AEGON THE NETHERLANDS

GENERAL HISTORY
AEGON Nederland N.V. is the holding company for the AEGON Group’s Dutch insurance and banking activities. AEGON’s operations in the Netherlands are collectively referred to as AEGON The Netherlands.

The head office of AEGON The Netherlands is located in The Hague, with additional offices in Leeuwarden, Groningen and Nieuwegein.

The primary operational subsidiaries in the Netherlands are:

• AEGON Levensverzekering N.V.
• AEGON Schadeverzekering N.V.
• AEGON NabestaandenZorg N.V.
• AEGON Spaarkas N.V.
• AEGON Bank N.V.
• Spaarbeleg Kas N.V.
• Meeùs Groep B.V.
• TKP Pensioen B.V.
• AEGON Investment Management B.V.

AEGON The Netherlands is involved in both life and non-life insurance business and provides financial services and asset management.

As of January 1, 2004, AEGON The Netherlands implemented a new organization structure with five service centers and four marketing and sales organizations. Prior to this reorganization initiative a business unit structure was in place. The five service centers that focus on customer service and the administration of the five main product lines are as follows:

• Service center pensions
• Service center life insurance
• Service center non-life insurance
• Service center banking
• Service center asset management

During 2004, AEGON The Netherlands continued the restructuring process. The product assortment has been reduced and the development of new product propositions is currently underway; integration of the IT systems is in progress and will be completed in phases in 2005 and 2006.

The marketing and sales organizations (MSO) have been structured to serve the different sales channels, such as independent agents, AEGON affiliated organizations and AEGON The Netherlands’s own advisors.

The MSO’s are:

• Corporate & Institutional Clients (C&IC), which focuses on large companies as well as company pension funds and industry pension funds
• Intermediary, which focuses on retail and institutional clients through independent agents
• Meeùs, which focuses on the affiliated Meeùs Groep
• AEGON Spaarbeleg, which supports AEGON The Netherlands’s own advisors as well as direct sales

PRODUCTS AND DISTRIBUTION
AEGON The Netherlands offers five product lines:

• Pensions
• Life insurance
• Non-life insurance
• Banking
• Asset management

While the majority of AEGON The Netherlands products are sold through agents, products are also sold via other channels such as direct marketing, specialized agents and tied agents. Institutional clients and large companies are directly targeted by the marketing and sales organization C&IC.

PENSIONS
Pension products are mainly sold by C&IC and Intermediary.
The main products are:

• Products for account of policyholders with guarantees (separate investment guaranteed contracts)
• Products for account of policyholders without guarantees (separate investment capital contracts)
• Medium and small-sized enterprises growth pensions
• Medium and small-sized enterprises guarantee pensions
• AEGON Pensioen Pakket (defined contribution)
• AEGON Garantie Pensioen (defined benefit)

Separate investment guaranteed contracts and separate investment capital contracts are defined benefit products with both single and recurring premiums and a disability rider. Profit sharing is based on the return of a pool of investments. Large group contracts also share technical results (mortality risk and disability risk). The assets are owned by AEGON The Netherlands but earmarked to form the basis for profit sharing for these contracts. The contract period is typically five years and the premium tariffs are fixed over this period. Separate investment capital contracts are only sold to company pension funds and AEGON The Netherlands has the option not to renew a contract at the end of the contract period, so that the longevity risk lies with the pension fund. Separate investment guaranteed contracts provide a guarantee on the benefits paid. The longevity risk therefore lies with AEGON The Netherlands.

AEGON Garantie Pensioen and medium and small-sized enterprises growth pensions are also defined benefit products with single and recurring premiums. The initial contract period is ten years, with renewals for five-year periods. Profit-sharing is based on excess interest earned on the general account investment portfolio. Premium tariffs are fixed over the contract period and the longevity risk lies with AEGON The Netherlands. Minimum interest guarantees are given for nominal benefits, based on 3% actuarial interest (4% on policies sold before the end of 1999), after retirement of the employee.

In September 2004, AEGON The Netherlands introduced AEGON Persoonlijk Pensioen Plan, an individual pension product based on defined contribution, which targets employees that fall outside a collective pension plan and directors who own a company. Clients can choose from several investment options as well as two options with limited guarantees. The insurance cover is client-specific: the client can select the retirement date and the type of pension.

TKP Pensioen offers administrative services for large pension funds. During 2004, this unit enlarged its base with the acquisition of a large account, which increased the number of participants to a total of 220,000.

LIFE INSURANCE
The life insurance products are mainly sold by the marketing and sales organization Intermediary and by AEGON Spaarbeleg. The products are predominantly standard financial products; the most important products are discussed below.

Fund plan and savings plan products. Fund plan and savings plan products are mainly endowment and savings type products, both single premium and recurring premiums with profit sharing based on the selected fund performance. A customer may choose from a wide variety of AEGON funds. AEGON The Netherlands has issued a guarantee of 3% for investments in the Mix Fund and/or the Fixed Income Fund (4% on policies sold before the end of 1999) at the maturity date if the policyholder has paid the premium for a consecutive period of at least ten years or on death of the insured.

Endowment and savings products. Endowment and savings products have recurring premiums with contractual surplus interest profit sharing.

Mortgage savings products. AEGON The Netherlands provides mortgage loans to customers for a period of twenty or thirty years. The loan is repaid at the redemption date with, fully or partly, the proceeds from a savings policy. Upon the death of the insured within the policy contract period, the benefit payment is used to repay the mortgage loan. The interest paid on the loan is normally tax deductible and the customer retains the full income tax benefit over the contract period so long as there is no early redemption. The interest paid on the mortgage loan usually equals the interest accumulated on the account balance under the savings policy. In case of surrender the policyholder loses the tax benefit.

In October 2004, AEGON The Netherlands introduced AEGON LevenHypotheek, a universal life-based mortgage investment product. The loan is repaid at the redemption date, in full or in part with the proceeds from a savings policy. Upon the death of the insured within the policy contract period, the benefit payment is used to repay the mortgage loan. The customer can choose from six funds in which to invest the savings premiums; two of these six funds offer limited guaranteed benefit payments on maturity date. The ultimate amount available at the maturity date will vary depending on the performance of the underlying funds.

Spaarbeleg Kas N.V. and AEGON Spaarkas N.V. sell life products with both single and recurring premiums and profit-sharing based on a specific bonus system (tontine system). The main characteristic of a tontine system is that when the policyholder dies, the balance is not paid out to the policyholder’s estate, but is distributed at the end of the year to the surviving policyholders of the specific series (a new series starts at the beginning of each calendar year) to which the deceased policyholder belonged. In addition to the tontine products, Spaarbeleg Kas N.V. sells a number of tax-driven products and has provided better access to products and services in order to meet consumers’ requests with respect to pension issues.

NON-LIFE PRODUCTS
Non-life insurance products are mainly sold by the marketing and sales organizations Intermediary and Meeùs. Non-life products consist primarily of accident and health and property and casualty. Over the past few years the Dutch government has gradually withdrawn from the sick leave (ziekteverzuim) and workers disability market. In the property and casualty segment, AEGON’s strategy is to seek value creation rather than volume.

BANKING
AEGON Bank N.V. supplies savings accounts with simple conditions. The products are sold through various marketing and sales organizations.

ASSET MANAGEMENT
AEGON Asset Management’s (AAM) approach is to further develop the institutional market by winning asset management customers in cooperation with the marketing and sales organization C&IC. AAM is also the asset manager for AEGON The Netherlands’ insurance activities.

ADVICE AND OTHER ACTIVITIES
The distribution units consist primarily of the Meeùs Groep, which is an intermediary company with its core activities in insurance and real estate. Within the financial advice segment, the Meeùs Groep has developed a broad range of activities such as insurance, pensions, mortgages, financing, savings and investments. In the real estate business the Meeùs Groep acts as a broker in both residential and commercial real estate.
In addition to this, the Meeùs Groep is active in the real estate management business.

REINSURANCE CEDED
Life
Reinsurance takes place through a profit-sharing contract between AEGON Levensverzekering N.V. and Swiss Re, with a retention of EUR 900,000 per policy with respect to death risk and a retention of EUR 25,000 annually with respect to disability risk.

Non-life
With regard to the fire insurance business, an excess of loss reinsurance strategy is in place, with a retention of EUR 5.0 million per risk and EUR 21.0 million per event. The motor business is also reinsured on an excess of loss basis, with a retention of EUR 2.5 million per event.