. Total gross deposits 11,330 15,554 (27) Net deposits (on and
off balance) by line of business Fixed annuities (1,192) (1,723) 31
Variable annuities (279) (232) (20) Retail mutual funds 247 245 1
Pensions and asset management 1,644 821 100 Institutional
guaranteed products (1,792) 2,549 N.M. Reinsurance (23) 0 N.M.
Total net deposits (1,395) 1,660 N.M. REVENUE GENERATING
INVESTMENTS At Mar. 31 At Dec. 31 2008 2007 Revenue generating
investments (total) 7 317,075 325,999 (3) Investments general
account 132,172 134,678 (2) Investments for account of
policyholders 76,192 81,663 (7) Off balance sheet investments third
108,711 109,658 (1) parties - Strong underlying earnings growth of
14% reflects organic growth, the acquisition of Merrill Lynch's
life insurance companies and higher investment spreads - Double
digit sales growth in both Individual savings & retirement and
pensions, and retail life sales up 9% - Operating earnings
significantly affected by market valuations on fair value items -
No significant impairments reflecting high quality of investment
portfolio "AEGON Americas reported solid underlying earnings growth
of 14% during the first quarter. For the most part, the basics of
our diversified business portfolio continued to perform well in a
difficult economic environment," said Pat Baird, CEO of AEGON
Americas. "We believe our investment portfolio and investment
oriented products to be well positioned to weather the difficult
credit environment. Our operating earnings and net income were
negatively affected by widening credit spreads and market
valuations being determined primarily by distressed sellers of
certain asset classes." Overview AEGON Americas' underlying
performance remained strong and all business lines reported organic
growth, with the exception of fixed annuities. Higher investment
spreads in the institutional business contributed positively to
earnings, as did the inclusion of Merrill Lynch's life insurance
companies. However, Americas faced significant headwinds during the
first quarter with unprecedented credit spread widening and growing
concerns of an economic slowdown in the United States. These led to
mark-to-market valuations impacting the operating earnings. Retail
life sales showed continued growth, with a double-digit increase in
deposits in both Individual savings & retirement and pensions.
The current financial crisis did however affect production in AEGON
Americas' institutional business. The investment portfolio
continues to weather the current turmoil in terms of impairment
charges. Although the subprime portfolio experienced negative
revaluations this quarter due to credit spread widening there were
no impairments on this portfolio. Underlying earnings before tax -
Underlying earnings from Life & protection remained relatively
flat. Strong organic growth was offset by unfavorable mortality
experience. - Earnings from Individual savings & retirement
increased by 8% thanks to a favorable mortality experience on a
closed structured settlement block, as well as additional income
from the Merrill Lynch acquisition. - Continued organic growth
resulted in a 10% increase in underlying earnings from Pensions
& asset management activities. - Underlying earnings from the
Institutional line of business were up 41%. The decrease in short
term interest rates during the quarter produced strong positive
spreads on institutional guaranteed products, while BOLI/COLI
earnings remained flat. - Life reinsurance earnings increased 38%
on solid growth and positive mortality. Operating earnings before
tax Operating earnings before tax declined to USD 156 million,
primarily due to the dislocation of financial markets. Increased
financial market volatility had a significant negative
mark-to-market impact on items carried at fair value. These fair
value items include hedge funds, derivatives, total return
annuities and guarantees on variable annuities like GMWB and
Canadian segregated funds. Each of these underperformed during the
quarter, including hedge funds, which underperformed after ten
straight quarters of outperformance. The total underperformance
(against long-term expected returns) of fair value items during the
quarter was USD 560 million versus an overperformance in the first
quarter 2007 of USD 35 million. - Operating earnings from Life
& protection business were negatively impacted by USD 30
million, due primarily to the underperformance of hedge fund
investments. - Individual savings & retirement business showed
an overall underperformance in fair value items of USD 260 million.
A drop in the risk free rate in Canada resulted in an
underperformance of AEGON Canada's segregated funds. Low interest
rates in the United States, meanwhile, led to declines in the value
of AEGON USA's total return and GMWB products. - Earnings from
Pensions & asset management activities declined as a result of
an underperformance in fair value items totaling USD 7 million. -
The continued widening of credit spreads caused significant
negative mark-to-market on credit derivatives. A large part of the
underperformance is related to the synthetic CDO program managed by
the Institutional business. While these assets cause substantial
short-term operating earnings volatility, AEGON does not expect any
cash losses on this program and believes these market adjustments
will reverse over time as the transactions under the program
mature. Total underperformance of earnings in the Institutional
business was USD 244 million. - Earnings from life reinsurance were
in line with last years' earnings. Although underlying earnings
contributed positive growth of USD 18 million, this was offset by
the underperformance of fair value assets and the total return
product run off. Net income AEGON Americas reported a net loss for
the first quarter of USD 39 million, a reflection of lower
operating earnings and the impact of impairment charges and
realized investment losses. Net income was also impacted by an
extraordinary tax expense totaling USD 90 million related to an
internal reinsurance agreement between US and Irish companies
within the AEGON Group. These agreements contain an embedded
derivative, valued on a mark-to-market basis. While there is no
direct impact on AEGON's overall pre-tax earnings (since any gain
or loss on the embedded derivative is eliminated in consolidation),
the tax rate differential between the United States and Ireland
does cause fluctuations in tax expenses. Commissions and expenses
Commissions and expenses decreased 2%. Operating expenses increased
3% driven by increases in employee benefit and acquisition
expenses. Sales and deposits Retail life production increased 9%
primarily as a result of a growth in both sales of high net worth
products and in direct marketing activities. This was partly offset
by declines in both BOLI/COLI production, as compared to a strong
first quarter in 2007, and life reinsurance where clients seek
higher retention levels. In total, new life sales in the Americas
declined to USD 262 million. In deposits, double-digit growth in
both pensions and Individual savings & retirement line of
business were offset by a large decrease in institutional deposits.
The result was a decline in total gross deposits of 27%. Fixed
annuity deposits were up 81%, with especially strong sales through
the bank channel due in part to a more favorable interest rate
environment and rate specials with key accounts. Variable annuity
deposits, up 9%, were spurred by the introduction of the new
Retirement Income Choice benefit rider. Despite volatile equity
markets, sales through the bank, broker /dealer and fee planner
channels rose by 17% and 63% respectively. This increase was offset
by declines in Canada, and in the direct marketing and agency
channels. Pension deposits continued to show significant growth, up
27%, with particularly strong results from the larger case market.
New spread-based institutional sales declined by 66% in the first
quarter on strict pricing discipline through a volatile spread
environment. Value of new business VNB of USD 118 million was down
20%. Life and Protection VNB increased 66% on higher sales, better
returns and lower expenses. However, lower sales volumes in the
Institutional and Life reinsurance business led to an overall
decline in total VNB. Pensions enjoyed strong sales growth, but
reported flat VNB as a result of lower terminal funding sales
linked to new retirement plans. The internal rate of return on new
business was virtually unchanged at 12.6%. Please refer to page 27
of this release for further details on AEGON's VNB. Revenue
generating investments Total revenue generating investments
decreased by 3% in the first quarter to USD 317 billion. THE
NETHERLANDS - EARNINGS EUR millions Notes 1Q 2008 1Q 2007 % 1
Underlying earnings before tax by line of business Life 32 28 14
Accident and health 8 10 (20) Life and protection 40 38 5 Saving
products 1 5 (80) Retail mutual funds 0 0 N.M. Individual savings
and retirement 1 5 (80) products Pensions and asset management 51
42 21 Distribution 11 8 38 General insurance 10 (6) N.M. Underlying
earnings before tax 113 87 30 Over / (under) performance of fair
value (29) 12 N.M. items Operating earnings before tax 84 99 (15)
Operating earnings before tax by line of business Life 32 28 14
Accident and health 8 10 (20) Life and protection 40 38 5 Saving
products 1 5 (80) Retail mutual funds 0 0 N.M. Individual savings
and retirement 1 5 (80) products Pensions and asset management 22
54 (59) Distribution 11 8 38 General insurance 10 (6) N.M.
Operating earnings before tax 84 99 (15) Gains/(losses) on
investments (49) 138 N.M. Impairment charges (17) (5) N.M. Income
before tax 18 232 (92) Income tax 1 (41) N.M. Net income 19 191
(90) Net underlying earnings 92 62 48 Net operating earnings 70 74
(5) Commissions and expenses 310 294 5 of which operating expenses
219 200 10 THE NETHERLANDS - SALES EUR millions Notes 1Q 2008 1Q
2007 % New life sales Life single premiums 445 379 17 Life
recurring premiums annualized 26 24 8 Total recurring plus 1/10
single 71 62 15 Life 31 24 29 Pensions 40 38 5 Total recurring plus
1/10 single 71 62 15 New premium production accident and 6 7 (14)
health insurance New premium production general insurance 8 7 14
Gross deposits (on and off balance) by line of business Saving
deposits 648 569 14 Pensions and asset management 47 110 (57) Total
gross deposits 695 679 2 Net deposits (on and off balance) by line
of business Saving deposits (72) (65) (11) Pensions and asset
management 36 (1,077) N.M. Total net deposits (36) (1,142) 97
REVENUE GENERATING INVESTMENTS At At Mar. 31 Dec. 31 2008 2007
Revenue generating investments (total) 7 64,965 65,643 (1)
Investments general account 31,460 30,813 2 Investments for account
of policyholders 20,649 21,354 (3) Off balance sheet investments
third 12,856 13,476 (5) parties - Underlying earnings before tax up
30% on higher investment income and the consolidation of a life
insurance company - Operating earnings significantly affected by
market valuations on fair value items - New life sales up 15% on
strong growth in individual annuities "From an operational point of
view, the Netherlands showed good progress during the first
quarter," said Jos Streppel, AEGON's Chief Financial Officer.
"Underlying earnings were up and, in most lines of business, sales
increased. But financial markets were volatile and inevitably
impacted our operating earnings." Overview AEGON The Netherlands
reported an increase in underlying earnings before tax of 30% in
the first quarter, a result of higher investment income, better
claim experience from the general insurance activities and the
inclusion of a life insurance company acquired in June 2007. For
most lines of business, sales increased, while immediate annuities
showed the strongest gains. Operating earnings before tax, however,
were lower, primarily driven by a lower valuation of private equity
investments. Underlying earnings before tax - Earnings for the life
business were up 14%, primarily on higher investment income.
Despite positive technical results, earnings from Accident &
health insurance at EUR 8 million were lower than last year because
of an increase in expenses. - The individual savings business,
meanwhile, reported lower earnings, due to higher guarantee costs.
- Underlying earnings for Pensions & asset management increased
by 21%. Higher investment income and the inclusion of a Dutch life
insurance company, contributed positively to earnings, partly
offset by lower technical results. - Lower expenses and an increase
in commission income led to higher earnings from Distribution. -
General insurance reported a significant improvement in its
performance as earnings for the first quarter last year were
negatively affected by claims from severe winter storms. Operating
earnings before tax Operating earnings before tax decreased by 15%,
as a result of a decline in the value of the company's private
equity investments. Changes to the fair value of private equity
investments are reflected in the operating earnings of the Pensions
& asset management business. Net income Net income was
significantly down. This decline was the result of a number of
different factors including lower operating earnings, a decrease in
investment gains on equities, negative movements in the fair value
of guarantees (net of hedging), and the impact of impairments on
equities. Investment gains were lower following the decision to
sell a significant part of the equity portfolio in 2007. The
increase in the fair value of guarantees during the first quarter
reflected lower equity markets and an increase in the volatility of
financial markets. The effective tax rate was low, mainly due to
the presence of tax-exempt gains and earnings. Commissions and
expenses Commissions and expenses rose 5%, largely because of
higher operating expenses, which is mainly the result of an
increase in employee benefit charges and higher project spending.
Sales and deposits Total new life sales in the Netherlands grew by
15%, thanks primarily to very strong sales of immediate annuities.
Pension sales were also up, a reflection of increased sales in the
institutional market and higher sales through the broker channel.
Sales of managed assets decreased, however, largely because of
intense competition in this segment of the market. Accident and
health production was also lower, mainly because of a decline in
sales of the 'WIA' disability product. General insurance production
was up, the result of the inclusion of several large contracts.
Gross deposits of saving products showed an increase in the first
quarter, a reflection of recent marketing campaigns and more
attractive interest rates. Inflows in the 'Levensloop' product
remained relatively stable, while overall 'Levensloop' assets
continued to grow. Total net deposits improved significantly. Value
of new business As a result of changes to its business mix, the VNB
declined. The company's internal rate of return, meanwhile, reached
10.7%, close to AEGON's hurdle rate of 11%. Please refer to page 27
for more detailed information on VNB. Revenue generating
investments At the end of March 2008, revenue generating
investments totaled EUR 65 billion, down fractionally from end-2007
levels. The decrease is a reflection of lower equity markets during
the first quarter. UNITED KINGDOM - EARNINGS GBP millions Notes 1Q
2008 1Q 2007 % Operating earnings before tax by line of business
Life 8 5 60 Accident and health 0 0 N.M. Life and protection 8 5 60
Pensions and asset management 28 38 (26) Distribution (2) 1 N.M.
Operating earnings before tax 34 44 (23) Gains/(losses) on
investments 2 1 100 Other income/(charges) 10 (41) 10 N.M. Income
before tax (5) 55 N.M. Income tax attributable to policyholder 41
(7) N.M. return Income before income tax on shareholders 36 48 (25)
return Income tax on shareholders return (5) (10) (50) Net income
31 38 (18) Net underlying earnings 30 37 (19) Net operating
earnings 30 37 (19) Commissions and expenses 157 144 9 of which
operating expenses 98 90 9 UNITED KINGDOM - SALES GBP millions
Notes 1Q 2008 1Q 2007 % New life sales 11 Life single premiums
1,498 1,827 (18) Life recurring premiums annualized 141 114 24
Total recurring plus 1/10 single 291 297 (2) Life 55 48 15 Pensions
236 249 (5) Total recurring plus 1/10 single 291 297 (2) Gross
deposits (on and off balance) by line of business Pensions and
asset management 112 185 (39) Total gross deposits 112 185 (39) Net
deposits (on and off balance) by line of business Pensions and
asset management (41) 56 N.M. Total net deposits (41) 56 N.M.
REVENUE GENERATING INVESTMENTS At At Mar. 31 Dec. 31 2008 2007
Revenue generating investments (total) 7 50,551 53,115 (5)
Investments general account 4,233 4,157 2 Investments for account
of policyholders 43,611 46,095 (5) Off balance sheet investments
third 2,707 2,863 (5) parties - Operating earnings decline on lower
financial markets - Growth in group pension and individual
annuities were offset by lower sales of personal pensions and
investment bonds - Value of new business up 3% in local currency;
margins continued to improve "Our strategy is bearing fruit," said
Otto Thoresen, CEO of AEGON UK. "We saw steady growth in our
annuity, individual protection and corporate pension businesses
during the quarter. In addition, we're making strong progress with
our bank distribution partnerships and our efforts to extend the
range of products and services we offer. Financial market
volatility, however, had an impact on both our earnings and on
general market sentiment." Overview Operating earnings before tax
declined 23%, due primarily to the impact of lower bond and equity
markets on fund-related charges in the pension business. Strong
growth in sales of group pensions and individual annuities were
offset by declines in personal pensions and investment bonds. The
value of new business rose by 3% in local currency, despite lower
sales volumes. Underlying earnings before tax In the UK underlying
earnings equal operating earnings. Operating earnings before tax -
Earnings from Life & protection operations grew 60% as result
of continued growth in the company's annuity and individual
protection businesses, following a successful strategy to expand
into higher margin products. - Earnings from Pensions & asset
management business were 26% lower as a decline in asset values
during the quarter led to a fall in income from fund-related
charges. - Lower sales and the cost of new investments resulted in
a decrease in earnings from AEGON UK's distribution activities. Tax
changes on investment products, worsening investor sentiment and
concerns over the UK housing market all contributed to the overall
decline in sales. Net income Net income decreased by 18% due to
lower operating earnings. A higher proportion of earnings was
generated by the Life & protection business, which is taxed at
a lower rate. The company's effective tax rate fell to 13.5%,
following the UK government's recent decision to reduce corporation
tax. Commissions and expenses Total commissions and expenses rose
9%. Operating expenses were higher as a result of recent business
growth and an increase in performance-related costs in the
company's asset management business. Higher amortization charges as
a result of maturing of the portfolio also led to an increase in
expenses. Sales and deposits Overall, new life sales were down 2%.
Sales of group pensions and annuities showed strong growth, but
were offset by a decline in individual pensions and investment
bonds. Sales of individual pensions were lower compared with the
record levels seen last year. These record levels were the result
of exceptional activity following 'Pension A-Day' in May 2006.
Meanwhile, recent tax changes and increased financial market
volatility led to lower sales of investment bonds, retail mutual
funds and managed assets. Currently, AEGON UK has a relatively
small share of the on-shore investment bond market. However, this
is expected to grow in the coming months, following the launch of a
new investment bond product earlier this year. This product offers
customers a wide choice of funds, flexible charging and commission
structures and the certainty of capital guarantees. In Q2 2008
AEGON will launch a pension contract called Income for Life. This
is a variable annuity style contract, developed for the
at-retirement pension market. Value of new business VNB increased
3% in local currency as a result of further improvement in margins,
despite a decline in sales volumes. Much of the improvement in
margins was concentrated in the annuity and individual protection
businesses. In the first quarter, the internal rate of return on
new business rose to 13.0%. Please refer to page 27 for more
detailed information on VNB. Revenue generating investments At the
end of March 2008, AEGON UK had a total of GBP 51 billion in
revenue generating investments, a decline compared with end-2007
levels due to lower equity and bond markets. OTHER COUNTRIES -
EARNINGS EUR millions Notes 1Q 2008 1Q 2007 % Operating earnings
before tax by line of business Life 17 8 113 Accident and health 2
1 100 Life and protection 19 9 111 Variable annuities 1 0 N.M.
Retail mutual funds 1 0 N.M. Individual savings and retirement 2 0
N.M. products Pensions and asset management 3 4 (25) General
insurance 7 8 (13) Share in net results of associates 8 8 0
Operating earnings before tax 39 29 34 Gains/(losses) on
investments 0 2 N.M. Impairment charges (1) 0 N.M. Income before
tax 38 31 23 Income tax (10) (14) (29) Net income 28 17 65 Net
underlying earnings 27 16 69 Net operating earnings 27 16 69
Commissions and expenses 91 79 15 of which operating expenses 43 39
10 OTHER COUNTRIES - SALES EUR millions Notes 1Q 2008 1Q 2007 % New
life sales 11 Life single premiums 172 272 (37) Life recurring
premiums annualized 39 55 (29) Total recurring plus 1/10 single 56
82 (32) Life 56 82 (32) Total recurring plus 1/10 single 56 82 (32)
New premium production accident and 2 2 0 health insurance New
premium production general insurance 8 5 60 Gross deposits (on and
off balance) Variable annuities 35 2 N.M. Retail mutual funds 48 18
167 Pensions and asset management 151 126 20 Total gross deposits
234 146 60 Net deposits (on and off balance) Variable annuities 34
1 N.M. Retail mutual funds 6 6 0 Pensions and asset management 92
102 (10) Total net deposits 132 109 21 REVENUE GENERATING
INVESTMENTS At At Mar. 31 Dec. 31 2008 2007 Revenue generating
investments (total) 7 10,724 10,885 (1) Investments general account
4,878 4,801 2 Investments for account of policyholders 2,655 2,729
(3) Off balance sheet investments third 3,191 3,355 (5) parties -
Operating earnings up 34% on strong performance from the life
business - Pension deposits in CEE show further significant growth
- Lower equity markets result in overall decline in life sales
Overview Other countries reported a 34% increase in operating
earnings before tax, primarily the result of strong life earnings.
Deposits rose as AEGON's pension business in CEE continued to show
significant growth as well as strong growth of variable annuity
deposits in Taiwan. However, declining equity markets during the
quarter resulted in a 32% decline in new life sales. Other
countries generated almost a quarter of AEGON's value of new
business in the first quarter, a reflection of their continued
importance to the Group. Underlying earnings before tax In Other
countries underlying earnings equal operating earnings. Operating
earnings before tax - Operating earnings from Life & protection
more than doubled to EUR 19 million as a result of strong growth
from the in-force book in Poland and a release of EUR 4 million
from reserves in Hungary. - Operating earnings from Individual
savings & retirement products increased to EUR 2 million due to
higher fee income from retail mutual funds in Hungary and higher
variable annuity sales in Taiwan. - Pensions & asset management
posted a slight decrease in operating earnings during the quarter
as higher contributions from Hungary and Poland were offset by the
cost of investments in new pension funds in the Czech Republic,
Romania and Slovakia. - Operating earnings from General insurance
also declined, due primarily to higher claims in Hungary following
severe storms in the country last March. - Operating earnings from
associate companies were unchanged. Net income Other countries
reported a 65% increase in net income. The increase was the result
of higher operating earnings and lower taxes, partly offset by a
decline in gains on investments. Commissions and expenses
Commissions and expenses increased by 15%. The majority of this
increase was due to the cost of investments in new ventures in CEE
and the inclusion of a number of newly acquired companies. In
addition, a shift to regular premium products in the region led to
an increase in commissions. Sales and deposits In CEE, new life
sales declined to EUR 22 million. Regular premium sales increased
9% as a result of the successful development of broker and agency
networks in Slovakia and the Czech Republic. However, this was more
than offset by the decline in single premium sales in Poland
because of weaker equity markets. In Asia, new life sales in Taiwan
decreased to EUR 13 million as a result of lower equity markets and
the ongoing shift from traditional to unit-linked products and
variable annuity deposits, which amounted to EUR 35 million. In the
coming months, new variable annuity products will be introduced.
Unit-linked products accounted for 70% of new life sales for Taiwan
in the first quarter. In China, single premium sales increased to
EUR 18 million as a result of strong single premium unit-linked
sales in the bank channel. Sales increases in China stem primarily
from recent efforts to expand AEGON's distribution network in the
country and the introduction of new products. Further progress in
this regard has been made with the opening earlier this month of a
new branch office in the southern Chinese province of Guangdong. In
Spain, new life sales increased to EUR 18 million as a result of
higher recurring premium sales. The partnership with CAM, which is
not consolidated in AEGON's accounts, saw a decrease of 37% in new
life sales. CAM is currently in the process of implementing a new
sales strategy to grow sales again going forward. Individual
savings & retirement net deposits increased strongly to EUR 40
million primarily as a result of higher variable annuity deposits
in Taiwan. Sales of mortgages in Hungary continued to grow with a
total of EUR 35 million provided to homebuyers. Pension & asset
management net deposits decreased 10% to EUR 92 million. Continued
strong pension deposits in CEE were partly offset by lower deposits
in the asset management business. General insurance new premium
production rose to EUR 8 million as a result of a successful sales
campaign for motor insurance in Hungary. Value of new business VNB
from Other countries decreased 11%, primarily as a result of lower
sales volumes. Other countries accounted for 23% of AEGON's total
VNB. In Asia, the decrease in VNB was due largely to a change in
product mix and lower production in Taiwan. In CEE, VNB was up 64%,
buoyed by the launch of a new mandatory pension fund in Romania,
which added EUR 7 million in value of new business. Excluding the
new pension fund in Romania, overall VNB from CEE increased 14%. In
Spain, VNB decreased mainly due to lower sales from CAM. Asia
accounted for 12% of VNB from Other countries, CEE for 55% and
France and Spain for the remaining 33%. By 2010, AEGON strives for
Other countries' contribution to VNB to reach between 30% and 35%.
The internal rate of return (IRR) in Asia rose in the first quarter
as a result of a shortening in the expected average duration of
unit-linked policies. The reduction in IRR in CEE is a reflection
of lower rates of return on the Romanian pension business and its
significant contribution to overall VNB from the region. In Spain,
AEGON's bank distribution partnerships continued to deliver high
rates of return. Please refer to page 27 for more detailed VNB
information. Revenue generating investments Revenue generating
investments decreased 1% in the first quarter as a result of lower
financial markets. NET UNDERLYING EARNINGS GEOGRAPHICALLY EUR
millions Notes 1Q 1Q % 2008 2007 1 Americas 348 364 (4) The
Netherlands 92 62 48 United Kingdom 40 55 (27) Other countries 27
16 69 Holding and other activities (4) (42) 90 Net underlying
earnings 503 455 11 OVER / UNDER PERFORMANCE OF FAIR VALUE ITEMS
EUR millions Operating earnings before tax 342 641 (47) (Over) /
under performance of fair value 374 (27) N.M. items - Americas
(Over) / under performance of fair value 29 (12) N.M. items - The
Netherlands (Over) / under performance of fair value (87) 0 N.M.
items - Holding and other activities Underlying earnings before tax
658 602 9 Net underlying earnings 503 455 11 AMERICAS - OVER /
UNDER PERFORMANCE OF FAIR VALUE ITEMS USD millions Over / (under)
performance of fair value items by line of business Life and
protection (30) 3 N.M. Individual savings and retirement (260) 15
N.M. products Pensions and asset management (7) 2 N.M.
Institutional products (244) 15 N.M. Reinsurance (19) 0 N.M. Total
over / (under) performance of fair (560) 35 N.M. value items Total
over / (under) performance of fair (374) 27 N.M. value items in EUR
NETHERLANDS - OVER / UNDER PERFORMANCE OF FAIR VALUE ITEMS EUR
millions Over / (under) performance of fair value items by line of
business Pensions and asset management (29) 12 N.M. Total over /
(under) performance of fair (29) 12 N.M. value items EXPLANATION
Certain assets held by AEGON Americas and AEGON The Netherlands are
carried at fair value, and managed on a total return basis, with no
offsetting changes in the valuation of related liabilities. These
include assets such as 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 these assets. Based on
current holdings and asset class returns, the long-term expected
return on an annual basis is 8-10%, depending on the asset class,
including cash income and market value changes. The expected
earnings from these assets classes are net of DPAC where
applicable. 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 annuity products 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 any
over- or underperformance compared to management's expected return
is excluded from underlying earnings. The Holding includes 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
widening of AEGON's credit spread resulted in a gain of EUR 87 mln
on the fair value movement on these bonds. SALES EUR millions 1Q
2008 1Q 2007 % New life sales 686 826 (17) Gross deposits (on and
off balance) 8,636 12,976 (33) New life sales Life single premiums
2,757 3,875 (29) Life recurring premiums annualized 410 438 (6)
Total recurring plus 1/10 single 686 826 (17) Life 284 308 (8)
Pensions 352 410 (14) BOLI/COLI 9 46 (80) Reinsurance 41 62 (34)
Total recurring plus 1/10 single 686 826 (17) New premium
production accident and health 166 176 (6) insurance New premium
production general insurance 16 12 33 Gross deposits (on and off
balance) Fixed annuities 306 193 59 Variable annuities 685 683 0
Saving products 648 569 14 Retail mutual funds 564 584 (3) Pensions
and asset management 3,183 3,161 1 Institutional guaranteed
products 3,249 7,786 (58) Reinsurance 1 0 N.M. Total gross deposits
8,636 12,976 (33) Net deposits (on and off balance) by line of
business Fixed annuities (795) (1,316) 40 Variable annuities (152)
(175) 13 Saving deposits (72) (65) (11) Retail mutual funds 171 192
(11) Pensions and asset management 1,170 (264) N.M. Institutional
guaranteed products (1,195) 1,946 N.M. Reinsurance (15) 0 N.M.
Total net deposits (888) 318 N.M. EMPLOYEE NUMBERS At At Mar. 31
Dec. 31 2008 2007 Number of employees 30,734 30,414 VALUE OF NEW
BUSINESS AND IRR VNB VNB IRR IRR EUR EUR % % EUR millions, after
tax Notes 1Q 2008 1Q 2007 % 1Q 2008 1Q 2007 Americas 79 113 (30)
12.6 12.8 The Netherlands 12 15 (20) 10.7 13.4 United Kingdom 53 58
(9) 13.0 12.5 Asia 5 12 (58) 17.0 13.2 Central and Eastern Europe
23 14 64 39.0 47.7 Other European Countries 14 21 (33) 43.2 47.2
Total 186 232 (20) 18.4 17.9 MODELED NEW BUSINESS, APE AND DEPOSITS
Premium Deposit business business APE Deposits EUR millions Notes
12 Americas 295 335 5,997 10,807 The Netherlands 73 67 0 0 United
Kingdom 378 446 0 0 Asia 17 35 7 0 Central and Eastern Europe 25 27
17 3 Other European Countries 59 64 6 4 Total 847 975 6,026 10,814
VNB/PVNBP SUMMARY Premium Deposit business business VNB PVNBP VNB/
VNB/ VNB PVNBP VNB/ VNB/ PVNBP APE PVNBP Deposits EUR millions
Notes 1Q 2008 % % 1Q 2008 % % 13 Americas 49 1,438 3.4 16.5 30
6,828 0.4 0.5 The Netherlands 12 625 1.9 16.2 0 0 - - United
Kingdom 53 2,573 2.0 13.9 0 0 - - Asia 5 99 4.6 26.6 1 51 1.3 10.0
Central and 12 166 7.1 48.2 12 400 2.9 68.6 Eastern Europe Other
European 14 542 2.6 23.5 0 6 3.1 3.1 Countries Total 144 5,444 2.6
16.9 42 7,284 0.6 0.7 Explanatory Notes: 1) 2007 Q1 information has
been adjusted to reflect the retrospective application of the
change in accounting principles relating to guarantees in the
Netherlands and, where applicable, the change in definition of
operating earnings to include AEGON's share in the net results of
associates and a new line of business format. These changes were
implemented in Q2 2007. 2) Certain assets held by AEGON Americas
and AEGON The Netherlands are carried at fair value, and managed on
a total return basis, with no offsetting changes in the valuation
of related liabilities. These include assets such as hedge funds,
private equities, real estate limited partnerships and convertible
bonds. Underlying earnings exclude any over- or underperformance
compared to management's long-term expected return on these assets.
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
annuity products 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 any
over- or underperformance compared to management's expected return
is excluded from underlying earnings. The Holding includes 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
widening of AEGON's credit spread resulted in a gain of EUR 87
million on the fair value movement on these bonds. Underlying
earnings exclude this amount. 3) Net income refers to net income
attributable to equity holders of AEGON N.V. 4) New life sales is
defined as new recurring premiums + 1/10 of single premiums. 5)
Deposits on and off balance sheet. 6) Return on equity is
calculated by dividing the net underlying earnings after cost of
leverage by the average shareholders' equity excluding the
preferred shares and the revaluation reserve. 7) As of 2008, Real
estate for own use (both general account and for account of
policyholders) has been reclassified from revenue generating
investments to other assets. 8) Capital securities that are
denominated in foreign currencies are, for purposes of calculating
the capital base ratio, revalued to the period-end exchange rate.
9) All ratios exclude AEGON's revaluation reserve. 10) Included in
other non-operating income/(charges) are charges made to
policyholders with respect to income tax. There is an equal and
opposite tax charge which is reported in the line Income tax
attributable to policyholder return. 11) Includes production on
investment contracts without a discretionary participation feature
of which the proceeds are not recognized as revenues but are
directly added to our investment contract liabilities. 12) APE =
recurring premium + 1/10 single premium. 13) PVNBP: Present Value
New Business Premium. CONDENSED CONSOLIDATED BALANCE SHEETS At At
Mar. 31 Dec. 31 2008 2007 EUR millions % Investments general
125,359 132,861 (6) account Investments for account 126,273 142,384
(11) of policyholders Investments in 470 472 (0) associates
Deferred expenses 11,082 11,488 (4) and rebates Other assets and
18,948 18,484 3 receivables Cash and cash 10,383 8,431 23
equivalents Total 292,515 314,120 (7) assets Shareholders' 12,597
15,151 (17) equity Other equity 4,801 4,795 0 instruments Minority
15 16 (6) interest Group 17,413 19,962 (13) equity Insurance
contracts 84,394 88,496 (5) general account Insurance contracts for
70,543 78,394 (10) account of policyholders Investment contracts
33,636 36,089 (7) general account Investment contracts for account
of 55,875 63,756 (12) policyholders Other 30,654 27,423 12
liabilities Total equity and 292,515 314,120 (7) liabilities
CAPITAL BASE Group equity 17,413 19,962 (13) Trust pass-through 137
143 (4) securities Subordinated 34 34 0 borrowings Senior debt
related to 1,313 1,255 5 insurance activities Total capital base
18,897 21,394 (12) CONDENSED CONSOLIDATED INCOME STATEMENT EUR
millions Notes 1Q 2008 1Q 2007 % 1 Premium income 6,315 7,352 (14)
Investment income 2,422 2,562 (5) Fee and commission income 434 459
(5) Other revenues 1 2 (50) Total revenues 9,172 10,375 (12) Income
from reinsurance ceded 335 438 (24) Results from financial
transactions (8,900) 1,479 N.M. Total income 607 12,292 (95)
Benefits and expenses 270 11,258 (98) Impairment charges 34 (2)
N.M. Interest charges and related fees 95 97 (2) Total charges 399
11,353 (96) Share in net results of associates 9 7 29 Income before
tax 217 946 (77) Income tax (64) (239) (73) Net income attributable
to equity 153 707 (78) holders of AEGON N.V. Net income per common
share Basic earnings per share 0.07 0.42 (83) Dilluted earnings per
share 0.07 0.42 (83) CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY At At Mar. 31 Dec. 31 2008 2007 EUR millions Shareholders'
equity at January 1 15,151 18,605 Net income 153 2,551 Movements in
foreign currency translations (1,066) (1,445) reserve Movements in
revaluation reserves (1,510) (2,164) Total recognized net income
for the period (2,423) (1,058) Dividends paid on ordinary shares 0
(583) Preferred dividend 0 (85) Repurchased and sold own shares
(73) (1,438) Coupons on perpetuals (net of tax) (46) (175) Other
changes (12) (115) Shareholders' equity at end of period 12,597
15,151 CONDENSED CONSOLIDATED CASH FLOW STATEMENTS EUR millions
Notes 1Q 2008 1Q 2007 % 1 Cash flow from operating activities 1,615
2,711 (40) Cash flow from investing activities Purchase and
disposal of intangible assets (1) (1) 0 Purchase and disposal of
equipment (11) (8) (38) Purchase, disposal and dividends of (6)
(256) 98 subsidiaries and associates (18) (265) 93 Cash flow from
financing activities Issuance and purchase of share capital (73)
(114) 36 Issuance, repayment and coupuons of perpetuals (62) (55)
(13) Issuance, repayment and finance interest on 810 108 N.M.
borrowings 675 (61) N.M. Net increase/ (decrease) in cash and cash
2,272 2,385 (5) equivalents AMOUNTS PER COMMON SHARE Notes 1Q 2008
1Q 2007 % 1 Net income in EUR 2 0.07 0.42 (83) Net income fully
diluted in EUR 2 0.07 0.42 (83) Net income in USD 0.10 0.55 (82)
Net income fully diluted in USD 0.10 0.55 (82) Net operating
earnings in EUR 2 0.15 0.28 (46) Net operating earnings fully
diluted in 2 0.15 0.28 (46) EUR Net operating earnings in USD 0.22
0.37 (41) Net operating earnings fully diluted in 0.22 0.37 (41)
USD At At Mar. 31 Dec. 31 2008 2007 Shareholders' equity in EUR 3
7.03 8.69 Shareholders' equity in USD 3 11.12 12.79 NET INCOME PER
COMMON SHARE CALCULATION EUR millions (except per share data) Notes
1Q 2008 1Q 2007 % 1 Net income 153 707 (78) Coupons on perpetuals
(46) (41) (12) Net income attributable to ordinary 107 666 (84)
shareholders Weighted average number of ordinary 1,499 1,581 (5)
shares outstanding Net income per share 0.07 0.42 (83) Quarterly
net income per share first quarter 0.07 0.42 (83) second quarter
0.34 third quarter 0.31 fourth quarter 0.40 SEGMENT REPORTING EUR
millions Notes 1Q 2008 1Q 2007 % 1 Operating earnings before tax
geographically Americas 104 505 (79) The Netherlands 84 99 (15)
United Kingdom 45 66 (32) Other countries 39 29 34 Holding and
other activities 64 (56) N.M. Eliminations 6 (2) N.M. Total
operating earnings before tax 342 641 (47) Revenues geographically
Americas 3,341 4,005 (17) The Netherlands 2,368 2,218 7 United
Kingdom 2,914 3,504 (17) Other countries 533 631 (16) Holding and
other activities 60 222 (73) Eliminations (44) (205) 79 Total
revenues 9,172 10,375 (12) Revenues Life insurance gross premiums
5,573 6,566 (15) Accident and health insurance 569 615 (7) General
insurance 173 171 1 Total gross premiums 6,315 7,352 (14)
Investment income 2,422 2,562 (5) Fee and commission income 434 459
(5) Other revenues 1 2 (50) Total revenues 9,172 10,375 (12)
INVESTMENTS GEOGRAPHICALLY amounts in million EUR (unless otherwise
stated) United Americas Kingdom The United USD GBP At March 31,
2008 Americas Netherlands Kingdom Investments 2,095 46 Shares 1,325
1,921 58 96,170 4,182 Bonds 60,821 18,287 5,255 19,626 5 Loans
12,412 9,094 6 13,554 0 Other financial 8,572 97 0 assets 727 0
Investments in 460 2,061 0 real estate 132,172 4,233 Investments
83,590 31,460 5,319 general account 0 21,354 Shares 0 8,764 26,833
0 12,765 Bonds 0 10,904 16,041 76,192 2,753 Separate accounts
48,186 0 3,459 and investment funds 0 5,080 Other financial 0 981
6,383 assets 0 1,659 Investments in 0 0 2,085 real estate 76,192
43,611 Investments for 48,186 20,649 54,801 account of
policyholders 208,364 47,844 Investments on 131,776 52,109 60,120
balance sheet 108,711 2,707 Off balance sheet 68,752 12,856 3,402
investments third parties 317,075 50,551 Total revenue 200,528
64,965 63,522 generating investments *) Investments 102,707 4,159
Available-for-sale 64,955 19,020 5,226 19,626 5 Loans 12,412 9,094
6 0 0 Held-to-maturity 0 0 0 85,304 42,021 Financial assets 53,949
21,934 52,803 at fair value through profit or loss 727 1,659
Investments in 460 2,061 2,085 real estate 208,364 47,844 Total
investments 131,776 52,109 60,120 on balance sheet INVESTMENTS
GEOGRAPHICALLY (cont.) amounts in million EUR (unless otherwise
stated) Holdings, other Other activities & Total At March 31,
2008 countries eliminations EUR Investments Shares 194 91 3,589
Bonds 3,977 21 88,361 Loans 611 0 22,123 Other financial 96 0 8,765
assets Investments in 0 0 2,521 real estate Investments 4,878 112
125,359 general account Shares 201 (18) 35,780 Bonds 287 0 27,232
Separate accounts 2,043 0 53,688 and investment funds Other
financial 124 0 7,488 assets Investments in 0 0 2,085 real estate
Investments for 2,655 (18) 126,273 account of policyholders
Investments on 7,533 94 251,632 balance sheet Off balance sheet
3,191 0 88,201 investments third parties Total revenue 10,724 94
339,833 generating investments *) Investments Available-for-sale
2,253 116 91,570 Loans 611 0 22,123 Held-to-maturity 1,966 0 1,966
Financial assets 2,703 (22) 131,367 at fair value through profit or
loss Investments in 0 0 4,606 real estate Total investments 7,533
94 251,632 on balance sheet INVESTMENTS GEOGRAPHICALLY amounts in
million EUR (unless otherwise stated) United Americas Kingdom The
United USD GBP At December 31, Americas Netherlands Kingdom 2007
Investments 2,386 48 Shares 1,621 1,997 66 98,834 4,104 Bonds
67,138 18,225 5,595 19,813 5 Loans 13,459 8,517 7 12,890 0 Other
financial 8,756 66 0 assets 755 0 Investments in 513 2,008 0 real
estate 134,678 4,157 Investments 91,487 30,813 5,668 general
account 0 23,291 Shares 0 9,736 31,757 0 13,360 Bonds 0 10,628
18,216 81,663 2,820 Separate accounts 55,474 0 3,845 and investment
funds 0 4,785 Other financial 0 990 6,525 assets 0 1,839
Investments in 0 0 2,508 real estate 81,663 46,095 Investments for
55,474 21,354 62,851 account of policyholders 216,341 50,252
Investments on 146,961 52,167 68,519 balance sheet 109,658 2,863
Off balance sheet 74,491 13,476 3,903 investments third parties
325,999 53,115 Total revenue 221,452 65,643 72,422 generating
investments *) Investments 104,391 4,080 Available-for-sale 70,913
19,163 5,563 19,813 5 Loans 13,459 8,517 7 0 0 Held-to-maturity 0 0
0 91,382 44,328 Financial assets 62,076 22,479 60,441 at fair value
through profit or loss 755 1,839 Investments in 513 2,008 2,508
real estate 216,341 50,252 Total investments 146,961 52,167 68,519
on balance sheet INVESTMENTS GEOGRAPHICALLY (cont.) amounts in
million EUR (unless otherwise stated) Holdings, other Other
activities & Total At December 31, countries eliminations EUR
2007 Investments Shares 181 70 3,935 Bonds 3,951 22 94,931 Loans
571 0 22,554 Other financial 98 0 8,920 assets Investments in 0 0
2,521 real estate Investments 4,801 92 132,861 general account
Shares 212 (24) 41,681 Bonds 248 0 29,092 Separate accounts 2,165 0
61,484 and investment funds Other financial 104 0 7,619 assets
Investments in 0 0 2,508 real estate Investments for 2,729 (24)
142,384 account of policyholders Investments on 7,530 68 275,245
balance sheet Off balance sheet 3,355 0 95,225 investments third
parties Total revenue 10,885 68 370,470 generating investments *)
Investments Available-for-sale 2,310 98 98,047 Loans 571 0 22,554
Held-to-maturity 1,876 0 1,876 Financial assets 2,773 (30) 147,739
at fair value through profit or loss Investments in 0 0 5,029 real
estate Total investments 7,530 68 275,245 on balance sheet *) As of
2008, Real estate for own use (both general account and for account
of policyholders) has been reclassified from revenue generating
investments to other assets. The comparative 2007 information has
been adjusted accordingly. ASSETS AND CAPITAL GEOGRAPHICALLY
amounts in million EUR (unless otherwise stated) United Americas
Kingdom The United Other Total USD GBP Americas Netherlands Kingdom
countries EUR At March 31, 2008 236,902 53,622 Assets 149,824
62,851 67,381 9,151 289,207 business units Other 3,308 assets Total
292,515 assets on balance sheet 17,260 1,984 Capital 10,916 3,056
2,493 1,373 17,838 in units Total 18,897 capital base Other net
(1,059) liabilities Total 17,838 At December 31, 2007 243,946
55,495 Assets 165,713 62,009 75,668 9,205 312,595 business units
Other 1,525 assets Total 314,120 assets on balance sheet 19,056
2,166 Capital 12,945 3,079 2,954 1,413 20,391 in units Total 21,394
capital base Other net (1,003) liabilities Total 20,391
RECONCILIATION NON-GAAP MEASURES TO INCOME BEFORE TAX EUR millions
Notes 1Q 2008 1Q 2007 % 1 Net operating earnings 267 484 (45)
Income tax on operating earnings 75 157 (52) Operating earnings
before tax 342 641 (47) Net gains and losses on investments (39)
283 N.M. Impairment charges (32) 7 N.M. Policyholder tax (54) 15
N.M. Income before tax 217 946 (77) Currencies Income statement
items: average rate 1 EUR = USD 1.4989 (2007: USD 1.3097). Income
statement items: average rate 1 EUR = GBP 0.7569 (2007: GBP
0.6699). Balance sheet items: closing rate 1 EUR = USD 1.5812
(2007: USD1.3318; year-end 2007: USD 1.4721). Balance sheet items:
closing rate 1 EUR = GBP 0.7958 (2007: GBP 0.6798; year-end 2007:
GBP 0.7334). Notes: 1) As adjusted for the retrospective
application of the accounting change and, where applicable, for the
change in definition of operating earnings to include our share in
the net results of associates. These changes were implemented in Q2
2007. 2) After deduction of preferred dividend and coupons on
perpetuals. 3) Shareholders' equity per share is calculated after
deduction of the preferred share capital of EUR 2.1 billion (at
Dec. 31, 2007: EUR 2.1 billion) and considering the number of
treasury shares. The number of common shares used in the
calculation of shareholders' equity per share is 1,492 million (at
Dec. 31, 2007: 1,500 million). The interim condensed consolidated
financial statements included in Appendix III have been prepared in
accordance with IAS 34 'Interim financial reporting. It does not
include all of the information required for full financial
statements and should therefore be read together with the 2007
consolidated financial statements of AEGON N.V. as included in
AEGON's Annual Report over 2007. As of January 1, 2008, AEGON
reclassified, on the phase of its balance sheet, the real estate
for own use from Investments general account and Investments for
account of policyholders to Other assets and receivables. In
addition AEGON reclassified cash flows from real estate held for
own use as cash flows from operating activities to investing
activities, to the extent that they relate to real estate that is
occupied by AEGON's own employees. The comparative 2007 information
has been adjusted accordingly. This change reduced Investments
general account by EUR 330 million and Investments for account of
policyholder by EUR 141 million with an offsetting increase in
Other assets and receivables of EUR 471 million. All other
accounting policies and methods of computation applied in the
interim financial statements are the same as those applied in the
2007 consolidated financial statements, which were prepared in
accordance with the International Financial Reporting Standards
(IFRS) as adopted by the European Union. For AEGON this is equal to
IFRS as published by the International Accounting Standards Board.
The published figures in these interim financial statements are
unaudited. Condensed consolidated income statement The result from
financial transactions in Q1 2008 amount to a loss of EUR 8,900
million compared to a gain of EUR 1,479 million in Q1 2007. This
decrease primarily reflects losses on investments for account of
policyholders. These losses are offset by a decrease in the
benefits and expenses line which decreases from an amount of EUR
11,258 million in Q1 2007 to EUR 270 million in Q1 2008. Capital
and funding The capital management section, provided on pages 6
& 7, includes information on issuances, repurchases and
repayments of debt and equity securities effectuated in this
interim reporting period. Business combinations On February 21,
2008, AEGON Hungary signed an agreement to purchase 100% of the
registered capital of UNIQA Asset Management Company and
Heller-Saldo 2000 Pension Fund Management Company, both Hungarian
entities, from UNIQA Insurance Company. The shares will be
transferred to AEGON by June 30, 2008, subject to the approval of
the regulatory authorities. Following the acquisition, assets under
management will increase by approximately EUR 300 million. On
February 26, 2008, AEGON has entered into an agreement to acquire
100% of Ankara Emeklilik Anonim Sirketi (Ankara Emeklilik), a
Turkish life insurance and pension provider, from Polis Bakim ve
Yardim Sandigi. The transaction is subject to regulatory approval
in Turkey, and is expected to close in the first half of 2008.
Ankara Emeklilik has a presence in the Turkish life insurance and
private pension market, with over 54,000 pension fund members and
approximately EUR 35 million in assets under management. Ankara
Emeklilik sells its products and services through a variety of
different channels and has an agreement in place to distribute
through a nationwide network of 236 branches belonging to
Sekerbank. Commitments and contingencies There have been no
material changes in contingent assets and liabilities reported in
the 2007 consolidated financial statements of AEGON. Events after
the balance sheet date On April 21, 2008, AEGON and China's
Industrial Securities have completed the establishment of their
asset management joint venture following the recent final approval
by the regulatory authorities. Under the agreement, AEGON has
acquired a 49% interest in Industrial Fund Management Company
(IFMC), a Chinese mutual fund manager with approximately EUR 3
billion assets under management as of March 31, 2008. Industrial
Securities, one of China's leading securities companies, will
retain the remaining 51% of IFMC. The initial agreement was
announced on May 28, 2007. The joint venture will be renamed AEGON
Industrial Fund Management Company. Both shareholders will be
equally represented in the Board of Directors. The current
management team, led by CEO Yang Dong, will continue to lead AEGON
Industrial FMC with the objective of becoming one of the top
players in the Chinese fund management market. Over the past two
years, assets under management have increased from EUR 600 million
to EUR 3 billion. AEGON is one of the world's largest life
insurance and pension groups, and a strong provider of investment
products. AEGON empowers local business units to identify and
provide products and services that meet the evolving needs of
customers, using distribution channels best suited to local
markets. AEGON takes pride in balancing a local approach with the
power of an expanding global operation. With headquarters in The
Hague, the Netherlands, AEGON companies employ approximately 30,000
people worldwide. AEGON's businesses serve millions of customers in
over twenty markets throughout the Americas, Europe, and Asia.
Respect, quality, transparency and trust constitute AEGON's core
values as the company continually strives to meet the expectations
of customers, shareholders, employees and business partners. AEGON
is driven to deliver new thinking with the ambition to be the best
in the industry. Group Corporate Communications & Investor
Relations Media relations Phone: +31(0)70-344-8344 E-mail: Media
conference call 8:15 am CET Audio webcast on http://www.aegon.com/
Investor relations Phone: +31(0)70-344-8305 or +1-877-548-9668 -
toll free USA only E-mail: Financial supplement AEGON's 2008
Financial supplement is available on http://www.aegon.com/ Analyst
& investor call 3:00 pm CET Audio webcast on
http://www.aegon.com/ Call-in numbers: USA +1-480-629-1990 UK
+44(0)208-515-2301 NL +31-20-796-5332 Website http://www.aegon.com/
DATASOURCE: AEGON N.V. CONTACT: Group Corporate Communications
& Investor Relations. Media relations, Phone:
+31(0)70-344-8344, E-mail: . Media conference call 8:15 am CET,
Audio webcast on http://www.aegon.com/. Investor relations, Phone:
+31(0)70-344-8305 or +1-877-548-9668 - toll free USA only, E-mail:
. Financial supplement: AEGON's 2008 Financial supplement is
available on http://www.aegon.com/. Analyst & investor call:
3:00 pm CET, Audio webcast on http://www.aegon.com/. Call-in
numbers: USA +1-480-629-1990, UK +44(0)208-515-2301, NL
+31-20-796-5332
Copyright