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Aegon reports first six months 2005 results

The Hague, August 11, 2005

"We are pleased to report a significant increase in life production and the continued strengthening of distribution during the first half of this year," said Aegon Chairman Donald J. Shepard.

  • Standardized new life production increased 16% to EUR 1,342 million in the first six months of 2005 and 29% in the second quarter to EUR 732 million
  • Operating earnings before tax decreased 2% to EUR 944 million and increased 12% to EUR 507 million in the second quarter
  • Net income in the first six months increased 32% to EUR 1,426 million and 71% to EUR 760 million in the second quarter of 2005
  • Interim dividend raised to EUR 0.22 per common share

"We are pleased to report a significant increase in life production and the continued strengthening of distribution during the first half of this year," said Aegon Chairman Donald J. Shepard. "The announced acquisition in Poland marks another important step in our growth strategy for Central and Eastern Europe. We also achieved further expansion in China with the opening of our Beijing branch and the new license in Nanjing. The progress that we have made across our businesses so far this year indicates that our strategy for growing Aegon's core business profitably is on track."

During the first six months, standardized new life production increased 16%. New life production in the Americas increased 13%, primarily reflecting strong Bank-Owned Life Insurance / Company-Owned Life Insurance (BOLI/COLI) production during the first quarter, continued strong traditional and Universal Life (UL) sales in the Agency channel and increased reinsurance sales. The Netherlands saw a solid improvement in group pension business in the first quarter, driving the increase in life production for the first six months. Life production in the United Kingdom decreased during the first six months, as first quarter production was affected by certain pricing and other changes in the core pensions markets. The second quarter showed a solid pick up in UK life production. Taiwan experienced exceptionally strong growth in life production, particularly in the second quarter, due to increased sales of traditional life products, which is unlikely to be repeated in the second half of the year.

View the Highlights Q2 2005

Sales of annuity and institutional guaranteed products in the Americas increased 4% compared to the first six months of 2004. Lower deposits in fixed annuities in the first six months of 2005 reflect our pricing discipline and the interest rate environment. New fixed annuity deposits in the second quarter were higher than in the first quarter driven by increased sales through the bank channel and in the pension business. Variable annuity deposits benefited from increasing retail sales. Institutional guaranteed product sales were also higher. Off balance sheet production increased in all country units with the largest portion coming from the UK.

Operating earnings before tax in the first half of 2005 decreased 2% to EUR 944 million (and increased 2% on a constant currency basis). The Netherlands and the United Kingdom reported increases in operating earnings. The increase in operating earnings in the Netherlands primarily reflects higher investment income and improved underwriting results, partly offset by additions to provisions for guarantees and for improvements to certain life products. The increase in operating earnings in the UK mainly reflects the positive impact from higher equity and bond markets. The decrease in operating earnings in the Americas is largely due to lower earnings from segregated fund business in Canada and currency translation effects. The divestiture of the general insurance activities in Spain at the beginning of this year is the primary reason for the decline in operating earnings in Other countries. In the second quarter of this year, operating earnings before tax increased 12% to EUR 507 million when compared to the same period last year. Each of the three major country units reported higher operating earnings before tax in the second quarter compared to the prior year period.

Net income increased 32% to EUR 1,426 million in the first six months of 2005 (35% on a constant currency basis) primarily reflecting increased net gains on investments. Net income per share increased 33% to EUR 0.84, after taking into account the payment of the dividend on preferred shares and the accrued coupons on perpetual capital securities.

Net gains/losses on investments and impairment charges together amounted to a gain of EUR 859 million compared to a gain of EUR 274 million in the first six months of 2004. Non recurring income amounted to EUR 176 million before tax, reflecting the book gain on the sale of the Spanish general insurance activities.

Commission and expenses decreased 6% to EUR 2,768 million (3% at constant currency exchange rates). The sale of most of Transamerica Finance Corporation's businesses in the course of 2004 as well as expense savings in Aegon USA and Aegon UK contributed to lower operating expenses.

Revenue generating investments amounted to EUR 335 billion at June 30, 2005 and increased 11% compared to year-end 2004.

Shareholders' equity at June 30, 2005 amounted to EUR 18,402 million, an increase of 23% compared to December 31, 2004. An interim dividend of EUR 0.22 per common share has been declared. This represents a 5% increase compared to the interim dividend of 2004 and is supported by the company's strong underlying cash flows and solid capital position. The interim dividend will be payable in either cash or stock at the election of the shareholder. The value of the stock dividend will be approximately 5% higher than the dividend in cash.