Local knowledge. Global power. 1 International Insurance-Reinsurance Forum 2010 Challenges & Difficulties for the Hungarian Pension Fund CEO of AEGON Hungary Pension Fund Judit Ludvai

Local knowledge. Global power. 2 Content Introduction AEGON in the pension fund marketTrends, especially during the crisisImpacts of government reactionsSales trends have changedSummary & Conclusions

Local knowledge. Global power. 3 Positioning AEGON

Local knowledge. Global power. 4 AEGON Strong Presence in CEE Hungary Slovakia Czech Republic Poland Romania Turkey

Local knowledge. Global power. 5 Growth of members ( ) Growth of AuM ( )  AEGON’s AuM grew much faster (7 times) than the market's (4.5 times)  AEGON’s member base grew much faster (2 times) than the market's (1.2 times) AEGON in Hungary - market leader position AEGON ranked 2nd in the mandatory and 3rd in the voluntary pension fund market 803 THS members, combined assets of EUR 2.2 billion 7X 2X

Local knowledge. Global power. 6 AEGON in Hungary - growing business 16% 20% AEGON’s market share - members ( ) 3 million MPT members EUR 9.3 billion assets

Local knowledge. Global power. 7 Old Channels Tied agent network Brokers New Channels Key Account Managers Call Center Pension advisers Online Benefits Capacity Control over sales Moderate commissions Independence Targeted Sales and Marketing Strategy AEGON Group: strong international background Acquisitions: 9 pension funds, UNIQA in 2008 Diversified, strong sales channels Elements of Success

Local knowledge. Global power. 8 Recent trends

Local knowledge. Global power. 9 Part I: What happened during the crisis? Pension fund losses, negative yields Negative media communication Funds became a political & economic tool Trend: Unsatisfied members Demand to return to PAYG Uncertainty & difficult to plan strategy Result:

Local knowledge. Global power. 10 Part I: Much ado about nothing  Investment returns almost recover AEGON’s performance (growth portfolio)

Local knowledge. Global power. 11  52 years old and older could return to PAYG  Time limit: December 31st 2009  Market: 69,000 members – 428 bill. EUR  AEGON: 14,000 members  52 years old and older could return to PAYG  Time limit: December 31st 2009  Market: 69,000 members – 428 bill. EUR  AEGON: 14,000 members Part I: Return to Pay As You Go

Local knowledge. Global power. 12 Part II: Falling Assets and PF Income Lay-offs, factories close, salary cuts Narrowing of career starter and corporate voluntary markets Trend: Decreasing contributions Increasing number of non-payers Lower PF income - Lower assets Result:

Local knowledge. Global power. 13 Operational fee cap reduction: 5.5%  4.5% AUM fee cap reduction: 0.8%  0.4% (10 bp/year) Fees Down: Expensive multi-portfolio asset management systems Unit-based accounting system Costs Up: 20% fall in pension fund results Potential fall in asset management quality Result: Part III: Unfavorable legislation: Lower PF Income

Local knowledge. Global power. 14 Advisors moved from mortgage & insurance to pension funds Transfer market became fierce Trend: Transfers multiplied Higher commission fees Higher operational costs Result: Part IV: The Transfer Market Sped Up

Local knowledge. Global power. 15 Part III: The numbers tell it all… oAlmost 220,000 switching members in 2009 oThe ratio of transfers reached 7% in 2009 o8% is critical oBrokers dictate conditions oLower value entrants Lapse Rate ( ) 4X Commission ( ) 3X 7%

Local knowledge. Global power. 16 Part III: Protection and Regulation of AEGON Commission payback Installment payment of commissions Lobby to moderate switching market AEGON’s steps: Not allowed, no tool Freedom of choice Result:

Local knowledge. Global power. 17 Part III: Governmental response – Transfer Limitations Stronger guarantees Members transferring their account 2x within 5 years lose any yield guarantee Extra documentation Extra fees for members switching within 2 years Transfer Market Changes: Less miss-selling Positive results expected in 3-5 years Result:

Local knowledge. Global power healthy and balanced years 2 years of turmoil Fast and furious, legislation Costly changes requiring heavy development Reduction of management and asset management fees Unreasonable transfers Pension funds topic of daily politics and media Pension funds have become a very difficult business to plan and strategize for. Pension funds need long term stability! Summary

Local knowledge. Global power. 19 Long Term stability in conditions Offer adequate pension Avoid transfer wars Set commission limits for agents and brokers Educate members Pension funds should: Maintain the original level of contribution rates Ensure the necessary level of operational fees Avoid regulatory return to PAYG Maintain independence from day-to-day politics Authorities should:

Local knowledge. Global power. 20 Q&A For further questions please contact