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Aegon returns to profit as market conditions improve

November 11, 2009

Aegon returned to profit in the third quarter this year, helped by an improvement in world financial markets and a substantial decline in impairments.

The company reported net income for the third quarter of EUR 145 million – a turnaround from a loss of EUR 329 million for the same three-month period last year.

Profits came despite EUR 66 million in one-off charges during the quarter and lower income as a result of measures taken recently to reduce financial risk.

At the same time, impairments dropped to EUR 285 million – a reflection of further improvements in the US housing market.

In a statement, Aegon CEO Alex Wynaendts said the third quarter numbers showed the company had taken the “right actions at the right time” to deal with the global financial crisis.

He added that strong sales and net deposits in the quarter “demonstrate the continued confidence of our customers”.

Third quarter earnings come as Aegon prepares to repay EUR 1 billion to the Dutch government at the end of this month – an important first step toward repaying the full EUR 3 billion provided by the Dutch State last year at the height of the financial crisis.

In his statement, Mr. Wynaendts said Aegon’s stronger capital position had enabled the company to repay the EUR 1 billion “while continuing to maintain a larger capital buffer, a necessary precaution in the current environment”.

Aegon’s underlying earnings were lower in the third quarter at EUR 351 million, down 13% compared with the second quarter. New life sales, meanwhile, rose 3% compared with the second quarter to EUR 484 million, supported by strong retail sales in the United States, while net deposits – excluding institutional guaranteed products – increased to close to EUR 2 billion. Aegon also booked a tax gain in the third quarter of EUR 154 million.

Aegon’s quarterly net profit was the company’s first in more than a year – a reflection of the severity of recent turmoil in world financial markets.

To counter the effects of the crisis, Aegon has taken decisive steps in recent months, reducing risk, lowering operating costs and freeing up additional capital from its businesses.

At the end of third quarter, Aegon’s excess capital – over and above what the company requires consistent with a AA rating – totaled EUR 4.8 billion, up from EUR 3.5 billion three months before.

Approximately EUR 900 million in extra capital was released in the third quarter – bringing the total of capital released since Aegon initiated its strategy just over a year ago to EUR 4.2 billion, well ahead of the company’s original schedule. Aegon has also achieved its target of reducing costs this year by EUR 150 million, three months ahead of the original plan.

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