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Aegon posts further improvement in second quarter earnings; capital position stronger

August 12, 2009

Aegon saw an improvement in both its earnings and capital position in the second quarter despite a continued uncertain market environment.

Underlying earnings before tax – the company’s main measure of profits – amounted to EUR 404 million, a turnaround after a loss in the first quarter of EUR 22 million.

Net income, meanwhile, showed a deficit of EUR 161 million, but that included a one-off loss of EUR 385 million linked to Aegon’s sale of its life insurance operations in Taiwan earlier this year. Impairments totaled EUR 393 million, approximately half on the company’s investments in US housing market assets, related to sub-prime mortgages.

The second quarter also saw an improvement in Aegon’s capital position – mainly the result of higher financial markets and efforts to free up capital from the company’s existing businesses.

In the first half of 2009, Aegon released EUR 1.6 billion in capital, exceeding its original target for the full-year of EUR 1.5 billion. Excess capital – over and above what the company needs to maintain a AA rating – stood at EUR 3.5 billion at the end of June, up from EUR 2.7 billion three months earlier. Aegon is also well on track to meet its target for cost savings this year of EUR 150 million.

In a statement, CEO Alex Wynaendts said maintaining a strong capital position remained “front and center” in Aegon’s strategy.

He said improvements to Aegon’s capital position in recent months will allow the company to reverse the impact of some measures it had taken previously to reduce financial risk.

He added, however, that Aegon had not declared an interim dividend for holders of common shares this year. Aegon will communicate its decision whether or not to pay a full year dividend when it announces its fourth quarter results, depending on cash flows and the company’s capital position.

Aegon’s turnaround in underlying earnings came despite lower investment income. New life sales were down 13% from the first quarter, excluding Taiwan. A slower pensions market in the Netherlands in the second quarter offset an increase in both sales in Spain and retail life sales in the United States.

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