S&P Lowers AEGON’s Ratings to ‘A+/A-1’

April 9, 2003

Standard & Poor’s Ratings Services announced that it has lowered its counterparty credit rating on AEGON N.V. (AEGON) to ‘A+/A-1’ from ‘AA-/A-1+’ “because of Standard & Poor’s view that future absolute earnings will be less strong over the short to medium term based on higher credit provisioning, tighter credit spreads, and reduced fee income on variable and unit-linked funds under management.”

S&P also announced the following actions on related ratings of Aegon’s affiliates:
— Lowered its long-term counterparty credit and financial strength ratings on the principal operating companies of the group in Europe and North America to ‘AA’ from ‘AA+’.
— Assigned its ‘AA’ long-term counterparty credit and financial strength ratings to Stonebridge Life Insurance Co., one of AEGON’s U.S. operating companies.
— Withdrew its ‘AA+’ financial strength rating on Transamerica Life Insurance Co. of NY because it no longer exists, having been merged into another of the rated AEGON operating companies.
— Lowered its long-term counterparty credit rating on Transamerica Finance Corp. to ‘BBB+’ from ‘A-‘ based on the downgrade of the ultimate parent, AEGON.
— Affirmed the ‘A-2’ short-term counterparty credit rating on Transamerica Finance Corp.
The rating agency’s outlook on all these companies is stable.

S&P noted that, although Aegon is based in the Netherlands, “more than 60% of its activities are in U.S. life insurance.” It acknowledged that the group maintains “very strong business position. It raised more than 2 billion Euros ($2.14 billion) in capital “to compensate for credit losses, strengthen reserving and accelerated amortization of deferred acquisition costs to protect emerging profits on its in-force book.”

S&P stated: “The group maintains very strong business positions in the U.S., the Netherlands, and the U.K. based on excellent distribution and product range. The risk profile is low given the strong focus on life and pensions business at more than 80% of group revenues. The AEGON USA group of companies is distinguished by an exceptionally broad array of life insurance products and services, extremely strong consolidated capital, and a high degree of sophistication in both its asset management and asset/liability management.”

The report lauded Aegon’s management, indicating that the company “has a strong culture based on a clear strategy and common standards for capital and target returns” that are positive influences on its ratings. “This results in well-capitalized operations, which price new business to achieve at least an 11% ROI. Combined with reducing costs, operating performance has consistently outpaced returns from other large European insurers.”

S&P credit analyst Thomas Upton noted: “The outlook is based on the group’s very strong franchise in chosen markets, the ability of management to steer a steady path through the volatile markets, and disciplined financial management. Capital adequacy remains very strong, and the quality of capital–via reduced financial leverage, reduced investment leverage and more prudent deferred acquisition cost assumptions–is expected to continue improving over the medium term. Fixed-charge coverage should be maintained above 5x going forward, and return on Dutch Accounting Principles equity should remain good relative to peers.”

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