A.M. Best Affirms Ratings of Entities of AEGON Americas; Assigns Debt Rating to New Funding Agreement-Backed Securities Program.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa" of the primary life/health member companies of AEGON's U.S. operations (AEGON USA). A.M. Best has also affirmed the FSR of A- (Excellent) and assigned an ICR of "a-" to AEGON USA's property/casualty subsidiary, Stonebridge Casualty Insurance Company (Columbus, OH). In addition, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a+" of Transamerica Life Canada (TLC) (Toronto), a stand-alone rated member of AEGON Canada (both of Toronto). AEGON USA and AEGON Canada are known as the AEGON Americas. TLC is the lead company of AEGON Canada. AEGON USA and AEGON Canada are part of the AEGON Group [NYSE:AEG], a leading multinational insurance organization based in The Hague, the Netherlands.

Concurrently, A.M. Best has affirmed the debt ratings of the outstanding notes issued under funding agreement-backed securities (FABS) programs sponsored by Monumental Life Insurance Company (Monumental Life) (Cedar Rapids, IA), a member of AEGON USA. Additionally, A.M. Best has assigned a debt rating of "aa" to Monumental Life's new FABS program, Monumental Global Funding III (MGF III). The outlook for all ratings is stable. (Please see link below for a detailed listing of the companies and ratings.)

The ratings for AEGON USA reflect the group'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 strong cash flow generation. The group also benefits from meaningful economies of scale, strong brand recognition and effective risk and asset/liability management.

AEGON USA's earnings profile is one of the more diversified in the industry, with the most creditworthy business (life insurance) representing the largest portion. Product lines contributing to overall earnings include traditional life, fixed annuities, variable life, variable annuities, mutual funds, pensions, accident and health and reinsurance. An additional source of earnings is provided by a well-established institutional investment products business that provides both spread-based guaranteed products and fee-based synthetic GICs.

While the ratings recognize AEGON USA's strong and diverse business profile, A.M. Best notes the company faces intense competition in its core individual life and asset accumulation businesses, which primarily consist of products that are commoditized in nature. Furthermore, with its sizable block of fixed annuity and institutional spread business, AEGON USA is exposed to considerable interest rate risk. Also, AEGON USA's substantial variable annuity portfolio exposes it to equity market related risk, both in terms of volatile fee income and in the form of secondary guarantees. A.M. Best believes the group's prudent risk management capabilities, disciplined asset/liability management and hedging programs serve to mitigate interest rate and equity risk under a broad range of economic scenarios. Finally, A.M. Best notes that AEGON USA's earnings are gradually becoming more dependent upon spread and fee businesses as new sales of life insurance are being outpaced by asset accumulation sales.

The ratings for TLC reflect its favorable market position in the Canadian segregated fund and life insurance markets, its historically profitable operating performance and sound asset/liability management capabilities. These strengths are tempered by the highly competitive nature of the Canadian marketplace and TLC's exposure to equity market volatility inherent in its segregated fund portfolio.

MGF III provides for the issuance of up to $17.5 billion of senior secured notes in U.S. dollars and other currencies in both domestic and foreign markets. Each series of notes will be issued by a newly created common law trust formed under the laws of Illinois. The program and notes will carry the ICR of "aa" of Monumental Life, reflecting A.M. Best's belief that, under the Iowa Insurance Code, funding agreements are treated pari passu with other general account policyholder obligations. Inside the United States, the notes will be offered and sold under Rule 144A, while outside the United States, the notes will be offered and sold under Regulation S.

For a complete listing of AEGON USA's and AEGON Canada's FSRs, ICRs and debt ratings, please visit www.ambest.com/press/053003aegon.pdf.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.