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A.M. Best Affirms Credit Ratings of Aegon N.V.'s U.S. Subsidiaries

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A.M. Best has affirmed the Financial Strength Rating (FSR) of A+
(Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
"aa-" of the U.S. life/health (L/H) subsidiaries of Aegon N.V. (Aegon)
(Netherlands) (NYSE:AEG). Aegon's U.S. L/H companies are collectively
referred to as Aegon USA Group (Aegon USA). The outlook of these Credit
Ratings (ratings) remains negative. (See below for a detailed list of
these companies.)

The ratings reflect Aegon USA's balance sheet strength, which A.M. Best
categorizes as very strong, as well as its adequate operating
performance, favorable business profile and appropriate enterprise risk
management. The ratings also reflect the strength and support of Aegon.

The negative outlooks reflect A.M. Best's ongoing concerns regarding
Aegon's credit profile. Specifically, A.M. Best notes that Aegon's
operating performance has been characterized by relatively flat top-line
trends, together with return on equity (ROE) that does not compare
favorably with its similarly rated European peers.

The rating affirmations of Aegon USA reflect the strongest level of
risk-adjusted capitalization, as measured by Best's Capital Adequacy
Ratio (BCAR), although the quality of the group's capital is diminished
somewhat by the significant reliance on special purpose financial
captives to finance reserves generated from term life and universal life
insurance with secondary guarantees. Aegon USA has additional access to
liquidity as a member of the Federal Home Loan Banks, which together
with its access to the capital markets, provides the group with
substantial financial flexibility. While the asset allocation within
Aegon USA's investment portfolio is not atypical for the U.S. life
industry, there is some exposure to higher risk assets.

The rating affirmations also reflect Aegon USA's continued profitability
with good margins on new business, which should continue to improve as a
result of aggressive expense reductions. Aegon USA's product lines
contribute to the company's diversified earnings, including traditional
life, variable life, variable annuities (VA), mutual funds, pensions and
accident and health insurance. While volatility exists in Aegon USA's
operating performance, the U.S. entities continue to maintain an
underlying trend of profitability on a statutory and IFRS basis. In
addition, the organization's increasing exposure to VAs exposes its
earnings to volatility, and while hedged, Aegon USA's earnings remain
somewhat correlated to capital market performance. A.M. Best notes that
overall top-line growth has been inconsistent, with direct premium
declining in each of the past three years. Additionally, ROE has been
generally in line with industry averages, albeit with some volatility.

Aegon USA's business profile continues to remain favorable, with
competitive market positions in the U.S. life and annuity arenas. The
group's market positions are supported by a large and diversified
distribution system. A.M. Best notes that the company has made a
strategic shift to focus on selling fee-based products, especially VAs,
and has de-emphasized spread-based products, particularly fixed
annuities. In a relatively stable capital market environment, the
required capital on VAs is generally less than that required for the
fixed annuity/spread-based products. However, A.M. Best views VAs with
living benefit riders as displaying some of the highest risk
characteristics and being vulnerable to tail risks, which could lead to
an increase in required capital. Although, the portfolio includes some
products viewed as less creditworthy by A.M. Best, the group benefits
from good diversification geographically and by product type.

The FSR of A+ (Superior) and the Long-Term ICRs of "aa-" have been
affirmed for the following members of Aegon USA Group:

  • Transamerica Life Insurance Company
  • Transamerica Financial Life Insurance Company
  • Transamerica Premier Life Insurance Company
  • Transamerica Advisors Life Insurance Company

This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information
.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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