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Aegon earnings show significant improvement in first quarter

May 13, 2009

Aegon reported a net loss for the first quarter, but earnings showed a sharp improvement from the second half of last year.

CEO Alex Wynaendts said he was “encouraged” by the figures and promised the company would stick to the strategy put in place last November to combat the financial crisis.

He said the improvement had come despite “the persistent challenges” of the current market environment.

Although we posted a net loss in the first quarter,” he said, “we are encouraged by the improvement in earnings and the indications that the fundamentals of our business remain sound.”

Mr. Wynaendts added that relatively stable new life sales and deposits during the quarter reflected “the strength of Aegon’s franchise and the continued confidence of our customers”.

Aegon made a net loss for the first three months of this year of EUR 173 million – the result primarily of lower equity markets and continued impairments on some of the company’s investments. In the fourth quarter last year, Aegon lost almost EUR 1.2 billion.

Despite difficult market conditions, earnings in the first quarter were helped by gains on the sale of bonds and shares - due partly to a repositioning of Aegon’s portfolio in the Netherlands.

Like other insurance companies, Aegon has been battling the effects of the global financial crisis in recent months. In response, the company has taken steps to lower risk, cut costs and free up additional capital from its existing operations. In addition, Aegon has been conducting a thorough review of its businesses around the world, most recently selling its life insurance activities in Taiwan and scaling back its institutional markets division in the United States.

With these measures in place, Aegon managed to release an extra EUR 900 million in capital in the first quarter and is on course to meet its target of reducing costs this year by EUR 150 million – approximately 5% of its total cost base. At the end of the quarter, Aegon’s excess capital – over and above AA capital adequacy requirements – stood at EUR 2.7 billion.

Aegon 2008 embedded value: equivalent to EUR 11.35 a share

Alongside its first quarter earnings, Aegon has also published its latest figures for embedded value – an important measure of the company’s underlying worth. At the end of 2008, Aegon’s embedded value totaled just over EUR 18.5 billion, down from EUR 21.7 billion twelve months before and equivalent to EUR 11.35 a share. Most of the decline was due to lower equity markets and widening credit spreads during the year.