Chairman’s letter

On behalf of the Executive Board, I am pleased to present this, my final Annual Report, which summarizes the progress we made during 2007 to strengthen AEGON’s position as a leading international provider of life insurance, pensions and related investment products.

Like you, we have kept a close eye on the recent turmoil in the world’s financial markets, brought on by the subprime crisis in the United States and the subsequent adverse effects on global credit markets. Keeping in mind that AEGON’s exposure to subprime mortgage-backed investments represents just over 2% of its general account investment portfolio, the Group experienced no material impairments to its portfolio during the year. The majority of AEGON’s subprime exposure continues to be rated either AAA or AA.

Solid Performance

The solid performance of AEGON’s businesses in the Americas, Europe and Asia resulted in a 4% increase in net underlying earnings for the year. New life sales showed an increase of 7% over the previous year. The better-than-expected progress our businesses made toward AEGON’s 2010 value of new business (VNB) target led us to increase that target by 14% to EUR 1.25 billion. In 2007, we reported a record VNB of EUR 927 million, AEGON’s fourth consecutive year of VNB growth.

The completion of a EUR 1 billion share repurchase plan in November and a 13% increase in AEGON’s full year dividend to EUR 0.62 per common share are evidence of our continued strong cash flows and solid capital position. We continue to have sufficient capital to support the organic growth of our businesses while at the same time pursuing acquisition opportunities consistent with our disciplined approach to pricing.

SERVING THE GROWING RETIREMENT MARKET

We believe that AEGON is taking the right steps to serve the developing retirement needs of our customers by providing innovative, need-specific products and services in both our established and developing markets. The introduction of our ‘5 for Life’ variable annuity product in the United Kingdom, first developed in the United States, is a clear example of how we use AEGON’s expertise to capture the opportunities presented by the reality of longer retirement in nearly every market we serve. As a further example, AEGON USA is supporting our new partnership with Sony Life to develop variable annuity products for the Japanese market, fulfilling AEGON’s ambition to enter the world’s second largest market for life insurance and related products. Similarly, AEGON UK is lending its support to the launch of our new business in India, where we will soon be providing life insurance and asset management products with our partner Religare. We believe this approach to cross-border coordination gives us a distinct competitive advantage and helps AEGON maximize the opportunities of today’s rapidly evolving markets.

In Central and Eastern Europe, AEGON further strengthened its position in the emerging pension markets with the acquisition of PTE Ergo Hestia in Poland and with our new joint venture in Romania where we have formed a pension fund management company with Banca Transilvania. In the Netherlands, we enhanced our group pension business with the acquisition of OPTAS, a pension provider to port employees in Rotterdam and Amsterdam.

ENHANCED DISTRIBUTION

Also during 2007, we further strengthened AEGON’s broad distribution network, a key growth driver in both our established and developing markets. In May, AEGON formed a new partnership with Barclays in the United Kingdom to distribute its products through the bank’s network of more than 900 financial planners. In June, we announced a new partnership with Taiwan’s leading banking conglomerate, Taishin, a group with more than four million customers and over 200 outlets across the country. In China, AEGON is in the process of forming a new asset management joint venture with Industrial Securities, further underscoring the Group’s commitment to this important growth market. In Spain, AEGON entered into a new partnership agreement with regional savings bank Caja Cantabria - the fourth such partnership which together provide access to approximately 3.5 million customers through over 1,800 bank branches across the country.

One of AEGON’s ambitions in the United States is to maintain its position as a leading provider of life insurance and variable annuity products to the brokerage channel. In line with this goal, AEGON formed a strategic partnership in 2007 with Merrill Lynch, the world’s leading brokerage house with over 16,000 advisors. As part of the new partnership - announced in August and completed at the end of 2007 - AEGON also acquired Merrill Lynch’s two life insurance companies. Meanwhile, the acquisition of Clark in March was an important step in enhancing AEGON’s position in the bank-owned and corporate-owned life insurance market.

STEADY EXPANSION

The international expansion of AEGON’s businesses into areas where we believe we can achieve long-term sustainable and profitable growth continues to be an important strategic objective for the Group. In addition to expanding further in Central and Eastern Europe, and entering the markets of Japan and India, AEGON-CNOOC secured another license to operate in the burgeoning coastal provinces of eastern China. With the addition of the Zhejiang province, AEGON-CNOOC’s businesses now have the potential to serve more than 200 million people in one of the world’s fastest growing economies.

Conclusion

Finally, on a personal note, as announced last November, I will step down as Chairman of the Executive Board on April 23, 2008, in accordance with the terms of my contract to retire in the year I turn 62. I welcome the Supervisory Board’s selection of Alex Wynaendts to succeed me in building on the progress we have made over the past several years. It has been my pleasure to serve with Alex and our Executive Board colleague Jos Streppel to improve AEGON’s balance sheet, strengthen the Group’s distribution network and expand AEGON’s footprint in both our established markets and the fast developing emerging economies of Asia and Central and Eastern Europe. AEGON today is in an even stronger position to capture growth in the world’s most important markets for life insurance and pensions.

I wish to express my gratitude to the Supervisory Board for having given me the opportunity to lead AEGON during what continues to be an exciting time for our business. I also want to thank the senior management in Europe, the Americas and Asia, along with our dedicated employees who work daily to generate long-term value for AEGON’s shareholders and create the better futures the Group’s many customers have come to expect and deserve.

Donald J. Shepard

CHAIRMAN OF THE EXECUTIVE BOARD