DONALD J. SHEPARD
DONALD J. SHEPARD
CHAIRMAN OF THE EXECUTIVE BOARD

Dear Reader,

On behalf of the Executive Board, it is my pleasure to present AEGON’s 2005 Annual Report detailing the progress we have made across our businesses in the Americas, Europe and Asia. In addition to the increased earnings reported by all major country units for the year, notable progress was made to enhance AEGON’s broad-base distribution network, improve further AEGON’s solid capital position and strengthen AEGON’s leadership position in the growing retirement markets of the United States and Europe.

AEGON’s full-year 2005 results, reported on March 9, 2006, included a 21% increase in operating earnings, matched by a 21% improvement in net income and a 9% increase in new life sales for the Group. The increased sales and earnings achieved during the year, combined with enhanced distribution and improvements in our operations, indicate that we have made good progress and are in a solid position to pursue balanced growth.

At AEGON, it continues to be our view that the life insurance and pensions business presents substantial growth opportunity. Demographic trends are creating the opportunities for life and pension companies to serve the evolving needs of individuals and families for long-term protection, asset accumulation, dissavings and wealth transfer solutions. AEGON, as one of the world’s leading companies specializing in these products, is taking steps to claim its share of the potential.

In the United States, AEGON’s largest country unit, we continue to serve nearly every customer segment with a broad range of life insurance, pensions and related savings and investment products, delivered through a highly diversified distribution network. The diversity of both our products and distribution channels enables AEGON USA to achieve higher economic returns over time. In the retirement market, we are focused on serving the needs arising from people living longer and having to manage their accumulated assets for a longer period of time. We are also committed to providing need-specific products and advice to the underserved middle-income segment (some 60 million households). We are developing new worksite marketing initiatives and further leveraging the expertise of our direct marketing business to capture growth internationally.

In the Netherlands, recent efforts to streamline operations and improve service to customers have yielded positive results. AEGON The Netherlands, with its expertise in the group life sector, was successful in capturing several large group pension contracts during 2005. We expect continued momentum of sales in our group life business, in addition to improved sales to individuals, as a result of new product initiatives.

In the United Kingdom, AEGON UK made considerable progress in growing its independent financial advisor network during 2005. The number of registered individuals affiliated with Positive Solutions has nearly doubled since AEGON’s initial investment in 2002. Further progress was also made in broadening AEGON’s product range in the UK. Growth in annuities, bonds, risk and investment products was encouraging, while AEGON UK’s pension business remained strong. We remain confident about the prospects for continued growth in the evolving UK market.

Reviewing briefly other highlights of 2005, AEGON’s position in Central and Eastern Europe was strengthened with the acquisition of a leading life insurance company in Poland. In Slovakia, enrollment in the pension fund which was begun in 2004 has continued to increase, and in June 2005, AEGON started operations in the Czech Republic. Furthermore, we have organized our activities in the region under the very capable leadership of AEGON Hungary’s CEO.

The Central and Eastern European countries, with a population of over 65 million, where AEGON is now active, offer strong growth potential for life and pension products.

It continues to be our view that pensions represent a key growth driver for our business. Leveraging AEGON’s pension expertise, we formally launched the AEGON Pension Network which has been developed with our French partners at La Mondiale to provide multi-national corporate clients with cross-border solutions. The recent addition of HDI Pensionsmanagement, a leading provider of group pensions in Germany, has added further momentum to this initiative which now covers ten European countries in addition to the United States.

In Spain, two new bancassurance joint ventures with Caja de Badajoz and Caja Navarra will serve to complement AEGON’s successful partnership with Caja de Ahorros del Mediterráneo. We will be exploring additional opportunities in the bank channel in keeping with our aim to grow AEGON’s presence in Spain.

During the year, we made further progress in our growth strategy for Asia. In Taiwan, recurring life business continued to be the main driver of growth during the year. However, AEGON Taiwan has also been successful in its strategy to introduce unit-linked products in the market with encouraging early results. AEGON-CNOOC received new licenses to begin operations in Beijing, as well as Nanjing which is located in the highly developed Jiangsu province of mainland China. In January of 2006, AEGON was among the first foreign insurers to receive a license to operate in Shandong, a prosperous coastal province. In addition, AEGON recently launched operations in Singapore under its well-established Transamerica brand. We have made clear our long-term commitment to China and believe that the 165 million inhabitants living in the areas where AEGON is now active are an indication of the future growth potential for our business.

AEGON successfully converted to International Financial Reporting Standards (IFRS) as of January 1, 2005. The overall objective of this major accounting change, which AEGON supports, is greater comparability among European-based companies. Even before reporting our first full set of IFRS results, in addition to comparative 2004 results, we initiated a program to inform our stakeholders about the ramifications of the conversion, and the inevitable volatility that IFRS entails.

Throughout the process, we have emphasized the importance of considering other measures in evaluating the underlying performance of AEGON’s businesses around the world. Developments in AEGON’s embedded value and value of new business will continue to provide additional benchmarks for assessing our progress. While it will take some time to adjust to the new reporting standard, our shareholders, partners and employees can be assured that the underlying performance of AEGON’s business is unaffected by accounting changes.