Strategy in action

AEGON is one of the world’s largest life insurance and pension companies and a leading provider of long-term savings and investment products.

wereldkaart

Headquartered in The Hague, the Netherlands, AEGON has businesses in more than twenty countries worldwide, employing more than 30,000 people and serving approximately 40 million customers. AEGON’s corporate structure places great importance on combining local knowledge and local expertise with the resources of an expanding global company.

AEGON was formed in 1983 – the result of a merger between two Dutch insurance companies, AGO and Ennia. But AEGON can trace its roots back to the mid-nineteenth century when the Group’s predecessors provided modest burial funds to customers wishing to ensure a proper funeral for their loved ones. In the United States and the United Kingdom, the history of AEGON companies also stretches back more than 150 years.

Today, AEGON is a global company, with revenue-generating investments of over EUR 370 billion and major operations in the United States, the Netherlands and the United Kingdom, as well as other new, emerging markets in Asia, the Americas and Central and Eastern Europe.

AEGON’s strategic framework

AEGON has a focused strategy, aimed at creating long-term value for all its stakeholders – its employees, business partners, customers and shareholders, as well as the wider communities around the world in which the Group operates.

AEGON is committed to its core businesses

AEGON believes that by focusing on what it does best it can provide lasting value for customers and shareholders alike. AEGON remains focused on three core markets: life insurance, pensions and other long-term savings and investment products.

AEGON serves local needs with global resources

AEGON stresses the importance of combining local management and local decision-making with the expanding resources of one of the world’s leading life insurance and pension companies.

AEGON pursues sustainable, profitable growth

AEGON believes its core markets will deliver significant growth in the years ahead. But AEGON wants that growth to be sustainable and profitable. AEGON’s aim is to achieve long-term average earnings growth of 10% a year.

AEGON aims to be a market leader

Whatever business it’s in and wherever that business is located, AEGON strives always to be a market leader. This is essential to realize benefits of scale and to attract and retain talented managers and strong local business partners.

AEGON wants to expand into new, high-growth markets

AEGON wants to strengthen its international presence by expanding into new markets that offer prospects for profitable, above-average, long-term growth. To achieve this, the Group seeks out opportunities both to grow existing businesses and to branch out into new areas through carefully selected acquisitions and partnerships.

Growing our value

AEGON believes its core markets offer significant prospects for growth in the years ahead. In many parts of the world, people are living longer, healthier lives. Workforces available to fund pension systems are shrinking and governments, particularly those in Europe, are shifting more responsibility for funding retirement to the private sector. In Europe, it is estimated that by 2050 the working-age population will have declined by 20%. At the same time, the population of over-65’s will have risen by a staggering 80%. In the United States, average life expectancy for men and women, according to the US Center for Health Statistics, has increased from 50 at the turn of the twentieth century to almost 78 today.

These changes are driving increased demand for life insurance, pensions and other long-term savings and investment products. But longer life expectancy rates also mean many people are having to manage their pension assets for longer periods than in the past. In the more mature markets of western Europe, North America and Japan, this is leading to a fundamental shift away from simply saving for retirement to managing those savings for an increasingly costly old age. Moreover, in the next few years, millions of ‘baby boomers’ around the world will enter retirement, releasing billions of euros in accumulated pension assets and savings. In Japan, for example, an estimated JPY 50 trillion – approximately EUR 320 billion – will be released from long-term savings over the next three years as around 8 million people enter retirement.

Prospects for strong, sustainable growth are not confined to AEGON’s established markets. In places such as China, India and Central and Eastern Europe, recent economic growth, rising levels of personal wealth and the emergence of new, ambitious middle classes are also expected to fuel demand over the coming years.

To capitalize on these opportunities, AEGON has built up a considerable international presence. Aside from its three largest markets – the United States, the Netherlands and the United Kingdom – AEGON today has businesses in five countries in Central and Eastern Europe, has recently signed partnerships in India and Japan and, through its joint venture with China National Offshore Oil Corporation (CNOOC), has representative offices in provinces in China covering some 200 million people.

Ambitious growth target

In November 2007, AEGON raised its value of new business (VNB) target for 2010, a reflection of the confidence the Group has in the growth potential of its core businesses. AEGON wants to increase its value of new business by 2010 to EUR 1.25 billion, up from its 2005 level of EUR 550 million. In 2007, VNB rose 20% to a record EUR 927 million, AEGON’s fourth consecutive year of VNB growth.

AEGON VNB target In millions	Currency	VNB 2005	Previous target 2010 1	New target 2010	New vs old % change
AEGON Group	EUR	550	1,100	1,250	+14%
Americas	USD	340	625	730	+17%
The Netherlands	EUR	39	82	82	No change
United Kingdom	GBP	67	158	213	+35%
Asia	EUR	83	98	105	+7%
Central and Eastern Europe	EUR	27	74	100	+35%
Other European countries	EUR	30	111	147	+32%
Originally published in November 2006.

How AEGON met its strategic goals in 2007

AEGON expanded its international presence by investing in markets that offer above-average growth.

Over the past several years, AEGON has expanded its international presence significantly, pushing out into new, high-growth emerging markets such as China, Mexico, India and the countries of Central and Eastern Europe. Today, AEGON is present in more than twenty markets in the Americas, Europe and Asia.

AEGON extends Polish pension business

In 2007, AEGON further strengthened its Polish pension business. In April, the Group completed its acquisition of pension fund PTE Ergo Hestia, later announcing a separate agreement to merge PTE Ergo Hestia with fellow pension fund manager PTE Skarbiec Emerytura. Together, the two companies will rank as the fifth largest pension fund manager in Poland, with more than 800,000 members and some EUR 1.7 billion in assets under management.

AEGON continues China expansion

In May, AEGON announced a joint venture with Industrial Securities, one of China’s leading financial securities firms. Under the agreement, AEGON is acquiring a 49% stake in Industrial Securities’ subsidiary, Industrial Fund Management Company. The new partnership gives AEGON an entry into the rapidly growing Chinese asset management market.

AEGON-CNOOC secured an operating license for Zhejiang province in eastern China. The license means that AEGON-CNOOC is now present in nine different locations in the country with a potential market of more than 200 million people.

AEGON starts Romanian pension fund

In August, authorities gave the go-ahead for BT AEGON’s new pension fund in Romania. BT AEGON – a joint venture between AEGON and Banca Transilvania, the country’s fourth largest commercial bank – is launching the new fund as Romania prepares to introduce new mandatory, privately run pension plans at the beginning of 2008.

AEGON strengthened its cooperation with the world’s banks to ensure its products reach as many customers as possible.

For AEGON, banks are an extremely important means of distribution. In some countries, indeed, they are the Group’s leading sales channel. AEGON has been working for many decades with banks in the United States and elsewhere, but the past few years have seen the Group extend its network of bank distribution agreements in countries such as Spain, Taiwan, China and Central and Eastern Europe.

AEGON buys US distributor Clark Inc.

In February, AEGON increased its tender offer price for Clark Inc., a distributor of bank-owned and corporate-owned life insurance in the United States. The acquisition was completed three weeks later, further strengthening AEGON’s commercial reach in the United States.

AEGON forms partnership with Barclays

In May, AEGON formed a new partnership with Barclays Bank, one of the United Kingdom’s leading high street banks. The Group’s most significant bank distribution agreement in the United Kingdom to date, the partnership sees AEGON products made available to Barclays customers through the bank’s network of over 900 financial planners across the country.

AEGON agrees Taiwan joint venture

In June, AEGON announced a life insurance and pension distribution joint venture in Taiwan, with Taishin Financial Holdings, one of the country’s largest financial services companies. The agreement is a boost for AEGON’s businesses in the region: Taishin has more than four million customers and some 300 outlets across Taiwan. As part of the joint venture, AEGON also acquired a 2.5% interest in Taishin’s Chang Hwa Bank, the country’s eighth largest retail bank.

AEGON extends Spanish bank network

In July, AEGON unveiled its fourth bank distribution agreement in Spain, with Caja Cantabria, a regional savings bank in the north of the country. Together, AEGON and Caja Cantabria will sell life insurance and pensions through the Spanish bank’s network of some 170 branches, serving more than 500,000 customers. With this latest agreement, AEGON will have access to some 1,800 bank branches across Spain and more than 3.5 million potential customers.

AEGON capitalized on new opportunities opening up in life insurance, pensions and long-term investment products.

AEGON believes that its core products – life insurance, pensions and long-term savings and investment products – offer significant potential for growth in the years ahead. AEGON has sought to further broaden its range of products and services and strengthen its presence in strategic markets, such as pensions and variable annuities. Four years after it was first set up, AEGON Global Pensions, the Group’s international pension unit, now serves customers throughout the Americas, Europe and Asia.

AEGON and Sony Life team up in Japan

In January, AEGON formed a partnership with Sony Life, one of Japan’s leading life insurers. The partnership gives AEGON a presence in the world’s second largest life insurance market. Together, AEGON and Sony Life will focus initially on the rapidly growing variable annuities market, but the new joint venture will also provide a platform in the future for closer cooperation in other areas.

AEGON buys Dutch life insurer OPTAS

In March, AEGON bought Dutch life insurer OPTAS. The acquisition further strengthened AEGON’s group pension business in the Netherlands, where AEGON became the number one player. OPTAS has a total of 60,000 policyholders, most of them working in Rotterdam, one of Europe’s busiest ports.

AEGON signs new Merrill Lynch partnership

In August, AEGON entered a strategic business relationship with US investment bank Merrill Lynch. Under the agreement, AEGON acquired Merrill Lynch’s two US life insurance companies. In addition, Transamerica, AEGON’s US subsidiary, will have access to Merrill Lynch’s distribution network for variable annuities. In 2007, Merrill Lynch, the United States’ largest wirehouse, sold more than USD 800 million in variable annuities.

AEGON returned a total of EUR 1.9 billion to shareholders as part of an efficient capital management strategy.

In August 2007, AEGON announced it would repurchase EUR 1 billion worth of its own shares. The repurchase, part of the Group’s overall capital management strategy, was aimed at improving returns for its shareholders. By the end of 2007, AEGON had repurchased a total of 99.8 million of its own shares, including 25.2 million bought as part of the Group’s policy of repurchasing stock dividends distributed during the year. Another 8 million common shares were repurchased in order to hedge granted option rights.

In addition, AEGON also increased its 2007 dividend by 13% to EUR 0.62 per share. AEGON had already increased its 2006 dividend to EUR 0.55 per share, up from EUR 0.45 the year before.

Wynaendts

Over the past several years, Chief Operating Officer and Executive Board member Alex Wynaendts has been instrumental in helping further strengthen AEGON’s operations, spearheading the Group’s international growth strategy and leading efforts to bring about greater and more effective integration of its worldwide insurance, pension and bank distribution businesses.

"The past few years we’ve achieved very rapid growth. We’ve expanded our businesses in Central and Eastern Europe; we’ve signed new partnerships in India and Japan, further strengthened our presence in China, and extended our commercial reach in places such as Spain, the Netherlands, the United States and the United Kingdom.

This expansion is the culmination of months, sometimes years of hard work and preparation. We believe our core markets will continue to grow in the years ahead. We want to capitalize on these growth opportunities, making sure we’re in the right markets and making sure, too, that our businesses – our insurance, pension and bank distribution businesses – work together as efficiently and effectively as possible.

new opportunities

"We believe the prospects for our more established markets are very positive. But there are other opportunities as well opening up in the new, emerging economies of Asia and Central and Eastern Europe. In China, with the addition of Zhejiang last year, we now have offices in provinces that cover more than 200 million people. In Central and Eastern Europe, we now have businesses in five countries: Hungary, Poland, the Czech Republic, Slovakia and, most recently, Romania. In India, we are launching new life insurance and asset management businesses with our partner, the Ranbaxy Promoter Group.

lasting values

"For AEGON, however, there’s no such thing as growth for growth’s sake. Of course, we want to grow. But if we are to create lasting value for our shareholders and our customers, this growth has to be profitable and sustainable over the long term. From this viewpoint, our recent performance has been excellent. Our value of new business – the best measure we have of future profitability – has risen in each of the past four years. In 2007, our VNB rose 20% to a record EUR 927 million, putting us firmly on track to meet our upgraded 2010 target.

better financial futures

"Moreover, strong earnings growth has enabled us, in the past few months, to return more than EUR 1.9 billion in surplus capital to our shareholders by increasing our dividend payments and by repurchasing approximately 100 million of our own shares.

Naturally, we are ambitious for our businesses. We know we can go much further. In the years ahead, we want to expand into new markets where we believe AEGON’s expertise, its knowledge of international markets and local situations and its product innovation can make a real difference and help people build better financial futures for themselves and their families."

AEGON Global Pensions

AEGON recognized some time ago that as companies become more international so do their pension requirements. First set up in 2005 as AEGON Pension Network, AEGON Global Pensions is one of the few pension providers worldwide dedicated to helping multinational companies improve management of their international retirement and employee benefit plans. AEGON Global Pensions now serves customers in Europe, the Americas and Asia, helping them make the most of an increasingly global business environment.

"What strikes you first is the sheer scale. In India, you need ‘feet on the street’. That’s the big thing here."

John Mungall, head of AEGON UK’s project team for India

Asia

At the end of 2006, AEGON signed a new partnership in India with the Ranbaxy Promoter Group. Together, the two companies are setting up joint ventures in life insurance and asset management. For AEGON, the Indian market offers exciting prospects: a young, growing population and a new economic vibrancy that is driving demand for life insurance and other long-term savings and investment products. John Mungall, head of AEGON UK’s project team for India, talks about the opportunities opening up for AEGON and some of the challenges facing the Group as it expands its presence in one of the world’s fastest-developing economies.

"One of the first things that strikes you when you first come here is the sheer scale. India is a huge market, not necessarily in terms of dollars or euros perhaps, but in terms of the potential demand and the number of policies we’re writing. You can’t really call yourself a player unless you’ve got a hundred branches. A lot of the work we’ve been doing has been focused on putting a solid distribution network in place. Since we announced we were going into India, we’ve been hiring like crazy. I think we’ve done more hiring here in the past few months than we would do in ten years in Edinburgh. We’re putting in place a ‘hub and spoke’ model – a strong central office, running various agencies, which might be nothing more than the room in someone’s house. We want to reach not only the cities but also the rural areas where there are also pockets of wealth. ‘Feet on the street’ is a big thing here – having the salesmen in the right places across the country selling your products for you. Consumers in India are just like those anywhere else in this respect. They want to see the whites of your eyes before making a major financial commitment.

The prospects for the Indian market are tremendous. The thing you have to bear in mind is that India has a very young population, more so than in China, for example. That means there’s a huge supply of labor feeding economic growth. In recent years, the Indian economy has been expanding at a rate of more than 8%. With that growth you’re getting the emergence of a new middle class and more nuclear families, rather than the traditional, extended families. Increasingly, the attitude now is that people have to do more than in past to look after themselves. So, people have more to save and they have more reason to save.

There are ten of us in all from AEGON UK working in India, plus another two from the Netherlands. We do six weeks in the country, then ten days back at home. What we’ve been doing is putting the whole chain in place from the products, to the sales, to the back office. We want our legacy in India to be one of quality. We want all the right processes and controls in place, so we know where every rupee belongs, where it comes from and where it’s going. So, eventually, when we hand over to new management, we will have laid down a foundation for an effective, well-run business.

This is an essential part of AEGON’s strategy for international expansion – taking the expertise we have in one place and applying it to another. While AEGON UK is working in India, our colleagues from AEGON USA have been working to get our new partnership with Sony Life in Japan off the ground."

Objectives for 2010

AEGON has set itself very clear targets for 2010 with regard to both its financial performance and its strategic objectives.

Financial and strategic objectives	Objectives 2010	Performance 2007
Group	Increase value of new business to EUR 1.25 billion from its 2005 level of EUR 550 million.	Value of new business +20% at EUR 927 million.
AEGON Americas	Increase value of new business to USD 730 million.	Value of new business USD 581 million.
AEGON The Netherlands	Double value of new business to EUR 82 million.	Value of new business EUR 51 million.
AEGON The Netherlands	Grow life production by between 8% and 10% a year.	New life sales +5%.
AEGON UK	Increase value of new business to GBP 213 million.	Value of new business GBP 157 million.
	Increase new business margins to 22%.	Business margins 20.5%.
	Achieve a market share of 10%.	Market share 7.9% (Q3 2007)
AEGON Other countries	Minimum 30%-35% share of overall value of new business.	’Other countries’ accounted for 24% of overall value of new business.
Central and Eastern Europe	Increase value of new business to EUR 100 million.	Value of new business EUR 72 million.
Other European countries	Increase value of new business from Spain and France to EUR 147 million.	Value of new business EUR 71 million.

Other strategic objectives	AEGON will continue to invest in core products to capitalize on opportunities opening up in the life insurance, pensions and long-terms savings and investment markets; AEGON will seek ways of strengthening and expanding its distribution network, particularly through the world’s banks;	AEGON will seek opportunities to expand its international presence by investing in markets that offer above-average long-term growth; In 2007, AEGON’s main objective will be to grow its businesses organically, but it will pursue a selective acquisition policy aimed at strengthening the Group’s position in certain key markets, such as Ukraine, Turkey, Germany and South Korea.