A.M. Best Affirms Ratings of AEGON N.V.a?s U.S. Operations

OLDWICK, N.J.--([ BUSINESS WIRE ])--A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of aaa-a of the life/health subsidiaries of AEGON N.V.a�s (AEGON) (Netherlands) (NYSE: AEG)U.S. operations. AEGONa�s U.S. life/health companies are collectively referred to as AEGON USA Group (AEGON USA). In addition, A.M. Best has affirmed the debt ratings of aaa-a of the outstanding notes issued under the funding agreement-backed securities (FABS) programs sponsored by Monumental Life Insurance Company (Cedar Rapids, IA), a member of AEGON USA. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

"Review of BCAR Treatment for XXX Captives"

The affirmation of AEGON USAa�s ratings reflects its favorable earnings performance and risk-adjusted capitalization during 2010. For year-end 2010, AEGON USA recorded U.S. statutory net income of $918 million compared to $865 million for year-end 2009. International Financial Reporting Standards (IFRS) earnings for AEGON Americas (which includes the United States, Canada and Latin America operations) were $1.5 billion for year-end 2010 compared to $697 million for year-end 2009. Going forward, A.M. Best expects IFRS earnings to be more consistent with 2009 results due to lower realized gains and fewer tax-related benefits. The groupa�s risk-adjusted capitalization remained strong as its year-end 2010 regulatory capital ratio improved slightly over the previous year and is significantly higher than historical levels.

AEGON USAa�s stand-alone credit profile considers the groupa�s strong market position in a number of U.S. life and annuity market segments, a large multi-channel distribution platform, diversified sources of earnings and a strong positive cash flow. The group also benefits from meaningful economies of scale, strong brand recognition and effective asset/liability and liquidity management. AEGON USAa�s ratings also recognize A.M. Besta�s assessment of the financial strength and support of the parent, AEGON. As a result, the stand-alone ratings of AEGON USA receive rating enhancement in consideration of AEGONa�s overall creditworthiness and the strategic and financial importance of the U.S. operations to AEGON.

A.M. Best notes that the group has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio was upgraded by reducing hedge fund holdings and increasing positions in treasuries and other short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) was placed into run off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. The group also reduced its exposure to equity market risk by increasing the size of its macro hedge covering its variable annuity business.

Despite this improved risk profile, A.M. Best notes the possibility of additional material credit losses within the groupa�s general account investment portfolio. Pre-tax IFRS asset impairments totaled USD 506 million in 2010, and additional realized losses and impairments are likely to occur in 2011, given AEGON USAa�s sizable structured asset portfolio and exposure to direct commercial real estate. While the run rate on credit impairments has declined significantly since 2009, AEGON USA continued to report a material gross unrealized loss position within its fixed income portfolio on an IFRS basis as of December 31, 2010. In addition, the groupa�s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the capital markets would translate to lower fee income and higher required reserves on secondary guarantees. Although the additional equity hedging will serve to reduce volatility, the groupa�s earnings remain somewhat correlated to capital market performance.

AEGON announced on April 26, 2011 the divestment of its life reinsurance business, Transamerica Reinsurance (TARe), to SCOR SE, a global reinsurance company. Although A.M. Best notes that the removal of the TARe earnings would result in a contraction of AEGON USAa�s operating profile, A.M. Best views positively the divesture as it lowers required capital, reduces the need to arrange redundant reserve (XXX/AXXX) financing and allows senior management to focus on the groupa�s core businesses of life insurance and asset accumulation.

The FSR of A+ (Superior) and ICRs of aaa-a have been affirmed for the following subsidiaries of AEGON USA Group:

Transamerica Life Insurance Company
Transamerica Financial Life Insurance Company
Western Reserve Life Assurance Co. of Ohio
Monumental Life Insurance Company
Stonebridge Life Insurance Company
Transamerica Advisors Life Insurance Company
Transamerica Advisors Life Insurance Company of New York

The FSR of A (Excellent) and ICR of aaa has been affirmed for Canadian Premier Life Insurance Company, a subsidiary of AEGON N.V.

The following debt ratings have been affirmed:

Monumental Global Funding Limiteda"aaa-a program rating
-- aaa-a on all outstanding notes issued under the program

Monumental Global Funding IIa"aaa-a program rating
-- aaa-a on all outstanding notes issued under the program

Monumental Global Funding IIIa"aaa-a program rating
-- aaa-a on all outstanding notes issued under the program

The principal methodology used in determining these ratings is [ Besta�s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition ], which provides a comprehensive explanation of A.M. Besta�s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: aRisk Management and the Rating Process for Insurance Companiesa; aUnderstanding BCAR for Life and Health Insurersa; aReview of BCAR Treatment for XXX Captivesa; aAssessing Country Riska; aA.M. Besta�s Perspective on Operating Leveragea; aA.M. Besta�s Liquidity Model For U.S. Life Insurersa; a[ Rating Members of Insurance Groups ]a; and aRating Funding Agreement-Backed Securities.a Methodologies can be found at [ www.ambest.com/ratings/methodology ].

Founded in 1899, A.M. Best Company is the worlda�s oldest and most authoritative insurance rating and information source. For more information, visit [ www.ambest.com ].

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A.M. Best Affirms Ratings of AEGON N.V.a?s U.S. Operations