Best’s Rating Report - Transamerica

1 best 's Rating Report Transamerica life INSURANCE COMPANY A+. Transamerica PREMIER life INSURANCE COMPANY A+. Transamerica FINANCIAL life INSURANCE COMPANY A+. Transamerica ADVISORS life INSURANCE COMPANY A+. A+. Printed February 1, 2018 Page 1 of 42. best 's Rating Report market positions are supported by a large and diversified distribution system Ultimate Parent: Aegon that is made up of both independent and career agents, financial institutions, wirehouses and direct response channels. Subsequently, in late 2016 the Transamerica life INSURANCE COMPANY company exited the Affinity, Direct TV, and Direct Mail channels that were 4333 Edgewood Road part of the accident and health (A&H) line of business in the US.

2 Aegon USA. Cedar Rapids, IA 52499 enjoys the efficiencies and competitive advantages of meaningful economies Web: of scale, which have contributed favorably to its historical financial Tel.: 800-797-2643 performance. There should be lower dependency on release of required AMB#: 006095 NAIC#: 86231 surplus as the fee-based business grows. Aegon USA's earnings profile is one Ultimate Parent#: 085244 FEIN#: 39-0989781 of the more diversified in the industry. Product lines that contribute to overall earnings include traditional life , variable life , variable annuities, mutual funds, best 'S CREDIT Rating pensions and A&H insurance. Additional Rating consideration includes best 's assessment of the financial strength and support of the parent, Aegon.

3 best 's Financial Strength Rating : A+ Outlook: Negative As a result, Aegon USA receives Rating enhancement in consideration of best 's Financial Size Category: XV Aegon's overall creditworthiness and the strategic and financial importance of the operations to Aegon. Several years ago the company pursued a strategic shift to focus on selling RECENT DEVELOPMENTS products such as variable annuities, mutual funds, and 401(k)s and has Effective October 1, 2015, Stonebridge life Insurance Company merged de-emphasized sales of its spread-based products, especially fixed annuities. with and into Transamerica life Insurance Company. The company has In a stable equity market, the required capital on variable annuities is generally recently divested itself of its BOLI/COLI and payout annuity businesses.

4 Less than for fixed annuities and other spread-based products. However, from a product creditworthiness perspective, best views variable annuities with Rating RATIONALE living benefits as displaying some of the highest risk characteristics and being Rating Rationale: The published ratings of the Aegon USA companies vulnerable to tail risks, which could lead to an increase in the required capital reflect that they are integral to Aegon's strategy, fully integrated into the to support this segment. The institutional spread-based business (primarily group's operations, a material part of the business profile, significant guaranteed interest contracts, funding agreements and funding contributors to earnings and have received explicit financial support when agreement-backed securities) remains in run-off to reduce exposure to credit needed.

5 Risk, lower required capital and to shift to a more balanced mix of business Transamerica life Insurance Company (TLIC) sells individual between spread- and fee-based products. The group has executed several fixed non-participating whole life , endowment and term contracts, structured annuity coinsurance transactions, which have released capital and reduced its settlements and pension products, as well as a broad line of single fixed and spread-based liabilities. best also notes that over recent years, Aegon flexible premium annuity products. In addition, TLIC offers group life , USA has come to rely heavily on captive reinsurance to fund reserves universal life , credit life and individual and specialty health coverages.

6 The generated by term life and universal life insurance with secondary guarantees. company is licensed in 49 states and the District of Columbia, Guam, Puerto Aegon USA has also reduced its exposure to equity market risk by increasing Rico and US Virgin Islands. Sales of the company's products are primarily the size of its macro-equity hedge covering its variable annuity business. through a network of agents, brokers and financial institutions. However, while the additional equity hedging will serve to reduce volatility in some financial metrics, the group's earnings via fee income remain somewhat The following text is derived from best 's Credit Report on Aegon correlated to equity market performance. USA Group (AMB# 069707).

7 A positive Rating action could result from a material improvement in best 's view of the credit profile of Aegon. A negative Rating action could The ratings of the life insurance companies of Aegon USA reflect the strong result if there is a significant and sustained decline in consolidated business profile, adequate risk-adjusted capitalization, strong enterprise risk risk-adjusted capitalization as measured by best 's Capital Adequacy Model. A. management, and an underlying trend of statutory and IFRS profitability. The significant and sustained decline in net operating performance could also ratings also reflect best 's assessment of the financial strength and result in a negative Rating action, as well as a further decline in best 's support of the parent, Aegon (Aegon).

8 Partially offsetting these strengths view of Aegon's credit profile, or a change in best 's view of the strategic is the increasing focus on sales of products that have unfavorable risk importance of Aegon USA to Aegon. characteristics from a product creditworthiness standpoint, as well as the equity market sensitivity of its earnings and significant reliance on captive reinsurance. Aegon USA's business profile is viewed as strong by best , with competitive market positions in the life and annuity areas. The group's Printed February 1, 2018 Page 2 of 42. best 's Rating Report FIVE YEAR Rating HISTORY , there has been a delayering of management via the elimination of best 's best 's redundant processes and a restructuring of its distribution footprint.

9 The Date FSR Date FSR current product lines sold through Aegon USA's life companies include, life , 05/05/17 A+ 12/12/13 A+ accident & health, mutual funds, variable annuities, fixed annuities, 04/15/16 A+ 04/09/13 A+ retirement plans, and stable value solutions. The product lines are now 02/11/15 A+ organized by distribution channel in order to ensure better alignment with customers, and fall into four main categories of brokerage, partner, KEY FINANCIAL INDICATORS ($000) institutional/worksite, and wholesale. The brokerage distribution channel Total Capital offers life insurance & long-term care products through third-party outlets of Capital Asset Net Net brokerage general agents or independent wholesale organizations.

10 These are Surplus Valuation Premiums Invest Net typically non-registered products sold through independent insurance agents Year Assets Funds Reserve Written Income Income and financial institutions. The Partner network known as the Transamerica 2012 107,174,159 5,584,309 932,867 12,144,464 3,070,610 1,174,667 Financial Network', provides advice and guidance to individuals to meet their 2013 117,015,919 4,826,304 875,957 15,806,999 2,466,599 141,108 protection as well as investment needs including a Transamerica Agency 2014 126,197,750 5,985,784 747,987 16,191,362 2,354,940 335,423 Network' of approximately 1,700 agents, and over 54,000 associates in the 2015 126,035,999 5,458,642 740,321 14,777,001 2,323,782 -250,873 (World Financial Group).