THE HAGUE, The Netherlands, March 12 /PRNewswire-FirstCall/ -- Fourth quarter results in line with pre-announcement of February 17, 2009 - AEGON maintains strong capital position: - Excess capital over AA capital adequacy requirements of EUR 2.9 billion; - IGDa) capital surplus of EUR 5.6 billion, equivalent to a solvency ratio of 183%; - NAIC RBCb) ratio of 350% for the US life insurance operations; - Core capitalc) of EUR 16.2 billion excluding revaluation reserve at the end of 2008 (EUR 9.1 billion including revaluation reserve); - Decline in revaluation reserve of EUR 1.7 billion in Q4, driven by widening in credit spreads - Underlying loss before tax of EUR 181 million, due mainly to reserve strengthening and accelerated amortization of deferred acquisition costs in the US, and lower fees in general - Net loss in Q4 of EUR 1.2 billion, including an extraordinary tax charge of EUR 300 million - New life sales in Q4 2008 of EUR 598 million; total gross deposits of EUR 11.9 billion; net deposits of EUR 1.7 billion - Value of new business in Q4 of EUR 233 million, with an internal rate of return of 16.5% Statement Alex Wynaendts, CEO "The severe disruption in world financial markets significantly impacted AEGON's earnings during the fourth quarter of 2008. This challenging environment which has persisted in the early part of 2009 confirms that our strategic priorities of releasing capital and reducing costs, as well as putting in place contingencies to withstand further market deterioration are the right ones. In the fourth quarter, we released EUR 1 billion of capital and expect to release a further EUR 1.5 billion in 2009. Our businesses in the United States, the Netherlands and the United Kingdom are also on track to deliver on our target of EUR 150 million in cost reductions in 2009. We are pleased by the continued confidence of our customers as evidenced by resilient sales and a strong increase in deposits. We believe that the solid fundamentals of our business, combined with AEGON's financial position and the actions we are taking justify their continued confidence." KEY PERFORMANCE INDICATORS amounts in EUR millions (except per Notes Q4 2008 Q4 2007 % At share data) constant currency % Underlying earnings before tax 1 (181) 667 N.M. N.M. Net income 2 (1,182) 648 N.M. N.M. New life sales 3 598 800 (25) (19) Total deposits 4 11,933 9,594 24 17 Value of new business (VNB) 233 226 3 4 Return on equity 5 (8.7%) 12.5% N.M. amounts in EUR millions (except per FY 2008 FY 2007 % At share data) constant currency % Underlying earnings before tax 1,573 2,639 (40) (37) Net income (1,082) 2,551 N.M. N.M. New life sales 2,631 3,274 (20) (11) Total deposits 40,751 44,528 (8) (3) Value of new business (VNB) 837 927 (10) (2) Return on equity 6.6% 12.5% (47) a) The calculation of the IGD (Insurance Group Directive) capital surplus and ratio have been changed from the disclosure in the previous quarter to better reflect regulatory solvency requirements of local regulators and are based on Solvency I capital requirements on IFRS for entities within the EU, and local regulatory solvency measurements for non-EU entities. Specifically, required capital for the life insurance companies in the US is calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance Commissioners in the US b) National Association of Insurance Commissioners Risk Based Capital c) Core capital is the sum of shareholders' equity and the EUR 3 billion in convertible core capital securities from Vereniging AEGON, funded by the Dutch State In June 2008, AEGON set out three strategic priorities: 1. To reallocate capital toward businesses with higher growth and return prospects; 2. To improve growth and returns from existing businesses; 3. Manage AEGON as an international company. Subsequently, at the Analyst & Investor Day on November 24, AEGON identified and announced three priorities to counter the challenges of the current global financial crisis and position the company for growth: - Focus on capital preservation and accelerate the capital release program, with a EUR 600-800 million target for Q4 2008; - EUR 150 million cost reduction program for 2009; - Develop contingency plans for continued deterioration in financial markets. As announced last June, AEGON is conducting an ongoing review of its portfolio of businesses to ensure that they meet the criteria outlined in the strategy. On February 17, 2009, AEGON announced that due to the market dislocation it will downsize its institutional business (AEGON Institutional Market Division, IMD) in the Americas, which will result in lower credit risk in the long run and a release of capital in the near term. AEGON and the global financial crisis In the fourth quarter of 2008, the financial crisis accelerated and a severe global economic downturn began to unfold. Liquidity in financial markets was severely affected. Equity markets were down by more than 20%, while equity market volatility rose to a historical high. Meanwhile, as government bond yields reached historic lows, credit spreads more than doubled across many market segments in Q4. The downturn in financial markets has significantly impacted AEGON's results. Moreover, the continued deterioration in the US housing market increased risks in mortgage backed securities, leading to impairments. Also, corporate bonds, in particular high yield, experienced higher defaults. In order to provide a fuller view of the possible impacts of the financial crisis on AEGON, management disclosed updated earnings and capital sensitivities to a possible further downturn of financial markets. In particular, this additional information pertained to equity market exposure, impairments and interest rate movements. Given market developments and the ongoing uncertainty regarding the financial and economic environment, AEGON felt it was prudent to reinforce its capital buffer to a level substantially in excess of its AA capital adequacy requirements. On October 28, AEGON announced that it had secured EUR 3 billion of additional core capital from Vereniging AEGON funded by the Dutch State. Capital preservation As the financial crisis unfolded, acceleration of capital preservation actions has been a priority. The actions taken and plans to be executed are evidence of the financial flexibility within AEGON to manage through these extraordinary times. They include: - Releasing EUR 1.7 billion of capital in the second half year of 2008, including EUR 1 billion in the fourth quarter, by actively reducing risks - including investment risks, optimizing asset and liability management, reinsurance transactions and securitization; - Releasing an additional EUR 1.5 billion of capital in 2009 by lowering investment risk, and transferring risk through reinsurance. - Reducing spread-based balances within AEGON's institutional business in the United States by EUR 14 billion, freeing up EUR 0.6 billion of capital in the next two years (EUR 0.3 billion in 2009, which is included in total expected capital releases for 2009 of EUR 1.5 billion). The capital preservation actions in Q4 2008 of EUR 1 billion are expected to have a negative effect on earnings of EUR 60 million on an annual basis. As these actions are largely derisking measures, they can be reversed at any time. As a result of actions taken, the capital position of the company remains strong with excess capital of EUR 2.9 billion over AA capital adequacy requirements at year-end, a significant buffer against further market deterioration. Cost measures AEGON announced cost reduction measures totaling EUR 150 million in 2009. Actions to achieve this include: - Americas: no wage increases in 2009, staff reductions, deferred hiring, reorganization of the agency distribution, downsizing IMD; - The Netherlands: reduction of contract services, process reengineering, general cost savings; - United Kingdom: restructuring of IT and marketing and customer services, cost containment, savings in distribution. Capital management and capital position AEGON capitalizes its businesses at the higher of: - Regulatory requirements; - AA capital adequacy requirements; - Any self-imposed additional economic requirements under AEGON's economic framework. AEGON has EUR 2.9 billion excess capital over AA capital adequacy requirements and has an IGD capital surplus of EUR 5.6 billion, equivalent to an IGD solvency ratio of 183% (2007: 190%). Regulatory requirements are set by local regulators, while the IGD ratio is a European regulatory solvency calculation. The methodology to calculate the IGD ratio has changed from the disclosure over the third quarter results to better reflect regulatory solvency requirements of the respective local regulators. The previously disclosed IGD ratio included the calculation of the ratio for the businesses outside of the EU based on EU Solvency I capital requirements. The IGD ratio now takes into account Solvency I capital requirements on IFRS for entities within the EU, and local regulatory solvency measurements for non-EU entities. Specifically, required capital for the life insurance companies in the United States is calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance Commissioners in the United States. AEGON does not manage its capital base to the IGD ratio. AEGON USA had a NAIC RBC ratio of 350%, compared with 336% at the end of 2007. Core capital at year-end came in at EUR 9.1 billion, consisting of EUR 6.1 billion of shareholders' equity and EUR 3 billion of convertible core capital securities provided by Vereniging AEGON, funded by the Dutch State. Core capital includes a negative revaluation account on available-for-sale assets of EUR 7.2 billion. Excluding the revaluation account, core capital amounted to EUR 16.2 billion, 78% of the total capital base, above the minimum target of 70%. AEGON's negative revaluation account increased during the fourth quarter by EUR 1.7 billion, the result of unprecedented credit spread widening, more than offsetting the effect of declines in government bond yields. AEGON has not reclassified assets held as available-for-sale (AFS) to loans or held-to-maturity assets. Also, AEGON transferred a very limited amount of assets valued based on market prices to mark-to-model valuations, driven by current market developments. The mark-to-model is now 1.1% (EUR 1.1 billion) of the total valuation of debt instruments held at fair value (2007: 0.4%). For more details we refer to the explanatory notes on page 36. The lower valuation of the AFS bond portfolio will only affect earnings before tax if AEGON: - Is forced to sell those investments at a loss; or - Impairs certain investments because the company does not expect to receive (part of) interest and/or principal. AEGON's long-term business model, and its liquidity and asset and liability management, ensure that it is unlikely that AEGON will be forced to sell assets at distressed prices, as reflected in the revaluation account, to generate cash. Therefore, AEGON's negative revaluation reserve is not a good indication of future losses. AEGON expects impairments will be at elevated levels in 2009, due to the economic situation. FINANCIAL OVERVIEW EUR millions Notes Q4 2008 Q4 2007 % At constant currency % Underlying earnings before tax by line of business Life and protection 121 357 (66) (71) Individual savings and retirement products (433) 90 N.M. N.M. Pensions and asset management 179 137 31 28 Institutional products 100 96 4 (6) Life reinsurance (114) 18 N.M. N.M. Distribution (19) (21) 10 14 General insurance (3) 13 N.M. N.M. Interest charges and other (17) (34) 50 54 Share in net results of associates 5 11 (55) (73) Underlying earnings before tax (181) 667 N.M. (140) Over/(under) performance of fair value items (770) (145) N.M. Operating earnings before tax (951) 522 N.M. N.M. Operating earnings before tax by line of business Life and protection 104 346 (70) (75) Individual savings and retirement products (902) 79 N.M. N.M. Pensions and asset management 224 13 N.M. N.M. Institutional products (54) 93 N.M. N.M. Life reinsurance (319) 22 N.M. N.M. Distribution (19) (21) 10 14 General insurance (3) 13 N.M. N.M. Interest charges and other 13 (34) N.M. N.M. Share in net results of associates 5 11 (55) (73) Operating earnings before tax (951) 522 N.M. N.M. Gains/(losses) on investments 136 281 (52) (52) Impairment charges (501) (17) N.M. N.M. Other income/(charges) 38 (24) N.M. N.M. Income before tax (1,278) 762 N.M. N.M. Income tax 96 (114) N.M. N.M. Net income (1,182) 648 N.M. N.M. Net underlying earnings (69) 516 N.M. N.M. Net operating earnings (623) 399 N.M. N.M. Underlying earnings geographically Americas (234) 503 N.M. N.M. The Netherlands 75 109 (31) (31) United Kingdom 13 67 (81) (104) Other countries (17) 22 N.M. N.M. Holding and other (18) (34) 47 54 Underlying earnings before tax (181) 667 N.M. N.M. Operating earnings geographically Americas (1,167) 506 N.M. N.M. The Netherlands 227 (39) N.M. N.M. United Kingdom (6) 67 N.M. N.M. Other countries (17) 22 N.M. N.M. Holding and other 12 (34) N.M. N.M. Operating earnings before tax (951) 522 N.M. N.M. Commissions and expenses 1,863 1,438 30 28 of which operating expenses 928 867 7 6 EUR millions FY 2008 FY 2007 % At constant currency % Underlying earnings before tax by line of business Life and protection 911 1,295 (30) (25) Individual savings and retirement products (146) 496 N.M. N.M. Pensions and asset management 508 498 2 6 Institutional products 405 332 22 31 Life reinsurance (63) 114 N.M. N.M. Distribution 1 6 (83) (83) General insurance 45 47 (4) (2) Interest charges and other (112) (185) 39 36 Share in net results of associates 24 36 (33) (33) Underlying earnings before tax 1,573 2,639 (40) (37) Over/(under) performance of fair value items (1,619) (272) N.M. Operating earnings before tax (46) 2,367 N.M. N.M. Operating earnings before tax by line of business Life and protection 795 1,284 (38) (34) Individual savings and retirement products (922) 524 N.M. N.M. Pensions and asset management 251 181 39 47 Institutional products 8 339 (98) (98) Life reinsurance (361) 135 N.M. N.M. Distribution 1 6 (83) (83) General insurance 45 47 (4) (2) Interest charges and other 113 (185) N.M. N.M. Share in net results of associates 24 36 (33) (33) Operating earnings before tax (46) 2,367 N.M. N.M. Gains/(losses) on investments 35 746 (95) (97) Impairment charges (1,038) (76) N.M. N.M. Other income/(charges) (12) 40 N.M. N.M. Income before tax (1,061) 3,077 N.M. N.M. Income tax (21) (526) 96 97 Net income (1,082) 2,551 N.M. N.M. Net underlying earnings 1,234 2,033 (39) (36) Net operating earnings 69 1,805 (96) (96) Underlying earnings geographically Americas 1,073 1,993 (46) (42) The Netherlands 378 418 (10) (10) United Kingdom 141 271 (48) (47) Other countries 93 142 (35) (34) Holding and other (112) (185) 39 37 Underlying earnings before tax 1,573 2,639 (40) (37) Operating earnings geographically Americas (587) 2,102 N.M. N.M. The Netherlands 213 37 N.M. N.M. United Kingdom 122 271 (55) (47) Other countries 93 142 (35) (34) Holding and other 113 (185) N.M. N.M. Operating earnings before tax (46) 2,367 N.M. N.M. Commissions and expenses 6,109 5,939 3 9 of which operating expenses 3,272 3,237 1 7 Overview AEGON reported a net loss for Q4 of EUR 1.2 billion. Results are in line with preliminary results announced on February 17, 2009 and were significantly impacted by financial markets. Underlying earnings were down mainly due to declining financial markets, resulting in reserve strengthening and accelerated amortization of deferred policy acquisition costs (DPAC) in the variable annuities line of business in the Americas and reduced fees on asset balances in general. Net income was also down due to increased impairment charges and the impact of financial markets on so-called fair value items, which include certain investment classes in the Netherlands and the Americas, as well as a number of products containing financial guarantees. Lower equity and credit markets, as well as increased implied volatilities and lower interest rates severely impacted the fair value of guarantees in these products. In addition, alternative investment classes, like hedge funds and private equity, significantly underperformed long-term expected returns. Impairments came primarily from housing related structured assets, corporate high-yield bonds and equity investments. The impairments on corporate credit were driven by a number of small impairments. Net income also includes an extraordinary tax charge of EUR 300 million, related to intercompany reinsurance treaties between Ireland and the United States, offsetting the tax benefit from the reported operational losses. These reinsurance treaties are accounted for at fair value in both tax jurisdictions, while gains in the United States are taxed at 35% and losses in Ireland are tax deductible at 12.5%. Underlying earnings before tax In Q4 the underlying loss for the company amounted to EUR 181 million. Underlying earnings in the Americas came in at a negative USD 412 million. The impact on earnings from lower equity markets of USD 839 million mainly affected: a) The variable annuity business (USD 587 million) due to minimum guarantee reserves strengthening and accelerated amortization of DPAC and lower fees; b) The life reinsurance business as result of reserve strengthening of variable annuity blocks of business (USD 150 million); and c) The life business (USD 65 million). Underlying earnings in the Americas in Q4 also included USD 230 million of one-off charges, the most significant being an increase in the long-term assumption for equity market volatility (USD 145 million). Earnings also include a charge of USD 40 million related to intangible assets from the acquisition of Merrill Lynch's life insurance businesses, and a USD 45 million asset write-off in life reinsurance. In Q4 2007, underlying earnings in the Americas included a positive USD 52 million from updated mortality assumptions in the life business. In the Netherlands, underlying earnings were down 31% to EUR 75 million. The positive impact of an exceptional dividend received and better technical results in the pension business in the Netherlands was more than offset by decreases in investment income as well as charges in other lines of business. These charges include adverse technical results in the non-life business, system and project related one-off expenses and restructuring charges. Underlying earnings in the United Kingdom, meanwhile, were GBP 13 million, a decline of GBP 34 million due primarily to the impact of lower equity and credit markets on fee charges in the pension business. Other lines of business in the United Kingdom performed well. The decline in underlying earnings from Other countries to a loss of EUR 17 million was the result mainly of accelerated amortization of deferred acquisition costs in Taiwan (EUR 43 million), as underlying earnings in Central & Eastern Europe increased 87% to EUR 28 million and in Spain 11% to EUR 10 million. Net income Net income includes results on so-called fair value items, which include certain investment classes in the Netherlands and the Americas, as well as a number of products containing financial guarantees. The total underperformance of these fair value items amounted to EUR 770 million. The valuation of the fair value of liability guarantees reflects decreased interest rates, declining equity markets and sharply increased equity volatilities, as well as discount rates including a credit spread, a reflection of extremely dislocated and very illiquid markets. Underperformance of fair value items In Q4 2008, underperformance of alternative investment classes, such as hedge funds, private equity and credit derivatives, in the Americas and the Netherlands amounted to EUR 500 million. Fair value items include the under/overperformance on assets held at fair value through profit and loss and backing liabilities of a specific portfolio of group pension contracts in the Netherlands. In Q4 these assets underperformed long term expected returns by EUR 149 million. In order to maintain consistency in definitions, starting in Q4 2008, the net impact of the fair value movements of guarantees and the related hedges in the Netherlands has been included in fair value items. Previously, differences in fair value between guarantees and related hedges, referenced as hedge ineffectiveness, were reported in gains/losses on investments. Results for prior years have been adjusted (see Financial supplement Q4 2008). Lower bond and equity markets, as well as higher volatilities and lower interest rates negatively impacted the performance of certain products with guarantees reported at fair value. Those negative impacts were partly offset by a credit spread in the discount rates, a reflection of extremely dislocated and very illiquid markets. Products with guarantees at fair value contributed a total negative EUR 139 million to earnings. This includes mainly: - Net fair value losses on GMWB guarantees and related hedges in the Americas and the United Kingdom (EUR 280 million), segregated funds in Canada (EUR 201 million) and total return annuities (EUR 82 million); - Partially offset by EUR 425 million positive impact from hedge ineffectiveness in the Netherlands. Effectiveness of hedging was affected by extreme volatility in Q4, while higher implied volatilities impacted the valuation of guarantees. Gains on investments Gains on investments of EUR 136 million include primarily gains on derivatives considered as economic hedges at holding level and the Netherlands as well as realized gains on the sale of bonds, offset by lower real estate values in the Netherlands. Impairment charges Impairments of EUR 501 million included EUR 360 million on bonds/mortgages, primarily structured assets (subprime bonds EUR 100 million) and a number of corporate bonds in the Americas (EUR 158 million), as well as equity impairments (EUR 141 million). The impairments in corporate credit were driven by a number of small impairments. Equity investments are impaired when market values are 20% below cost price or when they are in an unrealized loss position for more than six months. Tax The tax benefit from the underlying loss, impairments and mark-to-market losses on the fair value items is more than offset by significant additional taxes related to cross border intercompany reinsurance transactions (EUR 300 million). These reinsurance treaties are accounted for at fair value in both tax jurisdictions, while gains in the United States are taxed at 35% and losses in Ireland are tax deductible at 12.5%. The driver of the tax losses in Ireland is credit spread widening. These tax losses are largely expected to reverse as the book matures and when credit spreads narrow. Commissions and expenses Commissions and expenses increased by 30% to EUR 1,863 million, primarily due to acceleration of DPAC amortization. Operating expenses increased by 7% to EUR 928 million, including several one-off items such as restructuring charges, redundancy charges and provisions. Sales Total new life sales for the company were in line with Q3 2008, and decreased by 19% (at constant currency) to EUR 598 million compared to Q4 2007. With the exception of the UK and Spain, all countries recorded lower sales in Q4 compared to Q4 2007. New life sales in the Americas were down 43% in local currency, particularly due to lower bank-owned and corporate owned life insurance (BOLI/COLI) sales (down 83%). Economic conditions also affected the high net worth market as well as variable universal life sales in the middle market. In Q4 2008 new life sales in the Netherlands decreased by 44% in local currency, primarily due to a 57% decline in pension sales, as Q4 2007 included several large contracts, while retail life sales held up reasonably well. New life sales in the United Kingdom increased by 5%, mainly driven by growth in the corporate pension market and individual annuities, offset by lower individual pension sales. New life sales in Q4 declined 34% to EUR 58 million in Other countries. In Central & Eastern Europe, sales of recurring premium life insurance rose 13%. Single premium sales in Poland were sharply lower because of a decline in equity markets, driving down total new life sales in Central & Eastern Europe by 27%. In Spain, sales of life insurance rose to EUR 23 million, due primarily to extraordinary activity, following changes in pension legislation. Sales through CAM, AEGON's largest bank partner in Spain, tripled to EUR 77 million (on a 100% basis), as a result of a successful strategy to increase the insurance penetration ratio among their existing client base. In Asia, new life sales decreased to EUR 13 million as increased sales in China were more than offset by a decline in Taiwan. SALES EUR millions Notes Q4 2008 Q4 2007 % At constant currency % New life sales Life single premiums 2,327 3,447 (32) (23) Life recurring premiums annualized 366 456 (20) (16) Total recurring plus 1/10 single 598 800 (25) (19) New premium production accident and health insurance 161 178 (10) (18) New premium production general insurance 17 21 (19) (14) Gross deposits (on and off balance) by line of business Fixed annuities 1,676 433 N.M. N.M. Variable annuities 590 640 (8) (18) Saving deposits 590 704 (16) (16) Retail mutual funds 501 598 (16) (33) Pensions and asset management 2,613 3,338 (22) (28) Institutional guaranteed products 5,963 3,881 54 46 Life reinsurance 0 0 0 0 Total gross deposits 11,933 9,594 24 17 Net deposits (on and off balance) by line of business Fixed annuities 593 (759) N.M. N.M. Variable annuities (114) (157) 27 27 Saving deposits (535) 94 N.M. N.M. Retail mutual funds (182) 266 N.M. N.M. Pensions and asset management 257 1,081 (76) (86) Institutional guaranteed products 1,679 (325) N.M. N.M. Life reinsurance (19) (82) 77 79 Total net deposits 1,679 118 N.M. N.M. EUR millions FY 2008 FY 2007 % At constant currency % New life sales Life single premiums 10,532 14,414 (27) (17) Life recurring premiums annualized 1,578 1,833 (14) (5) Total recurring plus 1/10 single 2,631 3,274 (20) (11) New premium production accident and health insurance 614 680 (10) (4) New premium production general insurance 68 58 17 17 Gross deposits (on and off balance) by line of business Fixed annuities 4,057 1,145 N.M. N.M. Variable annuities 2,636 2,743 (4) 3 Saving deposits 2,473 2,648 (7) (7) Retail mutual funds 2,698 2,248 20 26 Pensions and asset management 10,505 12,284 (14) (9) Institutional guaranteed products 18,380 23,458 (22) (16) Life reinsurance 2 2 0 50 Total gross deposits 40,751 44,528 (8) (3) Net deposits (on and off balance) by line of business Fixed annuities 71 (4,388) N.M. N.M. Variable annuities (441) (596) 26 20 Saving deposits (699) 231 N.M. N.M. Retail mutual funds 590 797 (26) (22) Pensions and asset management 1,769 2,527 (30) (28) Institutional guaranteed products 2,185 3,981 (45) (41) Life reinsurance (61) (82) 26 21 Total net deposits 3,414 2,470 38 47 REVENUE GENERATING INVESTMENTS At Dec. At Sep. 31 30 2008 2008 % Revenue generating (total) 6 331,844 350,756 (5) Investments general account 130,481 131,738 (1) Investments for account of policyholders 105,400 121,346 (13) Off balance sheet investments third parties 95,963 97,672 (2) Deposits Total gross on and off balance deposits for the company increased by 24% to EUR 11.9 billion in Q4. The increase is mainly a result of the continued growth in fixed annuity deposits and strong demand for synthetic guaranteed investment contracts (GICs) in the Americas during Q4 2008. In the pension business in the Americas, sales of retirement plans held up well. Variable annuity sales as well as asset management and mutual fund sales declined due to the volatility in the equity markets in Q4 2008. Sales of on balance guaranteed investment contracts in Q4 2008 increased by 46% in local currency. AEGON sees limited opportunities to grow spread-based business profitably in the foreseeable future and announced on February 17, 2009, its decision to downsize the portfolio of institutional spread-based products. Gross deposits in Central & Eastern Europe increased 18%. Higher pension deposits in all country units, reflecting growth of the business as well as the incorporation of new acquisitions, were partly offset by lower production of mutual funds and third party asset management products in Hungary due to the decline of equity markets. Deposits in Asia increased by EUR 148 million due to the newly acquired asset management business in China. Net deposits for the company amounted to EUR 1.7 billion as a result of strong fixed annuity and synthetic guaranteed investment contracts deposits, partly offset by net outflows of savings deposits in the Netherlands. In Central & Eastern Europe, the pension business continued to report strong net inflows. FINANCIAL OVERVIEW, Q4 GEOGRAPHICALLY United Americas Kingdom USD GBP Underlying earnings before tax by line of business 227 18 Life and protection (623) 0 Individual savings and retirement products 23 (23) Pensions and asset management 131 0 Institutional products (170) 0 Life reinsurance 0 3 Distribution 0 0 General insurance Interest charges and other 0 0 Share in net results of associates (412) (2) Underlying earnings before tax (1,330) (15) Over/(under) performance of fair value items (1,742) (17) Operating earnings before tax Operating earnings before tax by line of business 113 18 Life and protection (1,295) 0 Individual savings and retirement products (11) (23) Pensions and asset management (84) 0 Institutional products (465) 0 Life reinsurance 0 3 Distribution 0 0 General insurance Interest charges and other 0 0 Share in net results of associates (1,742) (2) Operating earnings before tax (10) (16) Gains/(losses) on investments (499) 2 Impairment charges (1) 28 Other income/(charges) (2,252) 12 Income before tax 393 (20) Income tax (1,859) (8) Net income (279) 17 Net underlying earnings (1,136) 2 Net operating earnings amounts in million EUR (unless otherwise stated) Holding, other The United Other activities & Total Americas Netherlands Kingdom countries eliminations EUR Underlying earnings before tax by line of business Life and protection 176 (37) 22 (40) 0 121 Individual savings and retirement products (416) (20) 0 3 0 (433) Pensions and asset management 20 169 (12) 2 0 179 Institutional products 100 0 0 0 0 100 Life reinsurance (114) 0 0 0 0 (114) Distribution 0 (22) 3 0 0 (19) General insurance 0 (15) 0 12 0 (3) Interest charges and other (17) (17) Share in net results of associates 0 0 0 6 (1) 5 Underlying earnings before tax (234) 75 13 (17) (18) (181) Over/(under) performance of fair value items (933) 152 (19) 0 30 (770) Operating earnings before tax (1,167) 227 (6) (17) 12 (951) Operating earnings before tax by line of business Life and protection 96 26 22 (40) 0 104 Individual savings and retirement products (885) (20) 0 3 0 (902) Pensions and asset management (5) 258 (31) 2 0 224 Institutional products (54) 0 0 0 0 (54) Life reinsurance (319) 0 0 0 0 (319) Distribution 0 (22) 3 0 0 (19) General insurance 0 (15) 0 12 0 (3) Interest charges and other 13 13 Share in net results of associates 0 0 0 6 (1) 5 Operating earnings before tax (1,167) 227 (6) (17) 12 (951) Gains/(losses) on investments (10) 84 (20) (10) 92 136 Impairment charges (355) (68) 5 (49) (34) (501) Other income/(charges) (1) 0 36 1 2 38 Income before tax (1,533) 243 15 (75) 72 (1,278) Income tax 261 (119) (26) 9 (29) 96 Net income (1,272) 124 (11) (66) 43 (1,182) Net underlying earnings (155) 80 19 (10) (3) (69) Net operating earnings (759) 129 0 (10) 17 (623) - Underlying loss of USD 412 million, including USD 839 million impact from steep decline in equity markets and USD 145 million impact from higher volatility assumptions - Continued momentum in fixed annuity deposits, driving 11% increase in total value of new business; strong retirement plan sales; ttotal net deposits USD 3.0 billion - Impact of USD 1.3 billion on earnings from fair value items, due to lower interest rates, lower equity markets, increased equity market volatility and underperformance of alternative assets - Impairments of USD 499 million; USD 184 million on structured assets; USD 232 million on corporate credit Overview Financial markets accelerated their negative trend in the fourth quarter and the economy showed signs of considerable contraction. Equity markets showed a steep decline, volatilities spiked, credit risk increased and credit spreads widened to an extent not seen before, while at the same time, government bond yields came down to historic lows. Results in Q4 2008 in the Americas were significantly impacted by the financial markets turmoil. Underlying earnings were down primarily due to the impact of a more than 20% decline in equity markets on reserve strengthening, accelerated amortization of deferred acquisition costs and lower fees. Also, long-term assumptions for equity market volatility were increased, resulting in a negative impact of USD 145 million primarily in the variable annuity line of business. In Q4 2007, underlying results in the life business included a favorable USD 52 million contribution to earnings from the update of mortality assumptions. Fair value items showed a considerable underperformance of USD 1.3 billion, driven by alternative investment returns, the impact from an increase in implied volatility and lower interest rates on fair valuation of guarantees, hedge ineffectiveness and wider credit spreads. Results in the Americas also included USD 499 million of impairments, including USD 184 million of structured asset impairments, primarily securities backed by subprime mortgages. Impairments of corporate bonds were concentrated in the high yield portfolio and were driven by a number of small impairments. Sales of individual savings and retirement products rose sharply, driven by continued demand for fixed annuities. New life sales were down in all lines of business, however, particularly in BOLI/COLI (bank-owned/corporate-owned life insurance). Value of new business was up 11%, primarily due to higher fixed annuity sales. Underlying earnings before tax AEGON reported an underlying loss before tax in the Americas for Q4 2008 of USD 412 million: - Earnings from Life & Protection declined 39% compared to Q4 2007 to USD 227 million. The decline in equity markets led to a charge of USD 65 million. In Q4 2007 underlying earnings included a favorable USD 52 million from updated mortality assumptions; - Individual Savings & Retirement earnings were a loss of USD 623 million, due to the equity markets impact on minimum guarantee reserve strengthening and accelerated DPAC amortization (in total USD 587 million). Long-term assumptions for equity market volatility were increased, a one-off negative impact of USD 135 million. Earnings also include a charge of USD 40 million related to intangible assets from the acquisition of Merrill Lynch's life insurance businesses; - Pensions & Asset Management earnings decreased to USD 23 million, a result of lower fees from declined asset balances; - Earnings from the Institutional business were down 4% to USD 131 million on lower BOLI/COLI earnings. A decrease in short-term rates continued to produce strong positive spreads on institutional guaranteed products; - In the Life Reinsurance business the underlying loss amounted to USD 170 million, including a USD 150 million due to the equity markets impact on minimum guarantee reserve strengthening, and an USD 45 million asset write-off. Net income AEGON reported a net loss for Q4 of USD 1,859 million in the Americas, including three significant items: underperformance of fair value items (USD 1.3 billion), impairment charges (USD 499 million) and a tax charge (USD 429 million). The underperformance of fair value items comprised a number of different elements: - Total fair value investments underperformed by USD 531 million as a result of alternative assets underperforming expected long-term returns and underperformance of credit derivatives and adjustments on other credit-related instruments; - Lower interest rates, declining equity markets, increased equity market volatility and widening credit spreads contributed to a USD 798 million lower mark-to-market valuation for GMWB guarantees, total return annuities and Canadian segregated funds. The valuation of the fair value of liability guarantees includes sharply increased equity volatilities, as well as discount rates including a credit spread, a reflection of extremely dislocated and very illiquid markets. Total impairment charges in the Americas during Q4 totaled USD 499 million. These impairments include USD 184 million of impairments on mortgage backed securities, of which the majority is backed by subprime hybrid adjustable rate mortgages. Net impairments on corporate bonds were USD 232 million. Other impairments include equity and commercial mortgage loan impairments. The tax benefit from the underlying loss, impairments and mark-to-market losses on the fair value items was more than offset by significant additional taxes related to cross border intercompany reinsurance transactions (USD 429 million). These reinsurance treaties are accounted for at fair value in both tax jurisdictions, while gains in the United States are taxed at 35% and losses in Ireland are tax deductible at 12.5%. The driver of the tax losses in Ireland is credit spread widening. These tax losses are largely expected to reverse as the book matures and when credit spreads narrow. Commissions and expenses Total commissions and expenses increased 46% in Q4, primarily due to accelerated DPAC amortization following lower equity markets. Q4 operating expenses were level with operating expenses last year. Sales and deposits Total new life sales in the Americas were down 43% in the quarter, driven primarily by a decline in the BOLI/COLI business. Activity in the BOLI/COLI market has declined significantly as a result of the current financial crisis. Life reinsurance and life sales were down as well compared to last year, but were in line with Q3 2008 sales. However, the economic downturn continues to impact sales of both high net worth and equity-indexed universal life products in the middle market. Total gross deposits were up 21% compared to last year on continued growth in fixed annuity sales (USD 2.3 billion) and strong demand for synthetic guaranteed investment contracts. In the pension and asset management business, sales of retirement plans came in strong, while total pension deposits were down in particular due to lack of terminal funding sales. Managed assets clearly declined because of financial market turmoil, which also affected mutual fund sales as well as variable annuity deposits. Compared with Q4 2007 variable annuity deposits were down 17%. Sales of accident and health products were in line with sales in Q3 2008. Value of new business The value of new business (VNB) in the Americas amounted to USD 167 million, and the internal rate of return (IRR) was 12.4%, both driven primarily by strong fixed annuity production. The VNB and IRR were negatively affected by hedge costs in the variable annuity business. Please refer to page 28 for more detailed information on VNB. Revenue generating investments AEGON's total revenue generating investments at the end of December 2008 totaled USD 286 billion, down 6% from three months earlier, on lower financial markets. AMERICAS - EARNINGS USD millions Notes Q4 2008 Q4 2007 % FY 2008 FY 2007 % Underlying earnings before tax by line of business Life 159 287 (45) 769 847 (9) Accident and health 68 86 (21) 363 428 (15) Life and protection 227 373 (39) 1,132 1,275 (11) Fixed annuities 86 91 (5) 368 366 1 Variable annuities (709) 52 N.M. (587) 288 N.M. Retail mutual funds 0 6 N.M. 8 21 (62) Individual savings and retirement products (623) 149 N.M. (211) 675 N.M. Pensions and asset management 23 36 (36) 150 166 (10) Institutional guaranteed products 127 107 19 544 374 45 BOLI/COLI 4 30 (87) 50 81 (38) Institutional products 131 137 (4) 594 455 31 Life reinsurance (170) 27 N.M. (93) 156 N.M. Share in net results of associates 0 1 N.M. 1 0 N.M. Underlying earnings before tax (412) 723 N.M. 1,573 2,727 (42) Over/(under) performance of fair value items (1,330) 7 N.M. (2,434) 149 N.M. Operating earnings before tax (1,742) 730 N.M. (861) 2,876 N.M. Operating earnings before tax by line of business Life 70 291 (76) 593 883 (33) Accident and health 43 91 (53) 321 443 (28) Life and protection 113 382 (70) 914 1,326 (31) Fixed annuities (110) 112 N.M. (68) 486 N.M. Variable annuities (1,185) 17 N.M. (1,289) 205 N.M. Retail mutual funds 0 6 N.M. 8 22 (64) Individual savings and retirement products (1,295) 135 N.M. (1,349) 713 N.M. Pensions and asset management (11) 46 N.M. 91 188 (52) Institutional guaranteed products (76) 99 N.M. (15) 379 N.M. BOLI/COLI (8) 34 N.M. 26 85 (69) Institutional products (84) 133 N.M. 11 464 (98) Life reinsurance (465) 33 N.M. (529) 185 N.M. Share in net results of associates 0 1 N.M. 1 0 N.M. Operating earnings before tax (1,742) 730 N.M. (861) 2,876 N.M. Gains/(losses) on investments (10) 172 N.M. (103) 376 N.M. Impairment charges (499) (21) N.M. (1,138) (65) N.M. Other income/(charges) (1) 0 N.M. 6 0 N.M. Income before tax (2,252) 881 N.M. (2,096) 3,187 N.M. Income tax 393 (284) N.M. 74 (1,003) N.M. Net income (1,859) 597 N.M. (2,022) 2,184 N.M. Net underlying earnings (279) 555 N.M. 1,143 2,003 (43) Net operating earnings (1,136) 558 N.M. (491) 2,098 N.M. Commissions and expenses 1,451 993 46 4,961 4,569 9 of which operating expenses 527 525 0 2,167 2,124 2 For the amounts in euro see the Financial Supplement. AMERICAS - SALES USD millions Notes Q4 2008 Q4 2007 % FY 2008 FY 2007 % New life sales Life single premiums 262 1,095 (76) 931 2,509 (63) Life recurring premiums annualized 179 252 (29) 852 1,025 (17) Total recurring plus 1/10 single 205 362 (43) 945 1,276 (26) Life 138 204 (32) 669 742 (10) BOLI/COLI 15 90 (83) 36 207 (83) Life reinsurance 52 68 (24) 240 327 (27) Total recurring plus 1/10 single 205 362 (43) 945 1,276 (26) New premium production accident and health insurance 205 249 (18) 870 898 (3) Gross deposits (on and off balance) by line of business Fixed annuities 2,328 610 N.M. 5,947 1,567 N.M. Variable annuities 747 900 (17) 3,680 3,723 (1) Retail mutual funds 396 796 (50) 2,813 2,865 (2) Pensions and asset management 2,771 3,790 (27) 12,987 13,675 (5) Institutional guaranteed products 8,075 5,772 40 26,945 32,097 (16) Life reinsurance 1 0 N.M. 4 3 33 Total gross deposits 14,318 11,868 21 52,376 53,930 (3) Net deposits (on and off balance) by line of business Fixed annuities 896 (1,124) N.M. 103 (6,004) N.M. Variable annuities (150) (249) 40 (811) (844) 4 Retail mutual funds (219) 350 N.M. 778 964 (19) Pensions and asset management 24 1,292 (98) 2,660 4,107 (35) Institutional guaranteed products 2,433 (343) N.M. 3,203 5,447 (41) Life reinsurance (25) (112) 78 (89) (112) 21 Total net deposits 2,959 (186) N.M. 5,844 3,558 64 REVENUE GENERATING INVESTMENTS At Dec. At Sep. 31 30 2008 2008 % Revenue generating investments (total) 6 286,167 304,706 (6) Investments general account 120,790 127,130 (5) Investments for account of policyholders 58,943 68,420 (14) Off balance sheet investments third parties 106,434 109,156 (2) For the amounts in euro see the Financial Supplement. - Underlying earnings declined 31% to EUR 75 million - Life sales down 44%, due to a standstill in group pension market; retail sales held up well Overview The Netherlands reported a net income in Q4 of EUR 124 million. Underlying earnings were down 31% to EUR 75 million compared to Q4 2007. The positive impact of an exceptional dividend received and better technical results in the pension business was more than offset by decreases in investment income as well as (one-off) charges in other lines of business. These charges include system and project related expenses, restructuring charges and adverse technical results. Fair value items overperformed long-term expectations by EUR 152 million. Fair value items include: a) Under/overperformance of assets held at fair value through profit and loss, backing liabilities of a specific portfolio of group pension contracts held in the general account; b) Differences in fair value between guarantees and related hedges, referenced as hedge ineffectiveness, previously reported in gains/losses on investments; c) Private equity investments. Impairments were EUR 68 million, while investment gains amounted to EUR 84 million. Underlying earnings before tax - Life reported a loss of EUR 34 million on lower investment income and higher costs, including EUR 27 million of system and project related expenses as well as slightly lower technical results; - In Accident and Health the underlying loss came in at EUR 3 million, due to higher claims, lower investment income and higher expenses; - Earnings in the Savings business came in at a loss of EUR 20 million. Competition in the savings market is fierce, putting pressure on margins and volumes. Q4 2007 earnings included EUR 15 million of non-recurring accelerated amortization of deferred costs; - Earnings from Pensions & Asset Management amounted to EUR 169 million, the result of an exceptional EUR 75 million dividend and better technical results of EUR 37 million; - Earnings from Distribution include an exceptional restructuring charge of EUR 21 million. Also, the slowdown in the real estate market led to lower overall revenues. Earnings in Q4 2007 included a one-off charge of EUR 12 million related to the harmonization of claw back provisions of the Unirobe Meeus Groep; - General insurance earnings were down, mainly due to higher claims, lower investment income and expenses to improve and grow the business. Net income Fair value items include the under/overperformance on assets held at fair value through profit and loss, backing liabilities of a specific portfolio of group pension contracts held in the general account. In Q4 these assets underperformed long-term expected returns by EUR 149 million. Private equity investments, included in fair value items, significantly underperformed long term excepted return by EUR 124 million. Also, in order to maintain consistency in definitions, starting in Q4 2008, the net impact of the fair value movements of guarantees and the related hedges has been included in fair value items. Previously, differences in fair value between guarantees and related hedges, referenced as hedge ineffectiveness, were reported in gains/losses on investments. Earnings include a EUR 425 million positive impact from hedge ineffectiveness. The valuation of the fair value of liability guarantees includes sharply increased interest rate and equity volatilities, as well as discount rates including a credit spread, a reflection of extremely dislocated and very illiquid markets. Impairments of EUR 68 million were primarily related to equities and high yield bonds. Investment gains amounted to EUR 84 million and include gains on derivatives considered as economic hedges and realized gains on the sale of bonds, offset by lower real estate values. Commissions and expenses Commissions and expenses increased by 5%, due primarily to higher operating expenses. Operating expenses increased as a result of a one-time restructuring charge of EUR 21 million as well as a one-off EUR 27 million of system and project related expenses, while Q4 2007 included a total EUR 27 million of one-time charges in the Savings and Distribution businesses. Sales and deposits Group pension sales declined significantly during the quarter - the result of market volatility and clients' increased reluctance to take decisions. At the same time, the Dutch group pension market has become increasingly competitive. Renewal rates did, however, continue to improve. Sales figures for Q4 2007 also included several large contracts. Sales of both single and regular premium individual life products held up reasonably well with a decline of 13%. Lower expiring deferred annuities resulted in lower sales of immediate annuities. Regular premium production declined as there is less appetite in the market for universal life products. During the year, life production increased 3%, while the Dutch life market contracted by an estimated 1% in 2008. Sales in accident & health were stable, mainly due to a saturated market. Alternative disability products have been successfully introduced, and partly offset the decline in WIA (the disability product introduced in 2006) sales during the quarter. Sales of general insurance products were in line with Q3 2008. Gross deposits were down by 10% compared with Q4 2007, due to fierce competition. Net deposits showed a decline as well, as clients withdrew balances in excess of the State guaranteed level of EUR 100,000 per account as concerns about the stability of banks, in general, increased. Value of new business The value of new business (VNB) increased to EUR 13 million and the internal rate of return improved to 10.8%, primarily as a result of a change in business mix. Please refer to page 28 for more detailed information on VNB. Revenue generating investments At the end of December 2008, revenue generating investments totaled EUR 63 billion; flat compared to September 2008 levels. THE NETHERLANDS - EARNINGS EUR millions Notes Q4 Q4 % FY FY % 2008 2007 2008 2007 Underlying earnings before tax by line of business Life (34) 53 N.M. 43 189 (77) Accident and health (3) 8 N.M. 23 39 (41) Life and protection (37) 61 N.M. 66 228 (71) Saving products (20) (14) (43) (14) 0 N.M. Individual savings and retirement products (20) (14) (43) (14) 0 N.M. Pensions and asset management 169 62 173 308 163 89 Distribution (22) (7) N.M. 3 16 (81) General insurance (15) 5 N.M. 8 8 0 Share in net results of associates 0 2 N.M. 7 3 133 Underlying earnings before tax 75 109 (31) 378 418 (10) Over/(under) performance of fair value items 152 (148) N.M. (165) (381) 57 Operating earnings before tax 227 (39) N.M. 213 37 N.M. Operating earnings before tax by line of business Life 29 36 (19) 75 141 (47) Accident and health (3) 8 N.M. 23 39 (41) Life and protection 26 44 (41) 98 180 (46) Saving products (20) (14) (43) (14) 0 N.M. Individual savings and retirement products (20) (14) (43) (14) 0 N.M. Pensions and asset management 258 (69) N.M. 111 (170) N.M. Distribution (22) (7) N.M. 3 16 (81) General insurance (15) 5 N.M. 8 8 0 Share in net results of associates 0 2 N.M. 7 3 133 Operating earnings before tax 227 (39) N.M. 213 37 N.M. Gains/(losses) on investments 84 132 (36) 20 465 (96) Impairment charges (68) 0 N.M. (138) (24) N.M. Other income/(charges) 0 0 0 0 30 N.M. Income before tax 243 93 161 95 508 (81) Income tax (119) 2 N.M. (1) 98 N.M. Net income 124 95 31 94 606 (84) Net underlying earnings 80 96 (17) 326 339 (4) Net operating earnings 129 (23) N.M. 139 41 N.M. Commissions and expenses 376 357 5 1,269 1,188 7 of which operating expenses 297 267 11 934 843 11 THE NETHERLANDS - SALES EUR millions Notes Q4 Q4 % FY FY % 2008 2007 2008 2007 New life sales Life single premiums 225 287 (22) 1,324 1,354 (2) Life recurring premiums annualized 18 44 (59) 86 124 (31) Total recurring plus 1/10 single 41 73 (44) 219 260 (16) Life 20 23 (13) 97 94 3 Pensions 21 49 (57) 122 166 (27) Total recurring plus 1/10 single 41 73 (44) 219 260 (16) New premium production accident and health insurance 4 4 0 15 18 (17) New premium production general insurance 7 6 17 28 26 8 Gross deposits (on and off balance) by line of business Saving deposits 590 704 (16) 2,473 2,648 (7) Pensions and asset management 83 41 102 228 390 (42) Total gross deposits 673 745 (10) 2,701 3,038 (11) Net deposits (on and off balance) by line of business Saving deposits (535) 95 N.M. (699) 232 N.M. Pensions and asset management 14 (119) N.M. (38) (1,256) 97 Total net deposits (521) (24) N.M. (737) (1,024) 28 REVENUE GENERATING INVESTMENTS At At Dec. Sep. 31 30 2008 2008 % Revenue generating investments (total) 6 63,079 63,310 (0) Investments general account 32,163 31,455 2 Investments for account of policyholders 19,133 19,566 (2) Off balance sheet investments third parties 11,783 12,289 (4) - Underlying earnings before tax declined to GBP 13 million, mainly on lower fund related charges in the pension business - Continued strong new life sales, up 5% - Higher margins lead to further increase in value of new business DATASOURCE: AEGON N.V. CONTACT: Group Corporate Communications & Investor Relations: Media, +31-(0)70-344-8956, , or Investors: +31-(0)70-344-8305 or 1-877-548-9668 - toll free USA only, Web site: http://www.aegon.com/

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