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.

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 businesses in other new, emerging markets in Asia, the Americas and Central and Eastern Europe.

AEGON’s business strategy

AEGON has a focused business 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, seeks sustainable and profitable growth and works through a wide variety of distribution channels to ensure customers can access the Group’s financial products in a way that best suits them. AEGON’s business strategy is made up of five basic principles:

• AEGON is committed to its core businesses;
• AEGON serves local needs with global resources;
• AEGON pursues sustainable, profitable growth;
• AEGON aims to be a market leader;
• AEGON wants to expand into new, high-growth markets.

The changing pension environment

• Already the average person in Western Europe spends a quarter of his or her life in retirement;
• A child born today is likely to live six years longer than its parents and nearly twenty years longer than its grandparents;
• According to recent research, fewer than 2 in 5 people in the UK believe they are saving enough to provide a comfortable retirement for themselves and their families;
• By 2050, there will be more than 430 million Chinese over the age of 60 – more than the total populations of the United States, the United Kingdom and the Netherlands combined;
• India’s middle class numbers more than 350 million people and could exceed 500 million by 2010;
• An estimated 48 million middle-income households in the United States say they don’t have enough life insurance.

Where AEGON sees future growth

AEGON believes its core markets – life insurance, pensions and long-term savings and investments – will 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 AEGON’s core 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 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.

How has AEGON put its strategy into practice during the past year?

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

• In 2007 AEGON further strengthened its businesses in Poland, completing the acquisition of PTE Ergo Hestia and merging it with fellow pension fund management company PTE Skarbiec-Emerytura. Together, PTE Ergo Hestia and PTE Skarbiec-Emerytura will become the fifth largest pension company in Poland, with more than 800,000 members and some EUR 1.7 billion in assets under management.
• AEGON continued to expand its presence in China, securing an operating license for Zhejiang province in the east of the country and signing a new asset management joint venture with Industrial Securities, one of China’s leading financial securities firms. AEGON-CNOOC is now present in nine different locations in the country with a potential market of more than 200 million people.
• AEGON got 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 fund as Romania prepared to introduce new mandatory, privately run pension plans at the beginning of 2008.
• 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 strengthened its cooperation with the world’s banks to ensure its products reach as many customers as possible.

• During the year, AEGON finalized its acquisition of Clark Inc., a distributor of bank-owned and corporate-owned life insurance in the United States. The Group also entered into a new strategic business partnership with the US financial services group Merrill Lynch, further strengthening its position in the fast-growing variable annuities business.
• AEGON formed a new partnership with Barclays Bank, one of the United Kingdom’s leading high street banks. The partnership sees a range of selected AEGON products made available to Barclays customers through the bank’s network of over 900 financial planners across the country.
• 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. Taishin has more than four million customers and some 300 outlets across Taiwan.
• AEGON also unveiled its fourth bank distribution agreement in Spain, with Caja Cantabria, a regional savings bank in the north of the country. The agreement means AEGON will have access to some 1,800 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 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.
• AEGON bought Dutch life insurer OPTAS, further strengthening its group pension business in the Netherlands, where AEGON became the number one player.
• 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, the agreement gives AEGON access to Merrill Lynch’s extensive distribution network, particularly important for 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. By the end of the year, the Group 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.

Objectives for 2010

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