S&P Affirms AEGON’s Ratings

October 30, 2008

Standard & Poor’s Ratings Services has affirmed its ‘A+/A-1’ long- and short-term counterparty credit ratings on Netherlands-based insurance group AEGON N.V. S&P also affirmed its ‘AA’ long-term counterparty credit and insurer financial strength ratings on AEGON’s core operating insurance entities. The outlook on all of the ratings, however, remains negative.

S&P said it made the announcement following the conclusion of a deal with the Dutch government for AEGON to receive €3 billion ($3.89 billion) of new capital. S&P noted that the Dutch government established a fund with an initial amount of €20 billion ($25.94 billion) on Oct. 9, “to be made available to ‘fundamentally sound and viable’ financial institutions. Insurers fall within the scope of ‘financial institutions’ for the purposes of the fund.”

S&P added that it “views the provision of this capital as giving a strong indicator of support from the Dutch authorities toward AEGON. However, no explicit support is incorporated into the ratings on AEGON N.V. or its subsidiaries beyond the above capital injection.”

Credit analyst Mark Button added, “This capital increase will mitigate the balance sheet concerns highlighted by Standard & Poor’s back in April when we revised our outlook on AEGON to negative. The maintenance of the negative outlook, however, recognizes that the operating environment in AEGON’s core markets has weakened significantly over recent months. This is likely to result in increased pressure on both AEGON’s earnings profile and its ability to execute on a number of balance-sheet management transactions.”

S&P said the “ratings on AEGON reflect the group’s very strong, well-diversified competitive position; very strong capital adequacy and capital quality; very strong financial flexibility; and strong risk controls for most key risks. These positive factors are partially offset by a difficult industry wide operating environment in AEGON’s core markets, and its exposure to investment markets.”

Button explained that the “negative outlook reflects the challenging operating environment in AEGON’s core markets. The ratings may be lowered if adverse trends in net flows emerge or there is a material decline in underlying operating earnings. In addition, should AEGON fail to free capital from its balance sheet, or incur higher-than-expected investment-related losses, the ratings are likely to be lowered.”

Source: Standard & Poor’s – www.standardandpoors.com

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