Back to Top MONUMENTAL LIFE INSURANCE COMPANY A+ STONEBRIDGE LIFE INSURANCE COMPANY A+ TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY A+

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1 MONUMENTAL LIFE INSURANCE COMPANY A+ STONEBRIDGE LIFE INSURANCE COMPANY A+ TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY A+ TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY A+ OF NEW YORK TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY A+ TRANSAMERICA LIFE INSURANCE COMPANY A+ WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO A+ A+ Back to Top 2013 A.M. Best Company, Oldwick, NJ Printed May 8, Page 1 of 44

2 Ultimate Parent: Aegon N.V. MONUMENTAL LIFE INSURANCE COMPANY 4333 Edgewood Road N.E. Cedar Rapids, IA Web: Tel.: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A+ Outlook: Stable Best s Financial Size Category: XV RATING RATIONALE Rating Rationale: The published ratings of the Aegon USA companies reflect that they are integral to Aegon s strategy, fully integrated into the group s operations, a material part of the business profile, significant contributors to earnings and have received explicit financial support when needed. Monumental Life Insurance Company sells a full line of insurance products, including individual, credit, and group coverages under life, annuity and accident and health policies as well as various investment products. The company is licensed in 49 states, the District of Columbia, Guam and Puerto Rico. Sales of the company s products are primarily through agents, brokers, financial institutions and direct response methods. The ratings of the life insurance companies of Aegon USA reflect the strong and diverse business profile of the overall operation, 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 asset/liability and liquidity management. The ratings also reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon N.V. (Aegon). Partially offsetting these strengths is the group s exposure, albeit reduced, to higher-risk investments (structured securities, direct commercial mortgage loans and various alternative strategies) as well as the equity market sensitivity of its earnings. Aegon USA s business profile remains strong, with competitive market positions in the U.S. life and annuity arena (top 10 life insurance and variable annuity writer), pensions (top 15 defined contribution plan provider) and mutual funds. The group s market positions are supported by a large and diversified distribution system that is made up of independent and career agents, financial institutions, wirehouses and direct response methods. Aegon USA enjoys the efficiencies and competitive advantages of meaningful economies of scale, which have contributed favorably to its historical financial performance. Aegon USA s earnings profile is one of the more diversified in the industry. Product lines that contribute to overall earnings include traditional life, fixed annuities, variable life, variable annuities, mutual funds, pensions and accident and health insurance. Aegon USA has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio has been upgraded by reducing hedge fund holdings and increasing positions in cash and U.S. Treasuries and other short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) remains in run-off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. Furthermore, the group has executed several fixed annuity coinsurance transactions, which has released capital and has reduced its spread-based liabilities. Aegon USA has also reduced its exposure to equity market risk by increasing the size of its macro equity hedge covering its variable annuity business. Lastly, the ratings reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon. As a result, the stand-alone ratings of the members of Aegon USA receive rating enhancement in consideration of Aegon s overall creditworthiness and the strategic and financial importance of the U.S. operations to Aegon. Despite Aegon USA s improved risk profile, A.M. Best notes the possibility of additional, material credit losses within the group s general account investment portfolio. Although IFRS asset impairments have continued to decline over recent years; with $151 million reported in 2012 versus $349 million in 2011, additional realized losses and impairments are likely to occur in 2013, given Aegon USA s sizable structured assets and exposure to direct commercial real estate. Furthermore, the group s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the equity markets would translate to lower fee income and higher required reserves on secondary guarantees. Although additional equity hedging will serve to reduce volatility, the group s earnings remain somewhat correlated to equity market performance. A.M. Best believes the members of Aegon USA are well positioned at the current rating level for the foreseeable future. Factors that could result in negative rating actions for these entities include a significant and sustained decline in consolidated risk-adjusted capitalization as measured by Best s Capital Adequacy Ratio (BCAR) model, net operating performance that does not meet A.M. Best s expectations or a decline in the creditworthiness of Aegon, which could constrain future financial support. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 04/09/13 A+ 06/29/10 A+ 04/13/12 A+ 04/23/09 A 04/27/11 A+ 06/18/08 A+ KEY FINANCIAL INDICATORS ($000) Total Capital Capital Asset Surplus Valuation Premiums Invest Funds Reserve Written Income Income Year Assets ,531,178 1,236, ,442 2,204,004 1,322, , ,727,978 1,436,586 72,351 1,846,861 1,093, , ,851,172 1,174, ,677 1,347, , ,107, , ,524 1,391, , , ,057, , ,992 1,497, , ,546 (*) Within several financial tables of this report, this company is compared against the Multiple Lines Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE 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 life insurance, pensions, long-term savings and investment products. Aegon USA was founded 1989 when Aegon N.V. (Aegon) decided to bring all of its operating companies in the U.S. under a single financial services holding company. Business is conducted through eight primary insurance subsidiaries and include Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Advisors Life Insurance Company of New York, Transamerica Advisors Life Insurance Company, Monumental Life Insurance Company, Stonebridge Life Insurance Company, Stonebridge Casualty Insurance Company and Western Reserve Life Assurance of Ohio. The Aegon USA group of companies is fully integrated and share senior and investment management along with support services. Aegon USA uses a variety of distribution channels, each of which conducts business through one or more of the Aegon USA life insurance companies. The channels are both owned and non-owned and include approximately 1,500 career agents as well as financial planners, banks, brokers and independent consultants. It is also prominent in the home service market and in the direct marketing of life and supplemental accidental death and dismemberment 2013 A.M. Best Company, Oldwick, NJ Printed May 8, Page 2 of 44

3 (AD&D) insurance. The Aegon USA companies are present in three main lines of business: Life & Protection (L&P), Individual Savings and Retirement, and Employer Solutions and Pensions. The Institutional Markets Division is no longer considered core to the group and the Life was sold to SCOR SE in Historically, the largest contributor to before-tax earnings has been the Life & Protection (L&P) division, which includes the Agency Group selling individual life and supplemental health products to the middle income market. Also included in the L&P division are the Brokerage Group, Transamerica Employee Benefits, Long Term Care and the Affinity Group. The Brokerage Group markets life insurance in the retail high net worth market through independent general agents with approximately 400 general agencies and 116,000 contract producers. The Affinity Group specializes in marketing life insurance and supplemental health insurance products to consumers through direct channels such as telemarketing, direct mail, television advertising and the Internet. This group also markets credit life, mortgage life and other life insurance and supplemental health products. Transamerica Long Term Care offers products and services aimed at meeting the long-term care insurance needs of its customers. Policies are sold through independent brokerage and at the worksite to individuals and groups. Through Transamerica Employee Benefits, L&P offers voluntary payroll deduction life and supplemental health insurance to employees at their place of work and are designed to supplement employees existing benefit plans. The Individual Savings & Retirement (IS&R) division offers a wide range of savings and retirement products, including mutual funds, investment advice as well as fixed and variable annuities. Transamerica Capital Management (TCM) is the underwriting and wholesaling broker/dealer for variable annuities and mutual funds. TCM builds relationships with independent financial professionals, agents affiliated with regional broker/dealers or major wirehouse firms and representatives through a large bank network. TCM serves these distribution channels through company-owned and external wholesalers. In 2007, Aegon USA acquired Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York (since renamed Transamerica Advisors Life Insurance Company and Transamerica Advisors Life Insurance Company of New York) as part of a strategic distribution relationship with Merrill Lynch with respect to variable annuities. The acquisition of the Merrill Lynch insurance companies served to place Aegon USA in the top ten of variable annuity sellers in the wirehouse and broker/dealer segment. In late 2009, IS&R reduced its sales of fixed annuities in response to lower market interest rates and lower investment returns available in the environment. Similar market conditions have continued over recent years and restricted sales of fixed annuities. As a result, IS&R has de-emphasized the sale of fixed annuities and has executed several large fixed annuity coinsurance transactions in recent years. The Employer Solutions and Pensions (ES&P) division includes full-service retirement plan investments and services in addition to guaranteed savings and investment products directed at various segments of the pension industry. The group sells a full range of products and services to small and mid-size corporate, non-profit and government sponsored plans through brokers, agents, consultants, third-party administrators and accounting firms. Transamerica Retirement Solutions (TRS) serves almost 4,000 mid-sized to large companies and more than 15,500 small to mid-sized companies across the U.S. TRS offers a number of specialized services, including innovative plan design, a wide array of investment choices, extensive education programs and online investment education. In addition, ES&P provides synthetic guaranteed investment contracts primarily to various retirement plans. ES&P is also a leading provider of single premium group annuities (Terminal Funding), which are used by companies to decrease the liability of the defined benefit plans. BOLI-COLI products were distributed through a select number of niche brokers (including an affiliate, Clark Consulting); however, in December, 2010, ES&P announced its plan to discontinue new sales in the executive non-qualified benefits market and related BOLI-COLI business. The former Institutional Markets Division offered institutional spread products such as traditional fixed rate guarantee investment contracts (GICs), funding agreements (FAs), FA-backed notes as well as fee-based products such as synthetic GICs. In 2009, Aegon announced its plan to run-off its instructional spread based business to reduce capital requirements and credit risk. The institutional line of business also included structured product transactions, such as credit default swaps, synthetic collateralized debt obligations, affordable housing tax credit guarantees and hedge fund principal protection. Going forward, Aegon USA will only continue to offer affordable housing tax credit guarantees. TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Period DPW Prem Assumed Ending ($000) (% Chg) ($000) (% Chg) ,433, , ,786, , ,731, , ,783, , ,843, , Yr CAGR Period Prem Ceded NPW & Deposits Ending ($000) (% Chg) ($000) (% Chg) , ,084, , ,971, , ,420, , ,422, , ,530, Yr CAGR Territory: The company is licensed in the District of Columbia, Guam, Puerto Rico, AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI and WY. The company is also licensed on United States military installations in foreign countries BY-LINE BUSINESS ($000) DPW Prem Assumed Product Line ($000) (%) ($000) (%) Industrial life 1, Ordinary life 645, , Group life 53, , Credit life 8, , Individual annuities 472, , Group annuities 124, Individual A&H 110, , Credit A&H 9, Group A&H 417, , Total 1,843, , Prem Ceded NPW Product Line ($000) (%) ($000) (%) Industrial life 1, Ordinary life 414, , Group life 5, , Credit life 5, , Individual annuities 31, , Group annuities , Individual A&H , Credit A&H 7, , Group A&H 87, , Total 553, ,497, BY-LINE RESERVES ($000) Product Line Industrial life 340, , , ,413 24,647 Ordinary life 4,697,107 4,994,348 4,851,083 4,685,951 1,264,749 Group life 582, , , , ,321 Credit life 2,493 2,852 37,613 62, ,919 Supplementary contr 97,426 78,064 72,658 92, ,638 Individual annuities 2,892,095 2,867,737 2,916,274 2,960,483 3,094,841 Group annuities 858, ,916 1,126,679 1,284,215 1,357,102 Deposit type contracts 889, , ,280 1,170,859 2,505,054 Individual A&H 474, , , , ,091 Credit A&H 7,328 8,266 32,104 46,876 70,054 Group A&H 80,558 80,622 78,627 75,741 67,176 Total 10,922,215 11,433,836 11,573,401 11,865,950 9,615, A.M. Best Company, Oldwick, NJ Printed May 8, Page 3 of 44

4 LIFE POLICIES STATISTICS -Ordinary Policies- -Group Policies- -Group Certificates- Year Issued In Force Issued In Force Issued In Force ,121 3,000, ,732 17, , ,946 2,882, ,222 11, , ,821 2,956, ,112 14, , ,098 2,709, ,030 7, , ,945 2,655, ,889 10, ,768 Whole Life Endow. & LIFE INSURANCE IN FORCE ($000) Total Insurance In Force Year Adds Term Credit Group Industrial ,069,494 21,887,163 5,302,910 8,368, ,593 75,449, ,188,134 21,063,919 3,579,243 7,426, ,996 71,047, ,206,937 35,964,246 7,197,140 6,702, ,088 87,827, ,826,523 18,938,266 2,139,276 6,085, ,666 64,716, ,004,243 16,405,018 1,775,979 5,697, ,647 62,580,355 NEW LIFE BUSINESS ISSUED ($000) Year Whole Life & Endow. Term Credit Group Industrial Total Insurance Issued Non- Par (%) Par (%) ,077,812 1,936,043 2,244, ,558 6,703, ,842,101 1,783, , ,206 4,599, ,948,665 1,553, , ,785 4,708, ,494,451 1,242,148 1,678, ,263 5,790, ,900,993 1,102, , ,636 5,160, ORDINARY LIFE STATISTICS Ord. Renew Average 1st Yr 1st Yr Gen. Lapse Premium Ord. Policy Avg Prem / Comm / Exp. / Ratio Persist (in dollars) Prem Total 1st Yr Policies Year % % Issued In Force ($/M) Prem Prem In Force ,706 20, ,100 20, ,093 24, ,671 20, ,878 20, Number of Policies First Year Gen l Exp/ Return on Issued In Force Premium Reserves Reserves Year (000) (000) (000) (%) (%) ,121 3,000,313 49, ,946 2,882,017 44, ,821 2,956,307 43, ,098 2,709,218 55, ,945 2,655,507 72, INDIVIDUAL ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res(%) (%) NPW (%) Res (%) NPW Year (000) ,801 3,235, ,153 3,052, ,197 2,988, ,079 2,945, ,493 2,989, GROUP ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res (%) (%) NPW (%) Res (%) NPW Year (000) ,058 1,357, ,277 1,284, ,552 1,126, , , , , TOTAL ANNUITY ACTUARIAL RESERVES BY WITHDRAWAL CHARACTERISTICS With Min or No Surrender Surrender Charge 5% With Charge (%) or more (%) MVA (%) No Surrender Allowed (%) Total Annuity Year Res (000) ,592, ,337, ,115, ,938, ,848, SEPARATE ACCOUNT DATA Sep Acct Assets 12,669,510 11,471,551 11,512,136 10,396,423 8,811,340 % Growth S/A Assets/Adm Assets Sep Acct Reserves 12,656,478 11,457,333 11,479,325 10,357,375 8,752,381 % Ordinary Life % Individual Annuities % Group Annuities Other Liabilities 13,032 14,218 32,811 39,048 58,960 S/A Prems & Deposits 466, , , , ,522 % Individual Annuities % Group Annuities Sep Acct Fees & Charges 36,701 34,847 32,602 29,143 34,249 % Ordinary Life % Individual Annuities % Group Annuities Fees & Chgs to Assets% Sep Acct Ben & Wdrwls 622, , , , ,586 % Ordinary Life % Individual Annuities % Group Annuities Ben & Wdrwl to Assets% GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) Florida 138, , , , ,628 California 122, , , , ,481 Kentucky 118, , , , ,425 New Jersey 111, , , , ,975 Pennsylvania 104,371 94,701 91,410 93, ,012 Texas 93,580 90,491 88,781 89,051 97,264 Virginia 91,065 91,535 83,143 88,116 91,668 Illinois 87,249 83,135 80,718 84, ,236 Maryland 79,898 75,108 76,166 80, ,212 North Carolina 74,580 74,013 67,901 66,202 87,096 All Other 820, , , ,679 4,001,900 Total 1,842,607 1,786,685 1,721,706 1,841,780 6,258,897 RISK MANAGEMENT Aegon USA s ERM program has evolved via a flattening of risk structure; moving strategic business units (SBU s) from a risk compliance culture to a risk management culture. SBU s are liability experts, engaging SBU CRO s more globally and moving operational risk from Internal Audit to the CRO s. The Group Risk and Capital Committee (GRCC) provides independent oversight of the group s operations. The GRCC covers all risk types, including credit and market risk, pricing and underwriting risk, operational risk, corporate risk as well as the management of the overall capital position, and reports to the group s executive board A.M. Best Company, Oldwick, NJ Printed May 8, Page 4 of 44

5 Country Risk: Aegon USA has a limited amount of country risk exposure as the company s operations are based in the U.S. However, the company has a modest amount of country risk exposure with its foreign life insurance operations in Canada (through Canadian Premier Life and Transamerica Life Canada) and Latin America with Mexico and Brazil. In 2006, Aegon acquired a 49% interest in Seguros Argos, a Mexican life insurance company. As part of the joint venture Aegon and Seguros Argos set up a jointly owned pension fund company, Afore Argos. In 2009, Aegon acquired a 50% interest in Mongeral S.A. Seguros e Previdencia, Brazil s 6th largest independent life insurer. The U.S. and Canada are considered Tier 1" by A.M. Best s Country Risk Group with Mexico and Brazil both considered Tier 3". OPERATING PERFORMANCE Operating Results: Aegon USA is the largest of Aegon s country units and produces approximately two-thirds of Aegon s IFRS operating earnings. Aegon USA has one of the more diversified earnings profiles in the industry with a good balance of underwriting income from life insurance products and fee-based income from variable and investment-type products. Boosted by the equity market recovery, Aegon USA s consolidated statutory earnings results have consistently improved in recent years. While 2011 consolidated statutory earnings were negatively impacted by the accounting treatment related to the structure of its sale of TARe (life reinsurance business) to SCOR S.E., 2012 consolidated statutory earnings were $1.8 billion. Furthermore, Aegon USA continues to report solid IFRS results. The Aegon Americas segment (which is largely made up of Aegon USA but also includes operations in Canada and Mexico) has recorded IFRS net income of $1.5 billion (2010), $0.9 billion (2011) and $1.3 billion (2012). However, A.M. Best notes that Aegon USA s statutory and IFRS results continue to be dampened by significant investment impairments as the group has taken significant, albeit declining IFRS writedowns of $1.4 billion (2009), $506 million (2010), $349 million (2011) and $151 million (2012). PROFITABILITY ANALYSIS ($000) Company Pre-tax Period Oper Operating Total Ending Income Gain Income Return , , , , ,020, , ,678 91, ,307 22, , , , , , , , , ,909 5-Yr Total 2,456,281 1,648,921 1,160,059 1,019,559 Company Industry Composite Period Operating Operating Operating Operating Ending ROR ROE ROR ROE Yr Avg PROFITABILITY TESTS Comm & Ben Paid Exp to NOG Operating to NPW NPW to Tot NOG to Return on Total Year & Dep & Dep Assets Tot Rev Equity Yield Return Year Avg NET OPERATING GAIN ($000) Product Line Industrial life 32,081-1,041 1,183 5,341 25,811 Ordinary life -9, ,457-36, , ,311 Group life ,959 9,043 29,464 28,811 Credit life ,006 8,446 16,259 39,306 Supplementary contr -9,925-9,574 1,097 6, Individual annuities 9,116-56,951-81, ,365 16,169 Group annuities 73, ,174 77, ,393 99,660 Individual A&H 19,886 33,052 13,722 29,200 43,035 Credit A&H 2,263 7,245 3,986 7,599 4,207 Group A&H 35,066 38,143 25,447 19,788 53,983 Total 151, ,550 22, , ,792 ACCIDENT AND HEALTH STATISTICS ($000) Premiums Premiums Loss Exp. Underwriting Year Written Earned Ratio Ratio Results , , , , , , , , , , , , , , ,411 Current Year Experience: Group 405, , ,659 Credit 2,397 2, ,135 Coll renew Non-can. 42,899 43, ,405 Guarant renew 124, , ,935 Non-renew, S.R Other accident 4,684 4, ,212 Other 1,192 1, ,120 INVESTMENT GAINS ($000) Company Realized Unrealized Inv Capital Capital Year Income Gains Gains ,322, ,128-26, ,093, , , ,200-22,857 33, ,041-28,842-12, ,314-7,876-34,638 5-Year Total 4,990, , ,500 Company -Industry Composite- Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield Year (%) (%) (%) (%) (%) (%) Yr Avg BALANCE SHEET STRENGTH Capitalization: Aegon USA s overall risk-based capitalization is adequate to support its current insurance and investment risks and Aegon N.V. has contributed capital when necessary. A.M. Best believes that Aegon USA has good statutory earnings capacity to support its capital position going forward, and that Aegon N.V. is likely to provide additional capital, if needed. Aegon USA s regulatory capital ratio at year-end 2012 remains strong as the group has successfully executed several capital initiatives over recent years, including asset de-risking, continued run-off of institutional spread-based balances and tax-related initiatives. Furthermore, Aegon USA has continued to accelerate capital release through several fixed annuity coinsurance transactions in 2011 and 2012, while also finalizing the sale of its reinsurance book of business in A.M. Best Company, Oldwick, NJ Printed May 8, Page 5 of 44

6 CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Realized Unrealized Operating Capital Income Capital Year Gain Gains Taxes Gains , ,128 47,934-26, , , , , ,320-22,857 39,987 33, ,550-28,842 31,580-12, ,422-7, ,095-34,638 5-Yr Total 1,648, , , ,500 Source of Surplus Growth Change Change % Chg in Other in in Year AVR Changes C&S C&S ,284-14, , ,091-49, , , , , , , , , , , Yr Total 240,734-1,180,752 79, QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus , , , , , , , , , , ,049 68, , ,410 19,910 Year-End Asset Valuation Interest Maint. Adjusted Year C&S Reserve Reserve C&S ,236, ,442 8,434 1,476, ,436,586 72,351 58,903 1,567, ,174, , ,077 1,533, , , ,586 1,319, , , ,935 1,365,247 LEVERAGE ANALYSIS Company -Industry Composite- C&S NPW Change C&S to Surplus & Dep in NPW to Surplus Year Liab Relief to Capital & Dep Liab Relief Current BCAR: 201 CEDED REINSURANCE ANALYSIS Company -Industry Composite- Face Affil Unaffil Total Total Amount Reins Reins Reins Surplus Reins Reins Reins Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage ,475, ,180, ,124, ,743, ,457, Liquidity: Aegon USA s investment portfolio provides ample liquidity as a majority of the group s assets are in highly liquid public bonds. Aegon USA s liquidity is also supported by $1.5 billion in committed bank lines through Aegon N.V., with whom it has a standing line of credit. LIQUIDITY ANALYSIS Company Operating Non-Inv Delnq & Cash Quick Current Grade Bonds Foreclsd Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital , ,221, ,963, ,734, ,452, Company Industry Composite Mtg & Cred Affil Ten Lns Invest Quick Current Year & RE to Cap to Capital Liquidity Liquidity Investments: With $111.3 billion in general account assets at December 31, 2012 (FIRS basis, excluding policy loans), Aegon USA maintains an investment portfolio that is well diversified and generally of high quality; however, holdings in structured securities and alternative asset classes expose the portfolio to potentially higher realized losses and impairments given the continued economic slowdown. The Aegon Americas segment (which is largely made up of Aegon USA, but also includes operations in Canada and Latin America) recorded IFRS net impairments of $151 million during Bonds represent approximately 70% of Aegon USA s investment portfolio and more than 90% are of investment grade quality. However, approximately 16% of the bond investments are in the form of structured securities including non-agency mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Although most of the structured portfolio is rated investment grade with approximately 60% being rated AAA, A.M. Best believes that mortgage and consumer related loans are likely to experience further defaults in light of the recessionary U.S. economic climate. Direct commercial mortgage loans comprise approximately 8% of total assets and are backed principally by office, retail, industrial and apartment properties. The commercial loan portfolio is performing well, with the vast majority of loans in good standing. Nevertheless, A.M. Best expects some defaults as a result of the persistently weak economic conditions. Aegon USA s exposure to alternative assets represents additional risk to the portfolio and consists of investments in higher risk and less liquid assets, such as hedge funds, private equity, mezzanine debt and real estate. A.M. Best notes that the alternative asset exposure has been reduced from prior years and is currently about 4% of the investment portfolio. Remaining assets include investments in common stock and preferred stock, cash and short-term investments. INVESTMENT YIELDS Cash & Invest. Short- Real Estate Exp. Year Yield Bonds Stocks Mortgages Term Gross Ratio INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity Years Yrs-Avg Maturity Government Gov t Agencies & Muni Industrial & Misc Hybrid Securities Affiliated Total A.M. Best Company, Oldwick, NJ Printed May 8, Page 6 of 44

7 Bonds (000) 12,448,872 13,926,055 14,724,168 15,486,018 17,962,223 US Government Foreign Government Foreign - All Other State/Special Revenue - US Public Utilities - US 5.8 Industrial & Misc - US Hybrid Securities Credit Tenant Lns - US Affiliated Private Issues Public Issues Bond Quality (%) Class Class Class Class Class Class INVESTMENTS - EQUITIES Stocks (000) 113, ,684 70,099 64,291 1,012,855 Unaffiliated Common Affiliated Common Unaffiliated Preferred INVESTMENTS - MORTGAGE LOANS & REAL ESTATE Mortgages (000) 1,864,851 2,131,124 2,321,498 2,634,705 3,091,985 Commercial Residential Farm Mortgage Quality (%) 90 Days Delinquent In Process of Foreclosure Total Delinquencies Real Estate (000) 5,203 7,432 6,708 6,920 9,676 Property Held for Inc Property Held for Sale INVESTMENTS - OTHER INVESTED ASSETS Other Inv Assets (000) 3,178,925 2,458,298 3,303,915 4,933,996 3,619,134 Cash Short-Term Schedule BA Assets All Other HISTORY Date Incorporated: 03/05/1858 Date Commenced: 05/22/1860 Domicile: IA MANAGEMENT Officers: Chairman of the Board, President and Chief Executive Officer, Brenda K. Clancy; Chief Investment Officer, Joel L. Coleman; Executive Vice President and Chief Financial Officer, C. Michiel van Katwijk; Senior Vice President and General Counsel, Craig D. Vermie; Vice President and Secretary, H. Stacey Boyer; Treasurer, Karen R. Wright. Directors: Ralph L. Arnold, Brenda K. Clancy, Robert J. Kontz, Mark W. Mullin, Arthur C. Schneider, C. Michiel van Katawijk, Craig D. Vermie. REGULATORY An examination of the financial condition was made as of December 31, 2009, by the insurance departments of Iowa, Maryland, Ohio and Vermont. The 2011 annual independent audit of the company was conducted by Ernst & Young, LLP. The annual statement of actuarial opinion is provided by Donald Krouse. Reserve basis: (Current ordinary business): 1980 CSO 4%, 4 1/2% and 5%; CRVM and Level valuation. (Current annuity business): 5.50% and 5.75% CARVM deferred; 83a 6%, 6.25% and 6.50% CARVM immediate; A % both, 5.50% and 5.75% deferred; Greater of AV or CARVM. FINANCIAL INFORMATION BALANCE SHEET ($000) - December 31, 2012 Assets Liabilities *Total bonds 12,448,872 + policy reserves 10,032,870 *Total preferred stocks 8,418 Policy claims 198,483 *Total common stocks 104,878 Deposit type contracts 889,345 Mortgage loans 1,864,851 Interest maint reserve 361,935 Real estate 5,203 Comm taxes expenses 48,876 Contract loans 477,665 Asset val reserve 191,992 Cash & short-term inv 1,355,524 Funds held reinsurance 5,104,202 Other invested assets 851,509 Other liabilities 748,651 Prems and consids due 201,418 Accrued invest income 170,354 Tot liab w/o sep accts 17,576,352 Other assets 898,979 Separate account bus 12,669,510 Total liabilities 30,245,861 Tot assets w/o sep accts 18,387,672 Common stock 10,137 Separate account bus 12,669,510 Surplus notes 160,000 Paid in & contrib surpl 621,273 Unassigned surplus 19,910 Assets 31,057,182 Total 31,057,182 *Securities are reported on the bases prescribed by the National Association of Insurance Commissioners. +Analysis of reserves; Life $5,392,002; annuities $3,629,809; supplementary contracts with life contingencies $118,619; accidental death benefits $21,075; disability active lives $21,947; disability disabled lives $109,307; miscellaneous reserves $177,841; accident & health $562,271. Back to Top Originally incorporated as a mutual company under the title Maryland Mutual Life and Fire Insurance Company, the title was changed in 1870 to Mutual Life Insurance Company of Baltimore. In 1928, the company was converted to the stock basis. During 1935 the present title was adopted. The company redomesticated from Maryland to Iowa during Mergers: Capital Security Life Insurance Company, North Carolina, 1998; Commonwealth Life Insurance Company, Kentucky, 1998; Peoples Security Life Insurance Company, North Carolina, 1998; Pension Life Insurance Company of America, New Jersey, 2004; Peoples Benefit Life Insurance Company, Iowa, A.M. Best Company, Oldwick, NJ Printed May 8, Page 7 of 44

8 SUMMARY OF OPERATIONS ($000) Premiums: Death benefits 183,520 Ordinary life 240,255 Matured endowments 11,213 Individual annuities 492,493 Annuity benefits 306,295 Credit life 5,912 Surrender benefits 824,936 Group life 52,992 Acc & health benefits 281,497 Group annuities 124,939 Int on policy funds 36,904 Acc & health group 405,404 Supplementary contracts 18,437 Acc & health credit 2,397 Incr life reserves -525,327 Acc & health other 173,228 Incr a & h reserves 41,635 Industrial 4 Res adj reins assumed -10 Total premiums 1,497,625 Commissions 258,896 Supplementary contracts 24,091 Comm exp reins assumed 48,696 investment income 822,314 expenses 5 Amort interest maint res 11,029 Interest expenses 9,600 Comm & exp reins ceded 377,804 Insur taxes lic & fees 31,215 Res adj on reins ceded -762,679 General ins expenses 214,072 Other income 44,275 transf to sep acct -189,380 Mgt and/or service fee 923 Other expenses -319 Misc operating expense -2,045 Other disbursements 209,745 Total 2,015,383 Total 1,759,586 Gain from operations before FIT & div to policyholders ,797 Dividends to policyholders: life... 1,279 Gains from operations after dividends to policyholders ,518 Federal income taxes incurred ,095 gain from operations after FIT and dividends ,422 CASH FLOW ANALYSIS ($000) Funds Provided Funds Applied Gross cash from oper 2,260,479 Benefits paid 1,594,215 Long-term bond proceeds 5,234,590 Comm, taxes, expenses 815,311 Other cash provided 653,689 Long-term bonds acquired 3,414,940 Other cash applied 1,655,174 Incr cash & short-term 669,117 Total 8,148,758 Total 8,148,758 Ultimate Parent: Aegon N.V. STONEBRIDGE LIFE INSURANCE COMPANY 29 South Main Street Rutland, VT Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA Web: Tel.: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A+ Outlook: Stable Best s Financial Size Category: XV RATING RATIONALE Rating Rationale: The published ratings of the Aegon USA companies reflect that they are integral to Aegon s strategy, fully integrated into the group s operations, a material part of the business profile, significant contributors to earnings and have received explicit financial support when needed. Stonebridge Life Insurance Company provides traditional ordinary life, credit, and accident and health insurance through credit card issuers. The ratings of the life insurance companies of Aegon USA reflect the strong and diverse business profile of the overall operation, 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 asset/liability and liquidity management. The ratings also reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon N.V. (Aegon). Partially offsetting these strengths is the group s exposure, albeit reduced, to higher-risk investments (structured securities, direct commercial mortgage loans and various alternative strategies) as well as the equity market sensitivity of its earnings. Aegon USA s business profile remains strong, with competitive market positions in the U.S. life and annuity arena (top 10 life insurance and variable annuity writer), pensions (top 15 defined contribution plan provider) and mutual funds. The group s market positions are supported by a large and diversified distribution system that is made up of independent and career agents, financial institutions, wirehouses and direct response methods. Aegon USA enjoys the efficiencies and competitive advantages of meaningful economies of scale, which have contributed favorably to its historical financial performance. Aegon USA s earnings profile is one of the more diversified in the industry. Product lines that contribute to overall earnings include traditional life, fixed annuities, variable life, variable annuities, mutual funds, pensions and accident and health insurance. Aegon USA has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio has been upgraded by reducing hedge fund holdings and increasing positions in cash and U.S. Treasuries and other short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) remains in run-off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. Furthermore, the group has executed several fixed annuity coinsurance transactions, which has released capital and has reduced its spread-based liabilities. Aegon USA has also reduced its exposure to equity market risk by increasing the size of its macro equity hedge covering its variable annuity business. Lastly, the ratings reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon. As a result, the stand-alone ratings of the members of Aegon USA receive rating enhancement in consideration of Aegon s overall creditworthiness and the strategic and financial importance of the U.S. operations to Aegon. Despite Aegon USA s improved risk profile, A.M. Best notes the possibility of additional, material credit losses within the group s general account investment portfolio. Although IFRS asset impairments have continued to decline over recent years; with $151 million reported in 2012 versus $349 million in 2011, additional realized losses and impairments are likely to occur in 2013, given Aegon USA s sizable structured assets and exposure to direct commercial real estate. Furthermore, the group s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the equity markets would translate to lower fee income and higher required reserves on secondary guarantees. Although additional equity hedging will serve to reduce volatility, the group s earnings remain somewhat correlated to equity market performance. A.M. Best believes the members of Aegon USA are well positioned at the current rating level for the foreseeable future. Factors that could result in negative rating actions for these entities include a significant and sustained decline in consolidated risk-adjusted capitalization as measured by Best s Capital Adequacy Ratio (BCAR) model, net operating performance that does not meet A.M. Best s expectations or a decline in the creditworthiness of Aegon, which could constrain future financial support. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 04/09/13 A+ 06/29/10 A+ 04/13/12 A+ 04/23/09 A 04/27/11 A+ 06/18/08 A A.M. Best Company, Oldwick, NJ Printed May 8, Page 8 of 44

9 KEY FINANCIAL INDICATORS ($000) Total Capital Capital Asset Surplus Valuation Premiums Invest Funds Reserve Written Income Income Year Assets ,138, ,446 19, , , , ,024, ,141 13, ,900 91, , ,157, ,533 15, ,210 96, , ,749, ,091 15, , , , ,676, ,746 16, , , ,103 (*) Within several financial tables of this report, this company is compared against the Multiple Lines Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE 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 life insurance, pensions, long-term savings and investment products. Aegon USA was founded 1989 when Aegon N.V. (Aegon) decided to bring all of its operating companies in the U.S. under a single financial services holding company. Business is conducted through eight primary insurance subsidiaries and include Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Advisors Life Insurance Company of New York, Transamerica Advisors Life Insurance Company, Monumental Life Insurance Company, Stonebridge Life Insurance Company, Stonebridge Casualty Insurance Company and Western Reserve Life Assurance of Ohio. The Aegon USA group of companies is fully integrated and share senior and investment management along with support services. Aegon USA uses a variety of distribution channels, each of which conducts business through one or more of the Aegon USA life insurance companies. The channels are both owned and non-owned and include approximately 1,500 career agents as well as financial planners, banks, brokers and independent consultants. It is also prominent in the home service market and in the direct marketing of life and supplemental accidental death and dismemberment (AD&D) insurance. The Aegon USA companies are present in three main lines of business: Life & Protection (L&P), Individual Savings and Retirement, and Employer Solutions and Pensions. The Institutional Markets Division is no longer considered core to the group and the Life was sold to SCOR SE in Historically, the largest contributor to before-tax earnings has been the Life & Protection (L&P) division, which includes the Agency Group selling individual life and supplemental health products to the middle income market. Also included in the L&P division are the Brokerage Group, Transamerica Employee Benefits, Long Term Care and the Affinity Group. The Brokerage Group markets life insurance in the retail high net worth market through independent general agents with approximately 400 general agencies and 116,000 contract producers. The Affinity Group specializes in marketing life insurance and supplemental health insurance products to consumers through direct channels such as telemarketing, direct mail, television advertising and the Internet. This group also markets credit life, mortgage life and other life insurance and supplemental health products. Transamerica Long Term Care offers products and services aimed at meeting the long-term care insurance needs of its customers. Policies are sold through independent brokerage and at the worksite to individuals and groups. Through Transamerica Employee Benefits, L&P offers voluntary payroll deduction life and supplemental health insurance to employees at their place of work and are designed to supplement employees existing benefit plans. The Individual Savings & Retirement (IS&R) division offers a wide range of savings and retirement products, including mutual funds, investment advice as well as fixed and variable annuities. Transamerica Capital Management (TCM) is the underwriting and wholesaling broker/dealer for variable annuities and mutual funds. TCM builds relationships with independent financial professionals, agents affiliated with regional broker/dealers or major wirehouse firms and representatives through a large bank network. TCM serves these distribution channels through company-owned and external wholesalers. In 2007, Aegon USA acquired Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York (since renamed Transamerica Advisors Life Insurance Company and Transamerica Advisors Life Insurance Company of New York) as part of a strategic distribution relationship with Merrill Lynch with respect to variable annuities. The acquisition of the Merrill Lynch insurance companies served to place Aegon USA in the top ten of variable annuity sellers in the wirehouse and broker/dealer segment. In late 2009, IS&R reduced its sales of fixed annuities in response to lower market interest rates and lower investment returns available in the environment. Similar market conditions have continued over recent years and restricted sales of fixed annuities. As a result, IS&R has de-emphasized the sale of fixed annuities and has executed several large fixed annuity coinsurance transactions in recent years. The Employer Solutions and Pensions (ES&P) division includes full-service retirement plan investments and services in addition to guaranteed savings and investment products directed at various segments of the pension industry. The group sells a full range of products and services to small and mid-size corporate, non-profit and government sponsored plans through brokers, agents, consultants, third-party administrators and accounting firms. Transamerica Retirement Solutions (TRS) serves almost 4,000 mid-sized to large companies and more than 15,500 small to mid-sized companies across the U.S. TRS offers a number of specialized services, including innovative plan design, a wide array of investment choices, extensive education programs and online investment education. In addition, ES&P provides synthetic guaranteed investment contracts primarily to various retirement plans. ES&P is also a leading provider of single premium group annuities (Terminal Funding), which are used by companies to decrease the liability of the defined benefit plans. BOLI-COLI products were distributed through a select number of niche brokers (including an affiliate, Clark Consulting); however, in December, 2010, ES&P announced its plan to discontinue new sales in the executive non-qualified benefits market and related BOLI-COLI business. The former Institutional Markets Division offered institutional spread products such as traditional fixed rate guarantee investment contracts (GICs), funding agreements (FAs), FA-backed notes as well as fee-based products such as synthetic GICs. In 2009, Aegon announced its plan to run-off its instructional spread based business to reduce capital requirements and credit risk. The institutional line of business also included structured product transactions, such as credit default swaps, synthetic collateralized debt obligations, affordable housing tax credit guarantees and hedge fund principal protection. Going forward, Aegon USA will only continue to offer affordable housing tax credit guarantees. TOTAL PREMIUM COMPOSITION & GROWTH ANALYSIS Period DPW Prem Assumed Ending ($000) (% Chg) ($000) (% Chg) , , , , , , , , , , Yr CAGR Period Prem Ceded NPW & Deposits Ending ($000) (% Chg) ($000) (% Chg) , , , , , , , , , , Yr CAGR Territory: The company is licensed in the District of Columbia, AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI and WY. The company is also licensed in Canada A.M. Best Company, Oldwick, NJ Printed May 8, Page 9 of 44

10 2012 BY-LINE BUSINESS ($000) DPW Prem Assumed Product Line ($000) (%) ($000) (%) Ordinary life 82, Group life 116, Credit life 1, Individual A&H 41, Credit A&H 1, Group A&H 225, , Total 469, , Prem Ceded NPW Product Line ($000) (%) ($000) (%) Ordinary life 39, , Group life 81, , Credit life 1, Individual annuities 162 Group annuities 495 Individual A&H 17, , Credit A&H 1, Group A&H 19, , Total 157, , BY-LINE RESERVES ($000) Product Line Ordinary life 112, , , , ,272 Group life 80,075 77,698 77, , ,255 Supplementary contr Individual annuities Group annuities Deposit type contracts 16,292 19,789 24,425 28,175 31,823 Individual A&H 59,878 59,004 58,417 58,210 67,766 Credit A&H Group A&H 500, , , , ,066 Total 770, , ,742 1,648,339 1,660,830 LIFE POLICIES STATISTICS -Ordinary Policies- -Group Policies- -Group Certificates- Year Issued In Force Issued In Force Issued In Force , , , , , , , , , , , , , , , , , , , ,537 Whole Life Endow. & LIFE INSURANCE IN FORCE ($000) Total Insurance In Force Year Adds Term Credit Group Industrial ,454,139 2,161, ,399 7,091,102 10,993, ,483,850 2,778, ,870 6,594,891 11,095, ,443,876 3,009, ,911 6,176,387 10,839, ,451,339 3,063, ,724 5,858,295 10,565, ,413,395 2,829,890 80,825 5,539,389 9,863,500 NEW LIFE BUSINESS ISSUED ($000) Year Whole Life & Endow. Term Credit Group Industrial Total Insurance Issued Non- Par (%) Par (%) , ,193 3,554 1,047,436 2,052, ,554 1,131,255 2, ,715 2,159, , ,093 2, ,451 1,527, , ,252 1, ,575 1,284, , ,624 1, , , ORDINARY LIFE STATISTICS Ord. Renew Average 1st Yr 1st Yr Gen. Lapse Premium Ord. Policy Avg Prem / Comm / Exp. / Ratio Persist (in dollars) Prem Total 1st Yr Policies Year % % Issued In Force ($/M) Prem Prem In Force ,723 11, ,798 13, ,759 15, ,176 15, ,119 14, Number of Policies First Year Gen l Exp/ Return on Issued In Force Premium Reserves Reserves Year (000) (000) (000) (%) (%) , ,749 7, , ,237 12, , ,910 11, , ,396 11, , ,081 9, INDIVIDUAL ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res(%) (%) NPW (%) Res (%) NPW Year (000) GROUP ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res (%) (%) NPW (%) Res (%) NPW Year (000) TOTAL ANNUITY ACTUARIAL RESERVES BY WITHDRAWAL CHARACTERISTICS With Min or No Surrender Surrender Charge 5% With Charge (%) or more (%) MVA (%) No Surrender Allowed (%) Total Annuity Year Res (000) GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) California 54,845 56,655 59,901 65,797 68,688 Texas 53,325 53,999 55,331 57,127 58,584 Florida 27,634 27,556 28,133 29,249 30,691 Pennsylvania 24,438 25,180 26,112 26,924 27,677 Ohio 21,848 22,245 23,213 25,293 25,163 Illinois 21,459 21,845 22,538 22,976 27,362 Georgia 15,653 16,081 17,002 17,480 18,227 Indiana 15,079 12,835 12,782 13,353 13,593 Michigan 14,541 14,769 15,209 15,630 17,428 Virginia 14,421 14,431 14,762 15,563 16,372 All Other 209, , , , ,943 Total 472, , , , , A.M. Best Company, Oldwick, NJ Printed May 8, Page 10 of 44

11 RISK MANAGEMENT Aegon USA s ERM program has evolved via a flattening of risk structure; moving strategic business units (SBU s) from a risk compliance culture to a risk management culture. SBU s are liability experts, engaging SBU CRO s more globally and moving operational risk from Internal Audit to the CRO s. The Group Risk and Capital Committee (GRCC) provides independent oversight of the group s operations. The GRCC covers all risk types, including credit and market risk, pricing and underwriting risk, operational risk, corporate risk as well as the management of the overall capital position, and reports to the group s executive board. Country Risk: Aegon USA has a limited amount of country risk exposure as the company s operations are based in the U.S. However, the company has a modest amount of country risk exposure with its foreign life insurance operations in Canada (through Canadian Premier Life and Transamerica Life Canada) and Latin America with Mexico and Brazil. In 2006, Aegon acquired a 49% interest in Seguros Argos, a Mexican life insurance company. As part of the joint venture Aegon and Seguros Argos set up a jointly owned pension fund company, Afore Argos. In 2009, Aegon acquired a 50% interest in Mongeral S.A. Seguros e Previdencia, Brazil s 6th largest independent life insurer. The U.S. and Canada are considered Tier 1" by A.M. Best s Country Risk Group with Mexico and Brazil both considered Tier 3". OPERATING PERFORMANCE Operating Results: Aegon USA is the largest of Aegon s country units and produces approximately two-thirds of Aegon s IFRS operating earnings. Aegon USA has one of the more diversified earnings profiles in the industry with a good balance of underwriting income from life insurance products and fee-based income from variable and investment-type products. Boosted by the equity market recovery, Aegon USA s consolidated statutory earnings results have consistently improved in recent years. While 2011 consolidated statutory earnings were negatively impacted by the accounting treatment related to the structure of its sale of TARe (life reinsurance business) to SCOR S.E., 2012 consolidated statutory earnings were $1.8 billion. Furthermore, Aegon USA continues to report solid IFRS results. The Aegon Americas segment (which is largely made up of Aegon USA but also includes operations in Canada and Mexico) has recorded IFRS net income of $1.5 billion (2010), $0.9 billion (2011) and $1.3 billion (2012). However, A.M. Best notes that Aegon USA s statutory and IFRS results continue to be dampened by significant investment impairments as the group has taken significant, albeit declining IFRS writedowns of $1.4 billion (2009), $506 million (2010), $349 million (2011) and $151 million (2012). PROFITABILITY ANALYSIS ($000) Company Pre-tax Period Oper Operating Total Ending Income Gain Income Return , , , , , , ,014 8, , , , , , , , , , , , ,136 5-Yr Total 1,264,240 1,038,100 1,029, ,398 Company Industry Composite Period Operating Operating Operating Operating Ending ROR ROE ROR ROE Yr Avg PROFITABILITY TESTS Comm & Ben Paid Exp to NOG Operating to NPW NPW to Tot NOG to Return on Total Year & Dep & Dep Assets Tot Rev Equity Yield Return Year Avg NET OPERATING GAIN ($000) Product Line Ordinary life 65,295 5,427-70,972 12,639 43,122 Group life 8,933 6, ,838 28,710 34,123 Credit life Supplementary contr 7,090 3, ,297 Individual annuities Group annuities Individual A&H 40,013 6,971 1,910 22,922 2,841 Credit A&H Group A&H 262, ,992 55,135 74, ,053 Total 382, , , , ,942 ACCIDENT AND HEALTH STATISTICS ($000) Premiums Premiums Loss Exp. Underwriting Year Written Earned Ratio Ratio Results , , , , , , , , , , , , , , ,869 Current Year Experience: Group 256, , ,338 Credit 1,979 1, Non-can. 20,854 20, ,533 Guarant renew 3,250 3, ,239 Non-renew, S.R Other accident Other ,468 INVESTMENT GAINS ($000) Company Realized Unrealized Inv Capital Capital Year Income Gains Gains ,218 1, ,037-6, , ,898-2, ,736-1,224 1, , ,033 5-Year Total 766,973-8, ,005 Back to Top 2013 A.M. Best Company, Oldwick, NJ Printed May 8, Page 11 of 44

12 Company -Industry Composite- Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield Year (%) (%) (%) (%) (%) (%) Yr Avg BALANCE SHEET STRENGTH Capitalization: Aegon USA s overall risk-based capitalization is adequate to support its current insurance and investment risks and Aegon N.V. has contributed capital when necessary. A.M. Best believes that Aegon USA has good statutory earnings capacity to support its capital position going forward, and that Aegon N.V. is likely to provide additional capital, if needed. Aegon USA s regulatory capital ratio at year-end 2012 remains strong as the group has successfully executed several capital initiatives over recent years, including asset de-risking, continued run-off of institutional spread-based balances and tax-related initiatives. Furthermore, Aegon USA has continued to accelerate capital release through several fixed annuity coinsurance transactions in 2011 and 2012, while also finalizing the sale of its reinsurance book of business in CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Realized Unrealized Operating Capital Income Capital Year Gain Gains Taxes Gains ,942 1,096 49, ,210-6,196 49, , ,692-2, , ,650-1,224 3,978 1, , ,535 2,033 5-Yr Total 1,038,100-8, , ,005 Source of Surplus Growth Change Change % Chg in Other in in Year AVR Changes C&S C&S ,904-69, ,306-4,351 9, ,797 51, , , , , ,217-47, Yr Total 2,366-1,036, , QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus ,309 83, ,945 28, , , ,174 66, ,583 78,163 Year-End Asset Valuation Interest Maint. Adjusted Year C&S Reserve Reserve C&S ,446 19,200 49, , ,141 13,894 49, , ,533 15,691 38, , ,091 15,723 38, , ,746 16,987 36, ,808 LEVERAGE ANALYSIS Company -Industry Composite- C&S NPW Change C&S to Surplus & Dep in NPW to Surplus Year Liab Relief to Capital & Dep Liab Relief Current BCAR: 201 CEDED REINSURANCE ANALYSIS Company -Industry Composite- Face Affil Unaffil Total Total Amount Reins Reins Reins Surplus Reins Reins Reins Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage ,896, ,636, ,347, ,994, ,422, Liquidity: Aegon USA s investment portfolio provides ample liquidity as a majority of the group s assets are in highly liquid public bonds. Aegon USA s liquidity is also supported by $1.5 billion in committed bank lines through Aegon N.V., with whom it has a standing line of credit. LIQUIDITY ANALYSIS Company Operating Non-Inv Delnq & Cash Quick Current Grade Bonds Foreclsd Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital , , , , , Company Industry Composite Mtg & Cred Affil Ten Lns Invest Quick Current Year & RE to Cap to Capital Liquidity Liquidity Investments: With $111.3 billion in general account assets at December 31, 2012 (FIRS basis, excluding policy loans), Aegon USA maintains an investment portfolio that is well diversified and generally of high quality; however, holdings in structured securities and alternative asset classes expose the portfolio to potentially higher realized losses and impairments given the continued economic slowdown. The Aegon Americas segment (which is largely made up of Aegon USA, but also includes operations in Canada and Latin America) recorded IFRS net impairments of $151 million during Bonds represent approximately 70% of Aegon USA s investment portfolio and more than 90% are of investment grade quality. However, approximately 16% of the bond investments are in the form of structured securities including non-agency mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Although most of the structured portfolio is rated investment grade with approximately 60% being rated AAA, A.M. Best believes that mortgage and consumer related loans are likely to experience further defaults in light of the recessionary U.S. economic climate A.M. Best Company, Oldwick, NJ Printed May 8, Page 12 of 44

13 Direct commercial mortgage loans comprise approximately 8% of total assets and are backed principally by office, retail, industrial and apartment properties. The commercial loan portfolio is performing well, with the vast majority of loans in good standing. Nevertheless, A.M. Best expects some defaults as a result of the persistently weak economic conditions. Aegon USA s exposure to alternative assets represents additional risk to the portfolio and consists of investments in higher risk and less liquid assets, such as hedge funds, private equity, mezzanine debt and real estate. A.M. Best notes that the alternative asset exposure has been reduced from prior years and is currently about 4% of the investment portfolio. Remaining assets include investments in common stock and preferred stock, cash and short-term investments. INVESTMENT YIELDS Domicile: VT Cash & Invest. Short- Real Estate Exp. Year Yield Bonds Stocks Mortgages Term Gross Ratio INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity Years Yrs-Avg Maturity Government Gov t Agencies & Muni Industrial & Misc Hybrid Securities Total Bonds (000) 1,235,067 1,238,622 1,537,257 1,394,348 1,562,299 US Government Foreign Government Foreign - All Other State/Special Revenue - US Public Utilities - US 7.3 Industrial & Misc - US Hybrid Securities Private Issues Public Issues INVESTMENTS - OTHER INVESTED ASSETS Other Inv Assets (000) 167, , , ,885 55,402 Cash Short-Term Schedule BA Assets All Other HISTORY Date Incorporated: 11/19/1900 Date Commenced: 05/07/1906 Originally incorporated as The Vermont Accident Insurance Company, the present title was adopted in Mergers: J. C. Penney Insurance Company, California, 1979; Veterans Life Insurance Company, Illinois, MANAGEMENT Officers: President, Edward H. Walker III; Chief Operating Officer, Brenda K. Clancy; Chief Financial Officer, C. Michiel van Katwijk; Chief Investment Officer, Joel L. Coleman; Senior Vice President, Secretary and General Counsel, Craig D. Vermie. Directors: Scott W. Ham, John R. Hunter, Glyn D. Mangum, Jr., Martha A. McConnell, Brian A. Smith, Craig D. Vermie, Edward H. Walker III. REGULATORY An examination of the financial condition was made as of December 31, 2009, by the insurance departments of Iowa, Maryland, Ohio and Vermont. The 2011 annual independent audit of the company was conducted by Ernst & Young, LLP. The annual statement of actuarial opinion is provided by Donald Krouse. Reserve basis: (Current ordinary business): 1980 CSO 4 1/2% CARVM and net level, 5% and 5 1/2%; CRVM valuation. (Current group business): 1980 CSO 4 1/2% and 5%; CRVM valuation. REINSURANCE The company maintains reinsurance agreements with several non-affiliated insurance companies. Only nominal amounts of ordinary life and A&H insurance in-force are ceded. Approximately 15% of group life insurance in-force is ceded. Maximum net retention on any one life is $1,000,000 for both ordinary life and group life policies. Back to Top Bond Quality (%) Class Class Class Class Class Class INVESTMENTS - EQUITIES Stocks (000) 3, ,522 Unaffiliated Common Affiliated Common Unaffiliated Preferred INVESTMENTS - MORTGAGE LOANS & REAL ESTATE Mortgages (000) 111, , , , ,756 Commercial Real Estate (000) 29,107 30,184 31,187 32,405 33,614 Property Occupied by Co FINANCIAL INFORMATION BALANCE SHEET ($000) - December 31, 2012 Assets Liabilities *Total bonds 1,235,067 + policy reserves 754,106 *Total preferred stocks 3,000 Policy claims 47,238 *Total common stocks 699 Deposit type contracts 16,292 Mortgage loans 111,912 Interest maint reserve 36,075 Real estate 29,107 Comm taxes expenses 29,980 Contract loans 30,338 Asset val reserve 16,987 Cash & short-term inv 67,214 Funds held reinsurance 579,592 Securities-colltrl assts 60,931 Payable for securities lending 60,931 deferred tax asset 76,102 Other liabilities 21,961 Prems and consids due 23,064 Total liabilities 1,563,162 Accrued invest income 16,227 Common stock 2,500 Other assets 23,247 Paid in & contrib surpl 33,083 Unassigned surplus 78,163 Assets 1,676,908 Total 1,676,908 *Securities are reported on the bases prescribed by the National Association of Insurance Commissioners. +Analysis of reserves; Life $185,226; annuities $35; supplementary contracts with life contingencies $11; accidental death benefits $3,193; disability active lives $52; disability disabled lives $57; miscellaneous reserves $4,487; accident & health $561, A.M. Best Company, Oldwick, NJ Printed May 8, Page 13 of 44

14 SUMMARY OF OPERATIONS ($000) Premiums: Death benefits 38,604 Ordinary life 42,727 Matured endowments 3 Credit life 1,805 Surrender benefits 3,216 Group life 35,144 Acc & health benefits 90,692 Acc & health group 256,504 Int on policy funds 283 Acc & health credit 1,979 Incr life reserves 2,475 Acc & health other 24,318 Incr a & h reserves 4,388 Total premiums 362,478 Commissions 20,172 investment income 341,083 Comm exp reins assumed 17,197 Amort interest maint res 7,076 Insur taxes lic & fees 11,838 Comm & exp reins ceded 53,659 General ins expenses 163,649 Other income 8,233 Misc operating expense 1 Other disbursements 23,871 Total 772,530 Total 376,389 Gain from operations before FIT & div to policyholders ,140 Dividends to policyholders: life... 0 Gains from operations after dividends to policyholders ,140 Federal income taxes incurred... 13,535 gain from operations after FIT and dividends ,605 CASH FLOW ANALYSIS ($000) Funds Provided Funds Applied Gross cash from oper 749,401 Benefits paid 146,542 Long-term bond proceeds 307,576 Comm, taxes, expenses 243,219 Mortgage loan proceeds 42,441 Long-term bonds acquired 300,157 Other cash provided 14,972 Div to stockholders 390,000 Other cash applied 29,188 Incr cash & short-term 5,284 Total 1,114,390 Total 1,114,390 Ultimate Parent: Aegon N.V. TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY 425 West Capital Avenue, Suite 1800 Little Rock, AR Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA Web: Tel.: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A+ Outlook: Stable Best s Financial Size Category: XV RATING RATIONALE Rating Rationale: The published ratings of the Aegon USA companies reflect that they are integral to Aegon s strategy, fully integrated into the group s operations, a material part of the business profile, significant contributors to earnings and have received explicit financial support when needed. Transamerica Advisors Life Insurance Company has sold non-participating annuity products, including variable annuities, modified guaranteed annuities and immediate annuities. The company s annuity products were sold by licensed agents of Merrill Lynch Life Agency, Inc. (MLLA), pursuant to a general agency agreement by and between the company and MLLA. The ratings of the life insurance companies of Aegon USA reflect the strong and diverse business profile of the overall operation, 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 asset/liability and liquidity management. The ratings also reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon N.V. (Aegon). Partially offsetting these strengths is the group s exposure, albeit reduced, to higher-risk investments (structured securities, direct commercial mortgage loans and various alternative strategies) as well as the equity market sensitivity of its earnings. Aegon USA s business profile remains strong, with competitive market positions in the U.S. life and annuity arena (top 10 life insurance and variable annuity writer), pensions (top 15 defined contribution plan provider) and mutual funds. The group s market positions are supported by a large and diversified distribution system that is made up of independent and career agents, financial institutions, wirehouses and direct response methods. Aegon USA enjoys the efficiencies and competitive advantages of meaningful economies of scale, which have contributed favorably to its historical financial performance. Aegon USA s earnings profile is one of the more diversified in the industry. Product lines that contribute to overall earnings include traditional life, fixed annuities, variable life, variable annuities, mutual funds, pensions and accident and health insurance. Aegon USA has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio has been upgraded by reducing hedge fund holdings and increasing positions in cash and U.S. Treasuries and other short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) remains in run-off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. Furthermore, the group has executed several fixed annuity coinsurance transactions, which has released capital and has reduced its spread-based liabilities. Aegon USA has also reduced its exposure to equity market risk by increasing the size of its macro equity hedge covering its variable annuity business. Lastly, the ratings reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon. As a result, the stand-alone ratings of the members of Aegon USA receive rating enhancement in consideration of Aegon s overall creditworthiness and the strategic and financial importance of the U.S. operations to Aegon. Despite Aegon USA s improved risk profile, A.M. Best notes the possibility of additional, material credit losses within the group s general account investment portfolio. Although IFRS asset impairments have continued to decline over recent years; with $151 million reported in 2012 versus $349 million in 2011, additional realized losses and impairments are likely to occur in 2013, given Aegon USA s sizable structured assets and exposure to direct commercial real estate. Furthermore, the group s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the equity markets would translate to lower fee income and higher required reserves on secondary guarantees. Although additional equity hedging will serve to reduce volatility, the group s earnings remain somewhat correlated to equity market performance. A.M. Best believes the members of Aegon USA are well positioned at the current rating level for the foreseeable future. Factors that could result in negative rating actions for these entities include a significant and sustained decline in consolidated risk-adjusted capitalization as measured by Best s Capital Adequacy Ratio (BCAR) model, net operating performance that does not meet A.M. Best s expectations or a decline in the creditworthiness of Aegon, which could constrain future financial support. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 04/09/13 A+ 06/29/10 A+ 04/13/12 A+ 04/23/09 A 04/27/11 A+ 06/18/08 A A.M. Best Company, Oldwick, NJ Printed May 8, Page 14 of 44

15 KEY FINANCIAL INDICATORS ($000) Total Capital Capital Asset Surplus Valuation Premiums Invest Funds Reserve Written Income Income Year Assets ,341, ,135 1, , , , ,102, ,014 8, , , , ,139, ,142 11,572 28, , , ,050, ,047 12,023 16, , , ,031, ,158 12,246 17, , ,189 (*) Within several financial tables of this report, this company is compared against the Individual Annuity Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE On December 28, 2007, Merrill Lynch Life Insurance Company and its affiliate, ML Life Insurance Company of New York (since renamed Transamerica Advisors Life Insurance Company and Transamerica Advisors Life Insurance Company of New York), were acquired by AEGON USA, Inc. for $1.12 billion and $130 million respectively. Transamerica Advisors Life Insurance Company is licensed to sell life insurance and annuity contracts in all states except New York, as well as the District of Columbia, Guam and the U.S. Virgin Islands. Life insurance and annuity products sold in New York are marketed exclusively through Transamerica Advisors Life Insurance Company of New York. The companies primarily market variable annuities and distribute their products exclusively through Merrill Lynch s network of over 15,000 financial advisors. 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 life insurance, pensions, long-term savings and investment products. Aegon USA was founded 1989 when Aegon N.V. (Aegon) decided to bring all of its operating companies in the U.S. under a single financial services holding company. Business is conducted through eight primary insurance subsidiaries and include Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Advisors Life Insurance Company of New York, Transamerica Advisors Life Insurance Company, Monumental Life Insurance Company, Stonebridge Life Insurance Company, Stonebridge Casualty Insurance Company and Western Reserve Life Assurance of Ohio. The Aegon USA group of companies is fully integrated and share senior and investment management along with support services. Aegon USA uses a variety of distribution channels, each of which conducts business through one or more of the Aegon USA life insurance companies. The channels are both owned and non-owned and include approximately 1,500 career agents as well as financial planners, banks, brokers and independent consultants. It is also prominent in the home service market and in the direct marketing of life and supplemental accidental death and dismemberment (AD&D) insurance. The Aegon USA companies are present in three main lines of business: Life & Protection (L&P), Individual Savings and Retirement, and Employer Solutions and Pensions. The Institutional Markets Division is no longer considered core to the group and the Life was sold to SCOR SE in LIFE POLICIES STATISTICS -Ordinary Policies- -Group Policies- -Group Certificates- Year Issued In Force Issued In Force Issued In Force , , , , ,640 Whole Life Endow. & LIFE INSURANCE IN FORCE ($000) Total Insurance In Force Year Adds Term Credit Group Industrial ,953,359 5,452 7,958, ,251,048 5,157 7,256, ,780,833 4,458 6,785, ,212,855 4,236 6,217, ,803,549 3,909 5,807,458 NEW LIFE BUSINESS ISSUED ($000) Year Whole Life & Endow. Term Credit Group Industrial Total Insurance Issued Non- Par (%) Par (%) ,807 1, ,100 1, ,050 1, ORDINARY LIFE STATISTICS Ord. Renew Average 1st Yr 1st Yr Gen. Lapse Premium Ord. Policy Avg Prem / Comm / Exp. / Ratio Persist (in dollars) Prem Total 1st Yr Policies Year % % Issued In Force ($/M) Prem Prem In Force , , , , , , , , , , Number of Policies First Year Gen l Exp/ Return on Issued In Force Premium Reserves Reserves Year (000) (000) (000) (%) (%) , , , , , INDIVIDUAL ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res(%) (%) NPW (%) Res (%) NPW Year (000) , , , , , , , , , , GROUP ANNUITY STATISTICS Comm & Exp to Res Exp to NPW (000) Res (%) (%) NPW (%) Res (%) NPW Year (000) , , , , , TOTAL ANNUITY ACTUARIAL RESERVES BY WITHDRAWAL CHARACTERISTICS With Min or No Surrender Surrender Charge 5% With Charge (%) or more (%) MVA (%) No Surrender Allowed (%) Total Annuity Year Res (000) , , , , , A.M. Best Company, Oldwick, NJ Printed May 8, Page 15 of 44

16 SEPARATE ACCOUNT DATA Sep Acct Assets 7,062,393 7,124,732 8,299,985 8,485,194 7,658,789 % Growth S/A Assets/Adm Assets Sep Acct Reserves 6,985,497 7,024,585 8,179,236 8,306,923 7,462,115 % Ordinary Life % Individual Annuities % Group Annuities Deposit Type Liabilities Other Liabilities 76, , , , ,674 S/A Prems & Deposits 27,872 26,444 39, , ,915 % Ordinary Life % Individual Annuities % Group Annuities 0.0 Sep Acct Fees & Charges 165, , , , ,756 % Ordinary Life % Individual Annuities Fees & Chgs to Assets% Sep Acct Ben & Wdrwls 730, , , ,908 1,133,373 % Ordinary Life % Individual Annuities % Group Annuities Ben & Wdrwl to Assets% GEOGRAPHIC BREAKDOWN BY DIRECT PREMIUM WRITINGS ($000) Florida 6,455 6,768 7,359 22,881 56,371 Texas 3,929 2,264 4,697 32,842 45,604 California 2,552 2,759 3,493 26,267 28,115 Illinois 2,525 1,552 4,154 31,999 37,565 Guam 1, ,608 New Jersey 1,281 1,338 1,527 6,048 25,603 Georgia ,091 7,160 21,298 Pennsylvania ,791 10,593 22,206 South Carolina ,789 9,140 10,339 North Carolina ,387 12,354 16,794 All Other 7,150 9,882 12, , ,633 Total 28,817 27,588 40, , ,136 RISK MANAGEMENT Aegon USA s ERM program has evolved via a flattening of risk structure; moving strategic business units (SBU s) from a risk compliance culture to a risk management culture. SBU s are liability experts, engaging SBU CRO s more globally and moving operational risk from Internal Audit to the CRO s. The Group Risk and Capital Committee (GRCC) provides independent oversight of the group s operations. The GRCC covers all risk types, including credit and market risk, pricing and underwriting risk, operational risk, corporate risk as well as the management of the overall capital position, and reports to the group s executive board. Country Risk: Aegon USA has a limited amount of country risk exposure as the company s operations are based in the U.S. However, the company has a modest amount of country risk exposure with its foreign life insurance operations in Canada (through Canadian Premier Life and Transamerica Life Canada) and Latin America with Mexico and Brazil. In 2006, Aegon acquired a 49% interest in Seguros Argos, a Mexican life insurance company. As part of the joint venture Aegon and Seguros Argos set up a jointly owned pension fund company, Afore Argos. In 2009, Aegon acquired a 50% interest in Mongeral S.A. Seguros e Previdencia, Brazil s 6th largest independent life insurer. The U.S. and Canada are considered Tier 1" by A.M. Best s Country Risk Group with Mexico and Brazil both considered Tier 3". OPERATING PERFORMANCE Operating Results: Aegon USA is the largest of Aegon s country units and produces approximately two-thirds of Aegon s IFRS operating earnings. Aegon USA has one of the more diversified earnings profiles in the industry with a good balance of underwriting income from life insurance products and fee-based income from variable and investment-type products. Boosted by the equity market recovery, Aegon USA s consolidated statutory earnings results have consistently improved in recent years. While 2011 consolidated statutory earnings were negatively impacted by the accounting treatment related to the structure of its sale of TARe (life reinsurance business) to SCOR S.E., 2012 consolidated statutory earnings were $1.8 billion. Furthermore, Aegon USA continues to report solid IFRS results. The Aegon Americas segment (which is largely made up of Aegon USA but also includes operations in Canada and Mexico) has recorded IFRS net income of $1.5 billion (2010), $0.9 billion (2011) and $1.3 billion (2012). However, A.M. Best notes that Aegon USA s statutory and IFRS results continue to be dampened by significant investment impairments as the group has taken significant, albeit declining IFRS writedowns of $1.4 billion (2009), $506 million (2010), $349 million (2011) and $151 million (2012). PROFITABILITY ANALYSIS ($000) Company Pre-tax Period Oper Operating Total Ending Income Gain Income Return , , , , , , , , , , , , , , , , , , , ,629 5-Yr Total 96,330 91,196-15,362-22,895 Company Industry Composite Period Operating Operating Operating Operating Ending ROR ROE ROR ROE Yr Avg PROFITABILITY TESTS Comm & Ben Paid Exp to NOG Operating to NPW NPW to Tot NOG to Return on Total Year & Dep & Dep Assets Tot Rev Equity Yield Return Year Avg NET OPERATING GAIN ($000) Product Line Ordinary life 31,245 44,237 44,765 42,999 78,535 Supplementary contr 2,802 3,449 6, ,327 Individual annuities 177, , , , ,598 Group annuities 4,455 5,726 7,019 23,215-24,548 Total 215, , , , , A.M. Best Company, Oldwick, NJ Printed May 8, Page 16 of 44

17 INVESTMENT GAINS ($000) Company Realized Unrealized Inv Capital Capital Year Income Gains Gains ,693 34,749-2, ,835-57,376-1, ,323-27,886 1, ,006-18, ,458-37,377-6,560 5-Year Total 602, ,558-7,533 Company -Industry Composite- Inv Inc Inv Return on Total Inv Inc Inv Growth Yield Inv Assets Return Growth Yield Year (%) (%) (%) (%) (%) (%) Yr Avg BALANCE SHEET STRENGTH Capitalization: Aegon USA s overall risk-based capitalization is adequate to support its current insurance and investment risks and Aegon N.V. has contributed capital when necessary. A.M. Best believes that Aegon USA has good statutory earnings capacity to support its capital position going forward, and that Aegon N.V. is likely to provide additional capital, if needed. Aegon USA s regulatory capital ratio at year-end 2012 remains strong as the group has successfully executed several capital initiatives over recent years, including asset de-risking, continued run-off of institutional spread-based balances and tax-related initiatives. Furthermore, Aegon USA has continued to accelerate capital release through several fixed annuity coinsurance transactions in 2011 and 2012, while also finalizing the sale of its reinsurance book of business in CAPITAL GENERATION ANALYSIS ($000) Source of Surplus Growth Realized Unrealized Operating Capital Income Capital Year Gain Gains Taxes Gains ,611 34, , ,663-57,376 7,291-1, ,128-27, , ,551-18,668-2, ,566-37, ,560 5-Yr Total 91, ,558 5,135-7,533 Source of Surplus Growth Change Change % Chg in Other in in Year AVR Changes C&S C&S , ,323-9, ,746 25, , ,173 34, , , , , , Yr Total -1, , , QUALITY OF SURPLUS ($000) Surplus Other Contributed Unassigned Year Notes Debt Capital Surplus ,198-61, , , , , ,778 3, , ,960 Year-End Asset Valuation Interest Maint. Adjusted Year C&S Reserve Reserve C&S ,135 1,654 8, , ,014 8,400 7, , ,142 11,572 9, , ,047 12,023 13, , ,158 12,246 14, ,129 LEVERAGE ANALYSIS Company -Industry Composite- C&S NPW Change C&S to Surplus & Dep in NPW to Surplus Year Liab Relief to Capital & Dep Liab Relief Current BCAR: 201 CEDED REINSURANCE ANALYSIS Company -Industry Composite- Face Affil Unaffil Total Total Amount Reins Reins Reins Surplus Reins Reins Reins Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage ,846, ,002, ,365, ,222, ,100, Liquidity: Aegon USA s investment portfolio provides ample liquidity as a majority of the group s assets are in highly liquid public bonds. Aegon USA s liquidity is also supported by $1.5 billion in committed bank lines through Aegon N.V., with whom it has a standing line of credit. LIQUIDITY ANALYSIS Company Operating Non-Inv Delnq & Cash Quick Current Grade Bonds Foreclsd Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital , , , , Company Industry Composite Mtg & Cred Affil Ten Lns Invest Quick Current Year & RE to Cap to Capital Liquidity Liquidity A.M. Best Company, Oldwick, NJ Printed May 8, Page 17 of 44

18 Investments: With $111.3 billion in general account assets at December 31, 2012 (FIRS basis, excluding policy loans), Aegon USA maintains an investment portfolio that is well diversified and generally of high quality; however, holdings in structured securities and alternative asset classes expose the portfolio to potentially higher realized losses and impairments given the continued economic slowdown. The Aegon Americas segment (which is largely made up of Aegon USA, but also includes operations in Canada and Latin America) recorded IFRS net impairments of $151 million during Bonds represent approximately 70% of Aegon USA s investment portfolio and more than 90% are of investment grade quality. However, approximately 16% of the bond investments are in the form of structured securities including non-agency mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. Although most of the structured portfolio is rated investment grade with approximately 60% being rated AAA, A.M. Best believes that mortgage and consumer related loans are likely to experience further defaults in light of the recessionary U.S. economic climate. Direct commercial mortgage loans comprise approximately 8% of total assets and are backed principally by office, retail, industrial and apartment properties. The commercial loan portfolio is performing well, with the vast majority of loans in good standing. Nevertheless, A.M. Best expects some defaults as a result of the persistently weak economic conditions. Aegon USA s exposure to alternative assets represents additional risk to the portfolio and consists of investments in higher risk and less liquid assets, such as hedge funds, private equity, mezzanine debt and real estate. A.M. Best notes that the alternative asset exposure has been reduced from prior years and is currently about 4% of the investment portfolio. Remaining assets include investments in common stock and preferred stock, cash and short-term investments. INVESTMENT YIELDS Cash & Invest. Short- Real Estate Exp. Year Yield Bonds Stocks Mortgages Term Gross Ratio INVESTMENTS - SECURITIES Current Year Distribution of Bonds By Maturity Years Yrs-Avg Maturity Government Gov t Agencies & Muni Industrial & Misc Hybrid Securities Total Bonds (000) 1,670,188 1,576,709 1,468,536 1,198,100 1,305,604 US Government Foreign Government Foreign - All Other State/Special Revenue - US Public Utilities - US 4.7 Industrial & Misc - US Hybrid Securities Credit Tenant Lns - US Private Issues Public Issues Bond Quality (%) Class Class Class Class Class Class INVESTMENTS - EQUITIES Stocks (000) 10,466 34,292 13,350 13,350 51,876 Unaffiliated Common 1.1 Unaffiliated Preferred INVESTMENTS - MORTGAGE LOANS & REAL ESTATE Mortgages (000) 42,294 44,355 50,816 57,752 63,157 Commercial Farm 5.6 INVESTMENTS - OTHER INVESTED ASSETS Other Inv Assets (000) 1,096,313 1,150,237 1,151,917 1,203,900 1,170,867 Cash Short-Term Schedule BA Assets All Other HISTORY Date Incorporated: 01/27/1986 Date Commenced: 12/23/1986 Domicile: AR Originally incorporated in Washington, the company redomesticated to Arkansas in 1991 just prior to merging with Tandem Insurance Group, Inc. Prior to 1988, activities of Merrill Lynch Life had involved the sale of a nominal volume of ordinary life insurance, but beginning in 1989, substantial growth in net premium income resulted from a new corporate emphasis on the sale of single premium deferred annuities and modified guaranteed annuities. During 1990, MLLIC assumption reinsured all of Family Life Insurance Company s (its former parent and a then indirect wholly owned subsidiary of ML & Co.) life insurance and annuity business which had been marketed through the ML & Co. retail distribution network. This transaction occurred in anticipation of the June 1991 sale of Family Life and its traditional mortgage protection business to Financial Industries Corporation. During October 1991, MLLIC and Tandem Insurance Group, Inc., merged, with the former being the surviving entity. These transactions, combined with the assumption of a large block of ML & Co. sold variable life insurance business from Monarch Life, contributed significantly to the growth in company assets from 1989 to The general account asset base has experienced declines since 1991 resulting from a significant part of MLLIC s general account annuity contracts reaching the end of their initial interest rate guarantee periods. MLLIC has offset this decline by conversion of a large portion of this business into its modified guaranteed annuity and variable annuity products. During the first quarter of 2003 MLLIC discontinued manufacturing and selling single premium variable life insurance products. In 2010, the present title was adopted. Mergers: Tandem Insurance Group, Inc., Illinois, MANAGEMENT Officers: President, Thomas A. Swank; Chief Investment Officer, Joel L. Coleman; Secretary, Richard Wirth; Treasurer and Chief Financial Officer, Eric J. Martin; Chief Actuary, Darin Zimmerman. Directors: Robert R. Frederick, John T. Mallett, Eric J. Martin, Thomas A. Swank, Richard Wirth. REGULATORY An examination of the financial condition was made as of December 31, 2009, by the insurance department of Arkansas. The 2011 annual independent audit of the company was conducted by Ernst & Young, LLP. The annual statement of actuarial opinion is provided by Donald Krouse. Reserve basis: (Current ordinary business): None. (Individual annuity business): Deferred variable annuities Market Value CSV. Immediate annuities 2000 Table a 5.5%. (Modified Guarantee Annuity): Market value CARVM A.M. Best Company, Oldwick, NJ Printed May 8, Page 18 of 44

19 REINSURANCE The maximum net retention on any one life is $500,000 for ordinary and variable life business. FINANCIAL INFORMATION BALANCE SHEET ($000) - December 31, 2012 Assets Liabilities *Total bonds 1,670,188 + policy reserves 1,981,232 *Total preferred stocks 10,350 Policy claims 34,088 *Total common stocks 117 Deposit type contracts 83,970 Mortgage loans 42,294 Interest maint reserve 14,724 Contract loans 752,437 Comm taxes expenses 4,137 Cash & short-term inv 118,101 Asset val reserve 12,246 Securities-colltrl assts 219,227 Payable for securities lending 219,227 deferred tax asset 82,977 Other liabilities -16,371 Prems and consids due 56 Accrued invest income 36,911 Tot liab w/o sep accts 2,333,254 Other assets 36,755 Separate account bus 7,062,393 Total liabilities 9,395,647 Tot assets w/o sep accts 2,969,413 Common stock 2,500 Separate account bus 7,062,393 Paid in & contrib surpl 414,698 Unassigned surplus 218,960 Assets 10,031,805 Total 10,031,805 *Securities are reported on the bases prescribed by the National Association of Insurance Commissioners. +Analysis of reserves; Life $1,236,255; annuities $610,377; supplementary contracts with life contingencies $129,191; disability active lives $7; disability disabled lives $32; miscellaneous reserves $5,370. SUMMARY OF OPERATIONS ($000) Premiums: Death benefits 172,380 Ordinary life 2,789 Annuity benefits 168,399 Individual annuities 15,151 Surrender benefits 575,094 Total premiums 17,940 Int on policy funds 5,672 Supplementary contracts 12,193 Supplementary contracts 23,518 investment income 121,458 Incr life reserves -180,242 Amort interest maint res 2,297 Commissions 35,764 Comm & exp reins ceded 3 Insur taxes lic & fees 185 income 6,600 General ins expenses 13,804 Other income 182,331 transf to sep acct -687,887 Mgt and/or service fee 1 Misc operating expense 1 Total 342,824 Total 126,686 Gain from operations before FIT & div to policyholders ,138 Federal income taxes incurred gain from operations after federal income taxes ,566 CASH FLOW ANALYSIS ($000) Funds Provided Funds Applied Gross cash from oper 342,755 Benefits paid 945,627 Transf from sep account 706,085 Comm, taxes, expenses 50,177 Long-term bond proceeds 279,456 Long-term bonds acquired 369,906 Other cash provided 119,031 Other cash applied 69,340 Incr cash & short-term 12,276 Total 1,447,326 Total 1,447,326 Ultimate Parent: Aegon N.V. TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY OF NEW YORK 4 Manhattanville Road Purchase, NY Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA Web: Tel.: Fax: AMB#: NAIC#: Ultimate Parent#: FEIN#: BEST S CREDIT RATING Best s Financial Strength Rating: A+ Outlook: Stable Best s Financial Size Category: XV RATING RATIONALE Rating Rationale: The published ratings of the Aegon USA companies reflect that they are integral to Aegon s strategy, fully integrated into the group s operations, a material part of the business profile, significant contributors to earnings and have received explicit financial support when needed. Transamerica Advisors Life Insurance Company of New York has sold non-participating annuity products, including variable annuities, modified guaranteed annuities and immediate annuities. The company s annuity products were sold by licensed agents of Merrill Lynch Life Agency, Inc. (MLLA), pursuant to a general agency agreement by and between the company and MLLA. As of September 30, 2009, the company, in addition to no longer actively marketing life insurance products, no longer actively markets variable annuity and market value adjusted annuity products. On December 28, 2007, the company and its affiliate, Transamerica Advisors Life Insurance Company, formerly known as Merrill Lynch Life Insurance Company, were acquired by Aegon USA, Inc., for $0.13 billion and $1.12 billion, respectively, for a total price for both entities of $1.25 billion. Prior to the acquisition date, the company was a wholly owned subsidiary of Merrill Lynch Insurance Group, Inc., which was an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. The ratings of the life insurance companies of Aegon USA reflect the strong and diverse business profile of the overall operation, 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 asset/liability and liquidity management. The ratings also reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon N.V. (Aegon). Partially offsetting these strengths is the group s exposure, albeit reduced, to higher-risk investments (structured securities, direct commercial mortgage loans and various alternative strategies) as well as the equity market sensitivity of its earnings. Aegon USA s business profile remains strong, with competitive market positions in the U.S. life and annuity arena (top 10 life insurance and variable annuity writer), pensions (top 15 defined contribution plan provider) and mutual funds. The group s market positions are supported by a large and diversified distribution system that is made up of independent and career agents, financial institutions, wirehouses and direct response methods. Aegon USA enjoys the efficiencies and competitive advantages of meaningful economies of scale, which have contributed favorably to its historical financial performance. Aegon USA s earnings profile is one of the more diversified in the industry. Product lines that contribute to overall earnings include traditional life, fixed annuities, variable life, variable annuities, mutual funds, pensions and accident and health insurance. Aegon USA has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio has been upgraded by reducing hedge fund holdings and increasing positions in cash and U.S. Treasuries and other 2013 A.M. Best Company, Oldwick, NJ Printed May 8, Page 19 of 44

20 short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) remains in run-off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. Furthermore, the group has executed several fixed annuity coinsurance transactions, which has released capital and has reduced its spread-based liabilities. Aegon USA has also reduced its exposure to equity market risk by increasing the size of its macro equity hedge covering its variable annuity business. Lastly, the ratings reflect A.M. Best s assessment of the financial strength and support of the parent, Aegon. As a result, the stand-alone ratings of the members of Aegon USA receive rating enhancement in consideration of Aegon s overall creditworthiness and the strategic and financial importance of the U.S. operations to Aegon. Despite Aegon USA s improved risk profile, A.M. Best notes the possibility of additional, material credit losses within the group s general account investment portfolio. Although IFRS asset impairments have continued to decline over recent years; with $151 million reported in 2012 versus $349 million in 2011, additional realized losses and impairments are likely to occur in 2013, given Aegon USA s sizable structured assets and exposure to direct commercial real estate. Furthermore, the group s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the equity markets would translate to lower fee income and higher required reserves on secondary guarantees. Although additional equity hedging will serve to reduce volatility, the group s earnings remain somewhat correlated to equity market performance. A.M. Best believes the members of Aegon USA are well positioned at the current rating level for the foreseeable future. Factors that could result in negative rating actions for these entities include a significant and sustained decline in consolidated risk-adjusted capitalization as measured by Best s Capital Adequacy Ratio (BCAR) model, net operating performance that does not meet A.M. Best s expectations or a decline in the creditworthiness of Aegon, which could constrain future financial support. FIVE YEAR RATING HISTORY Date Best s FSR Date Best s FSR 04/09/13 A+ 06/29/10 A+ 04/13/12 A+ 04/23/09 A 04/27/11 A+ 06/18/08 A+ KEY FINANCIAL INDICATORS ($000) Total Capital Capital Asset Surplus Valuation Premiums Invest Funds Reserve Written Income Income Year Assets ,362 51, ,139 8,155-13, ,568 81, ,588 7,570 22, ,182 95, ,071 8,137 14, ,740 58, ,897-13, ,943 77, ,553 18,842 (*) Within several financial tables of this report, this company is compared against the Individual Life Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE On December 28, 2007, Merrill Lynch Life Insurance Company and its affiliate, ML Life Insurance Company of New York (since renamed Transamerica Advisors Life Insurance Company and Transamerica Advisors Life Insurance Company of New York), were acquired by AEGON USA, Inc. for $1.12 billion and 130 million respectively. Transamerica Advisors Life Insurance Company is licensed to sell life insurance and annuity contracts in all states except New York, as well as the District of Columbia, Guam and the U.S. Virgin Islands. Life insurance and annuity products sold in New York are marketed exclusively through Transamerica Advisors Life Insurance Company of New York. The companies primarily market variable annuities and distribute their products exclusively through Merrill Lynch s network of over 15,000 financial advisors. 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 life insurance, pensions, long-term savings and investment products. Aegon USA was founded 1989 when Aegon N.V. (Aegon) decided to bring all of its operating companies in the U.S. under a single financial services holding company. Business is conducted through eight primary insurance subsidiaries and include Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company, Transamerica Advisors Life Insurance Company of New York, Transamerica Advisors Life Insurance Company, Monumental Life Insurance Company, Stonebridge Life Insurance Company, Stonebridge Casualty Insurance Company and Western Reserve Life Assurance of Ohio. The Aegon USA group of companies is fully integrated and share senior and investment management along with support services. Aegon USA uses a variety of distribution channels, each of which conducts business through one or more of the Aegon USA life insurance companies. The channels are both owned and non-owned and include approximately 1,500 career agents as well as financial planners, banks, brokers and independent consultants. It is also prominent in the home service market and in the direct marketing of life and supplemental accidental death and dismemberment (AD&D) insurance. The Aegon USA companies are present in three main lines of business: Life & Protection (L&P), Individual Savings and Retirement, and Employer Solutions and Pensions. The Institutional Markets Division is no longer considered core to the group and the Life was sold to SCOR SE in Historically, the largest contributor to before-tax earnings has been the Life & Protection (L&P) division, which includes the Agency Group selling individual life and supplemental health products to the middle income market. Also included in the L&P division are the Brokerage Group, Transamerica Employee Benefits, Long Term Care and the Affinity Group. The Brokerage Group markets life insurance in the retail high net worth market through independent general agents with approximately 400 general agencies and 116,000 contract producers. The Affinity Group specializes in marketing life insurance and supplemental health insurance products to consumers through direct channels such as telemarketing, direct mail, television advertising and the Internet. This group also markets credit life, mortgage life and other life insurance and supplemental health products. Transamerica Long Term Care offers products and services aimed at meeting the long-term care insurance needs of its customers. Policies are sold through independent brokerage and at the worksite to individuals and groups. Through Transamerica Employee Benefits, L&P offers voluntary payroll deduction life and supplemental health insurance to employees at their place of work and are designed to supplement employees existing benefit plans. The Individual Savings & Retirement (IS&R) division offers a wide range of savings and retirement products, including mutual funds, investment advice as well as fixed and variable annuities. Transamerica Capital Management (TCM) is the underwriting and wholesaling broker/dealer for variable annuities and mutual funds. TCM builds relationships with independent financial professionals, agents affiliated with regional broker/dealers or major wirehouse firms and representatives through a large bank network. TCM serves these distribution channels through company-owned and external wholesalers. In 2007, Aegon USA acquired Merrill Lynch Life Insurance Company and ML Life Insurance Company of New York (since renamed Transamerica Advisors Life Insurance Company and Transamerica Advisors Life Insurance Company of New York) as part of a strategic distribution relationship with Merrill Lynch with respect to variable annuities. The acquisition of the Merrill Lynch insurance companies served to place Aegon USA in the top ten of variable annuity sellers in the wirehouse and broker/dealer segment. In late 2009, IS&R reduced its sales of fixed annuities in response to lower market interest rates and lower investment returns available in the environment. Similar market conditions have continued over recent years and restricted sales of fixed annuities. As a result, IS&R has de-emphasized the sale of fixed annuities and has executed several large fixed annuity coinsurance transactions in recent years. The Employer Solutions and Pensions (ES&P) division includes full-service retirement plan investments and services in addition to guaranteed savings and investment products directed at various segments of the pension industry. The group sells a full range of products and services to small and mid-size corporate, non-profit and government sponsored plans through brokers, agents, consultants, third-party administrators and accounting firms. Transamerica Retirement Solutions (TRS) serves almost 4,000 mid-sized to large companies and more than 15,500 small to mid-sized companies across the U.S. TRS offers a number of specialized services, including innovative 2013 A.M. Best Company, Oldwick, NJ Printed May 8, Page 20 of 44