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Aegon stands firm amid market turmoil

August 7, 2008

Aegon’s main businesses turned in another solid performance in the second quarter, despite continued turmoil in world financial markets and the impact of a weaker US dollar and UK pound on earnings from the United States and the United Kingdom.

Underlying earnings before tax – the Group’s main earnings benchmark – declined 12% to EUR 596 million. However, stripping out the currency effects,  the decrease was just 2%.

Value of new business, another key target for the Group, was 2% higher on a constant currency basis, helped by strong sales in both the Americas and the United Kingdom. Aegon’s US fixed annuity business, meanwhile, enjoyed its best sales quarter for five years.

Underlying earnings before tax – the Group’s main earnings benchmark – declined 12% to EUR 596 million. However, strip out the effect of a weaker US dollar and UK pound and the decrease was just 2%.

Value of new business, another key target for the Group, was 2% higher on a constant currency basis, helped by strong sales in both the Americas and the United Kingdom. Aegon’s US fixed annuity business, meanwhile, enjoyed its best sales quarter for five years.

One year into the credit crisis, CEO Alex Wynaendts stressed Aegon’s overall financial strength, saying that the Group’s capital position and cash flows “continue to be strong despite the ongoing turbulence in financial markets”.

He admitted that the weaker US dollar and the UK pound had had “a considerable impact” on Aegon’s reported results, but added that the Group remained “confident in our position and in our ability to grow our business profitably while achieving greater capital efficiency.”

At the end of the second quarter, Aegon’s excess capital stood at over EUR 800 million, an important safeguard in current difficult market conditions. The Group also decided to leave its interim dividend payment to shareholders unchanged at EUR 0.30 a share.

Like other financial services companies, Aegon has had to face tumbling stock markets and worsening credit conditions in recent months.

But the Group has so far weathered the worst of the storm – testimony to the quality of its investment portfolio and its effective risk management.

In the second quarter, net impairment charges amounted to just EUR 98 million, a small fraction of Aegon’s overall revenue-generating investments of more than EUR 340 billion. Of the total impairments, less than half – EUR 41 million – were linked to the Group’s subprime investments in the United States.

Aegon acknowledged that, given current market circumstances, there could be further impairments to its US subprime book, but added it believes its current exposure of EUR 2.5 billion is of manageable size.

Second quarter earnings figures come just two months after Aegon unveiled new financial targets as part of an ambitious new growth plan designed to increase earnings, improve returns over the next few years and make better use of the Group’s expanding global resources.

Aegon's CEO reaffirmed his confidence in the Group's ability to deliver on its objectives.