Ultimate Parent: Aegon N.V.
TRANSAMERICA LIFE INSURANCE COMPANY4333 Edgewood Road N.E.
Cedar Rapids, IA 52499Web: www.transamerica.com
Tel.: 800-797-2643AMB#: 006095 NAIC#: 86231Ultimate Parent#: 085244 FEIN#: 39-0989781
BESTS CREDIT RATING
Bests Financial Strength Rating: A+ Outlook: NegativeBests Financial Size Category: XV
RECENT DEVELOPMENTSEffective October 1, 2015, Stonebridge Life Insurance Company merged
with and into Transamerica Life Insurance Company. The company hasrecently divested itself of its BOLI/COLI and payout annuity businesses.
RATING RATIONALE
Rating Rationale: The published ratings of the Aegon USA companiesreflect that they are integral to Aegons strategy, fully integrated into thegroups operations, a material part of the business profile, significantcontributors to earnings and have received explicit financial support whenneeded.
Transamerica Life Insurance Company (TLIC) sells individualnon-participating whole life, endowment and term contracts, structuredsettlements and pension products, as well as a broad line of single fixed andflexible premium annuity products. In addition, TLIC offers group life,universal life, credit life and individual and specialty health coverages. Thecompany is licensed in 49 states and the District of Columbia, Guam, PuertoRico and US Virgin Islands. Sales of the companys products are primarilythrough a network of agents, brokers and financial institutions.
The following text is derived from A.M. Bests Credit Report on AegonUSA Group (AMB# 069707).
The ratings of the life insurance companies of Aegon USA reflect the strongbusiness profile, adequate risk-adjusted capitalization, strong enterprise riskmanagement, and an underlying trend of statutory and IFRS profitability. Theratings also reflect A.M. Bests assessment of the financial strength andsupport of the parent, Aegon N.V. (Aegon). Partially offsetting these strengthsis the increasing focus on sales of products that have unfavorable riskcharacteristics from a product creditworthiness standpoint, as well as theequity market sensitivity of its earnings and significant reliance on captivereinsurance.
Aegon USAs business profile is viewed as strong by A.M. Best, withcompetitive market positions in the U.S. life and annuity areas. The groups
market positions are supported by a large and diversified distribution systemthat is made up of both independent and career agents, financial institutions,wirehouses and direct response channels. Subsequently, in late 2016 thecompany exited the Affinity, Direct TV, and Direct Mail channels that werepart of the accident and health (A&H) line of business in the US. Aegon USAenjoys the efficiencies and competitive advantages of meaningful economiesof scale, which have contributed favorably to its historical financialperformance. There should be lower dependency on release of requiredsurplus as the fee-based business grows. Aegon USAs earnings profile is oneof the more diversified in the industry. Product lines that contribute to overallearnings include traditional life, variable life, variable annuities, mutual funds,pensions and A&H insurance. Additional rating consideration includes A.M.Bests assessment of the financial strength and support of the parent, Aegon.As a result, Aegon USA receives rating enhancement in consideration ofAegons overall creditworthiness and the strategic and financial importance ofthe U.S. operations to Aegon.
Several years ago the company pursued a strategic shift to focus on sellingproducts such as variable annuities, mutual funds, and 401(k)s and hasde-emphasized sales of its spread-based products, especially fixed annuities.In a stable equity market, the required capital on variable annuities is generallyless than for fixed annuities and other spread-based products. However, from aproduct creditworthiness perspective, A.M. Best views variable annuities withliving benefits as displaying some of the highest risk characteristics and beingvulnerable to tail risks, which could lead to an increase in the required capitalto support this segment. The institutional spread-based business (primarilyguaranteed interest contracts, funding agreements and fundingagreement-backed securities) remains in run-off to reduce exposure to creditrisk, lower required capital and to shift to a more balanced mix of businessbetween spread- and fee-based products. The group has executed several fixedannuity coinsurance transactions, which have released capital and reduced itsspread-based liabilities. A.M. Best also notes that over recent years, AegonUSA has come to rely heavily on captive reinsurance to fund reservesgenerated by term life and universal life insurance with secondary guarantees.Aegon USA has also reduced its exposure to equity market risk by increasingthe size of its macro-equity hedge covering its variable annuity business.However, while the additional equity hedging will serve to reduce volatility insome financial metrics, the groups earnings via fee income remain somewhatcorrelated to equity market performance.
A positive rating action could result from a material improvement in A.M.Bests view of the credit profile of Aegon. A negative rating action couldresult if there is a significant and sustained decline in consolidatedrisk-adjusted capitalization as measured by Bests Capital Adequacy Model. Asignificant and sustained decline in net operating performance could alsoresult in a negative rating action, as well as a further decline in A.M. Bestsview of Aegons credit profile, or a change in A.M. Bests view of the strategicimportance of Aegon USA to Aegon.
Printed July 20, 2017 www.ambest.com Page 2 of 49
Bests Rating Report
FIVE YEAR RATING HISTORY
DateBestsFSR Date
BestsFSR
05/05/17 A+ 12/12/13 A+04/15/16 A+ 04/09/13 A+02/11/15 A+
KEY FINANCIAL INDICATORS ($000)Total Capital
Year Assets
CapitalSurplusFunds
AssetValuation
Reserve
NetPremiumsWritten
NetInvest
IncomeNet
Income2012 107,174,159 5,584,309 932,867 12,144,464 3,070,610 1,174,6672013 117,015,919 4,826,304 875,957 15,806,999 2,466,599 141,1082014 126,197,750 5,985,784 747,987 16,191,362 2,354,940 335,4232015 126,035,999 5,458,642 740,321 14,777,001 2,323,782 -250,8732016 131,790,027 5,234,756 813,683 13,943,320 2,453,819 471,091
(*) Within several financial tables of this report, this company is compared against the GroupAnnuity Composite.
(*) Data reflected within all tables of this report has been compiled from the company-filedstatutory statement.
Note: Net premiums written include annuity and other fund deposits.
BUSINESS PROFILEThe following text is derived from A.M. Bests Credit Report on Aegon
USA Group (AMB# 069707).
Aegon USA is one of the leading life insurance organizations in the U.S.with more than twenty million customers and provides a wide range of lifeinsurance, pensions, long-term savings and investment products. Aegon USAwas founded 1989 when Aegon N.V. (Aegon) decided to bring all of itsoperating companies in the U.S. under a single financial services holdingcompany. Business is conducted through five primary insurance subsidiariesand includes Transamerica Life Insurance Company, Transamerica FinancialLife Insurance Company, Transamerica Advisors Life Insurance Company,Transamerica Premier Life Insurance Company, and Transamerica CasualtyInsurance Company. The Aegon USA group of companies is fully integratedand share senior and investment management along with support services.
Aegon USA uses a variety of distribution channels, each of which conductsbusiness through one or more of the Aegon USA life insurance companies.The channels are both owned and non-owned and include career agents as wellas financial planners, banks, brokers and independent consultants. It is alsoprominent in the home service market and focused on agent-sold business aswell as the worksite, employer-based market. Through 2015, the Aegon USAcompanies were divisionally organized into two primary business divisions:Life & Protection (L&P) and Investments & Retirement (I&R).
Beginning in 2016, Aegon USA has restructured into a functionallyorganized business centered around the Transamerica brand. As a result, thecompany has eliminated its previous divisional alignment and created aunified organization that is functionally aligned (i.e. distribution, operations,finance, etc.). As a result of its recently implemented reorganization in the
U.S., there has been a delayering of management via the elimination ofredundant processes and a restructuring of its U.S. distribution footprint. Thecurrent product lines sold through Aegon USAs life companies include, life,accident & health, mutual funds, variable annuities, fixed annuities,retirement plans, and stable value solutions. The product lines are noworganized by distribution channel in order to ensure better alignment withcustomers, and fall into four main categories of brokerage, partner,institutional/worksite, and wholesale. The brokerage distribution channeloffers life insurance & long-term care products through third-party outlets ofbrokerage general agents or independent wholesale organizations. These aretypically non-registered products sold through independent insurance agentsand financial institutions. The Partner network known as the TransamericaFinancial Network, provides advice and guidance to individuals to meet their
