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© 2012 A.M. Best Company, Oldwick, NJ 08858 Printed May 8, 2012 www.ambest.com of 39

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+

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Ultimate Parent: AEGON N.V.

MONUMENTAL LIFE INSURANCE COMPANY4333 Edgewood Road N.E.

Cedar Rapids, IA 52499Web: www.aegonins.com

Tel.: 319-355-8511 Fax: 319-355-2825AMB#: 006742 NAIC#: 66281Ultimate Parent#: 085244 FEIN#: 52-0419790

BEST’S CREDIT RATING

Best’s Financial Strength Rating: A+ Outlook: StableBest’s Financial Size Category: XV

RATING RATIONALE

Rating Rationale: The published ratings of the AEGON USA companiesreflect that they are integral to AEGON’s strategy, fully integrated into thegroup’s operations, a material part of the business profile, significantcontributors to earnings and have received explicit financial support whenneeded.

Monumental Life Insurance Company sells a full line of insuranceproducts, including individual, credit, and group coverages under life, annuityand accident and health policies as well as investment products, includingguaranteed investment contracts and funding agreements. The company islicensed in 49 states, the District of Columbia, Guam and Puerto Rico. Sales ofthe company’s products are primarily through agents, brokers, financialinstitutions and direct response methods.

The following text is derived from the report of AEGON USA Group.

The ratings of the life insurance companies of AEGON USA reflect thestrong and diverse business profile of the overall operation, largemulti-channel distribution platform, diversified sources of earnings andstrong cash flow generation. The group also benefits from meaningfuleconomies of scale, strong brand recognition and effective asset/liability andliquidity management. The ratings of AEGON USA also reflect A.M. Best’sassessment of the financial strength and support of the parent, AEGON N.V.(AEGON). Partially offsetting these strengths is the group’s exposure tohigher-risk investments (structured securities, direct commercial mortgageloans and various alternative strategies) as well as the equity market sensitivityof its earnings.

AEGON USA’s business profile remains strong, with competitive marketpositions in the U.S. life and annuity arena (top 10 life insurance and variableannuity writer), pensions (top 15 defined contribution plan provider) andmutual funds. The group’s market positions are supported by a large anddiversified distribution system that is made up of independent and careeragents, financial institutions, wirehouses and direct response methods.Through both acquisitions and organic growth, AEGON USA enjoys theefficiencies 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, fixedannuities, variable life, variable annuities, mutual funds, pensions andaccident and health insurance. Following the 2008-2009 global financialcrisis, one of AEGON USA’s strategic priorities has been to reduce itsearnings sensitivity to financial markets in order to realize better earningsstability. To accomplish this, AEGON USA undertook various initiatives tode-risk its balance sheet and improve its risk profile. The quality of theinvestment portfolio was upgraded by reducing hedge fund holdings andincreasing positions in cash and U.S. Treasuries and other short-terminvestments. The institutional spread-based business (primarily guaranteedinterest contracts, funding agreements and funding agreement-backedsecurities) is being run-off to reduce exposure to credit risk, lower requiredcapital and shift to a more balanced mix of business between spread andfee-based products. The group also reduced its exposure to equity market riskby increasing the size of its macro equity hedge covering its variable annuity

business. Lastly, AEGON USA’s ratings reflect A.M. Best’s assessment of thefinancial strength and support of the parent, AEGON. As a result, thestand-alone ratings of AEGON USA receive rating enhancement inconsideration of AEGON’s overall creditworthiness and the strategic andfinancial importance of the U.S. operations to AEGON.

Despite AEGON USA’s improved risk profile, A.M. Best notes thepossibility of additional, material credit losses within the group’s generalaccount investment portfolio. Although pre-tax IFRS asset impairmentsdeclined to USD 352 million in 2011 from USD 506 million in 2010,additional realized losses and impairments are likely to occur in 2012, givenAEGON USA’s sizable structured asset and direct commercial mortgage loanportfolios. AEGON USA’s investments in non-agency mortgage-backedsecurities, asset-backed securities and commercial mortgage-backedsecurities (CMBS) totaled approximately USD 20 billion at December 31,2011 (IFRS amortized cost basis). Furthermore, the group’s substantialvariable annuity portfolio exposes its earnings to volatility, as declines in theequity markets would translate to lower fee income and higher requiredreserves on secondary guarantees. Although additional equity hedging willserve to reduce volatility, the group’s earnings remain somewhat correlated toequity market performance.

A.M. Best believes AEGON USA is well positioned at the current ratinglevel for the foreseeable future. Factors that could result in negative ratingactions for these entities include a significant and sustained decline inconsolidated risk-adjusted capitalization as measured by Best’s CapitalAdequacy Ratio (BCAR) model, net operating performance that does notmeet A.M. Best’s expectations or a decline in the creditworthiness of AEGON,which could constrain future financial support.

FIVE YEAR RATING HISTORY

DateBest’sFSR Date

Best’sFSR

04/13/12 A+ 04/23/09 A04/27/11 A+ 06/18/08 A+06/29/10 A+ 05/30/07 A+

KEY FINANCIAL INDICATORS ($000)Total Capital

Year Assets

CapitalSurplusFunds

Condit’lReserveFunds

NetPremiumsWritten

NetInvest

IncomeNet

Income2007 37,935,163 731,779 432,726 2,428,080 1,465,481 361,3812008 35,531,178 1,236,153 231,442 -2,380,731 1,322,769 343,6642009 34,727,978 1,436,586 72,351 -1,932,803 1,093,285 191,6782010 32,851,172 1,174,423 151,677 1,347,585 910,200 -5372011 31,107,348 980,853 182,524 1,391,713 842,041 481,708

BUSINESS PROFILEThe following text is derived from the report of AEGON USA Group.

AEGON USA is one of the leading life insurance organizations in the U.S.with more than twenty million customers and provides a wide range of lifeinsurance, pensions, long-term savings and investment products. AEGONUSA was founded 1989 when AEGON N.V. (AEGON) decided to bring all ofits operating companies in the U.S. under a single financial services holdingcompany. Business is conducted through eight primary insurance subsidiariesand include Transamerica Life Insurance Company, Transamerica FinancialLife Insurance Company, Transamerica Advisors Life Insurance Company ofNew York, Transamerica Advisors Life Insurance Company, MonumentalLife Insurance Company, Stonebridge Life Insurance Company, StonebridgeCasualty Insurance Company and Western Reserve Life Assurance of Ohio.The AEGON USA group of companies is fully integrated and share senior andinvestment management along with support services.

AEGON USA uses a variety of distribution channels, each of whichconducts business through one or more of the AEGON USA life insurancecompanies. The channels are both owned and non-owned and includeapproximately 1,500 career agents as well as financial planners, banks,brokers and independent consultants. It is also prominent in the home servicemarket and in the direct marketing of life and supplemental accidental death


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and dismemberment (AD&D) insurance. The AEGON USA companies arepresent in three main lines of business: Life & Protection (L&P), IndividualSavings and Retirement, and Employer Solutions and Pensions. TheInstitutional Markets Division is no longer considered core to the group andthe Life Reinsurance was sold to SCOR SE in August 2011.

Historically, the largest contributor to before-tax earnings has been is theL&P division, which includes the career agency operations, conductedthrough Monumental Life, selling individual life and supplemental healthproducts to the middle income market. Also included in the L&P division isTransamerica Insurance & Investments Group (TIIG), Long Term Care andAEGON Direct Marketing Services (ADMS). TIIG markets life insurance inthe retail high net worth market through independent general agents withapproximately 400 general agencies and 116,000 contract producers. ADMSspecializes in marketing life insurance and supplemental health insuranceproducts to consumers through direct channels such as telemarketing, directmail, television advertising and the Internet. This group also markets creditlife, mortgage life and other life insurance and supplemental health products.Lastly, Transamerica Long Term Care offers products and services aimed atmeeting the long-term care insurance needs of its customers. Policies are soldthrough independent brokerage and at the worksite to individuals and groups.

The Individual Savings & Retirement division offers a wide range ofsavings and retirement products, including mutual funds, investment advice aswell as fixed and variable annuities. Transamerica Capital Management(TCM) is the underwriting and wholesaling broker/dealer for variableannuities and mutual funds. TCM builds relationships with independentfinancial professionals, agents affiliated with regional broker/dealers or majorwirehouse firms and representatives through a large bank network. TCMserves these distribution channels through company-owned and externalwholesalers. In 2007, AEGON USA acquired Merrill Lynch Life InsuranceCompany and ML Life Insurance Company of New York (since renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York) as part of a strategic distributionrelationship with Merrill Lynch with respect to variable annuities. Theacquisition of the Merrill Lynch insurance companies served to place AEGONUSA in the top ten of variable annuity sellers in the wirehouse andbroker/dealer segment. Starting in late 2009, AEGON USA reduced its salesof fixed annuities in response to lower market interest rates and lowerinvestment returns available in the environment. Similar market conditionscontinued in 2010 and continue to restrict sales of fixed annuities. As a result,AEGON USA recently decided to de-emphasize the sale of fixed annuities.

The Employer Solutions and Pensions (ES&P) division includesfull-service retirement plan investments and services in addition to guaranteedsavings and investment products directed at various segments of the pensionindustry. The group sells a full range of products and services to small andmid-size corporate, non-profit and government sponsored plans throughbrokers, agents, consultants, third-party administrators and accounting firms.Diversified Investment Advisors serves almost 4,000 mid-sized to largecompanies while Transamerica Retirement Services serves more than 15,500small to mid-sized companies across the U.S. ES&P offers a number ofspecialized services, including innovative plan design, a wide array ofinvestment choices, extensive education programs and online investmenteducation. ES&P is also a leading provider of single premium group annuities(Terminal Funding), which are used by companies to decrease the liability ofthe defined benefit plans. BOLI-COLI products were distributed through aselect number of niche brokers (including an affiliate, Clark Consulting)however, on December 1, 2010, AEGON announced its plan to discontinuenew sales in the executive non-qualified benefits market and relatedBOLI-COLI business. Through Transamerica Worksite Marketing, AEGONUSA offers voluntary payroll deduction life and supplemental healthinsurance to employees at their place of work and are designed to supplementemployees’ existing benefit plans.

The former Institutional Markets Division offered institutional spreadproducts such as traditional fixed rate guarantee investment contracts (GICs),funding agreements (FAs), FA-backed notes as well as fee-based productssuch as synthetic GICs. On February 17, 2009, AEGON announced its plan torun-off its instructional spread based business to reduce capital requirementsand credit risk. However, AEGON USA continues to be a market participantand has a leading market position in synthetic GICs which has been moved to

the Employer Solutions and Pensions division. The institutional line ofbusiness also included structured product transactions, such as credit defaultswaps, synthetic collateralized debt obligations, affordable housing tax creditguarantees and hedge fund principal protection. Going forward, AEGON USAwill only continue to offer affordable housing tax credit guarantees.

PREMIUM AND RESERVE ANALYSISDirect Premiums (000) 2011 2010 2009 2008 2007

Industrial life 1,670 1,884 2,131 2,384 2,718Ordinary life 635,937 644,383 669,466 688,106 704,252Group life 56,233 66,015 76,437 89,960 100,247Credit life 8,534 7,595 7,453 5,913 7,427Individual annuities 407,606 363,124 328,279 533,604 884,912Group annuities 117,364 88,491 140,189 545,058 390,394Individual A&H 114,888 118,791 123,891 128,176 127,871Credit A&H 9,761 12,614 7,613 2,883 8,905Group A&H 431,164 428,443 430,830 437,548 436,963Other … … … … 0

Total 1,783,157 1,731,339 1,786,289 2,433,632 2,663,687

Reins Assumed Prems(000) 2011 2010 2009 2008 2007

Ordinary life 3,213 86,008 8,414 8,850 18,649Group life 6,054 7,394 8,612 9,765 3,291Credit life 4,466 7,359 9,799 24,582 22,032Individual annuities 52,459 75,708 73,826 53,207 22,485Group annuities 245 419 87 … …Individual A&H 72,991 73,010 69,371 135,125 113,043Credit A&H -1,102 415 1,138 10,291 12,117Group A&H 74,607 65,475 59,693 6,193 9,392

Total 212,933 315,789 230,939 248,012 201,010

Reins Ceded Prems (000) 2011 2010 2009 2008 2007

Industrial life 1,662 1,871 500 … 2,710Ordinary life 441,448 561,497 50,628 163,434 116,863Group life 7,652 6,567 6,779 5,506 6,887Credit life 13,876 2,902 4,183 4,563 6,150Individual annuities 30,985 43,635 24,952 9 11Group annuities 210 358 … 248,000 250,000Individual A&H 49 2,489 2,298 4,264 4,524Credit A&H 22,243 3,769 4,142 5,321 6,845Group A&H 86,252 76,454 76,884 46,542 42,627

Total 604,378 699,542 170,367 477,640 436,617

Net Premiums & Deposits(000) 2011 2010 2009 2008 2007

Industrial life 8 13 1,631 2,384 8Ordinary life 197,949 169,152 627,520 533,801 606,326Group life 54,635 66,841 78,270 94,219 96,651Credit life -876 12,052 13,069 25,932 23,309Individual annuities 446,946 411,612 -3,101,014 602,097 925,491Group annuities 130,129 144,635 251,165 4,162,268 6,180,236Individual A&H 187,830 189,312 190,964 259,037 236,390Credit A&H -13,584 9,260 4,609 7,853 14,177Group A&H 419,519 417,464 413,638 397,199 403,728

Total 1,422,555 1,420,341 1,971,182 6,084,789 8,486,316Deposits (incl. above) 30,842 72,755 124,321 3,880,785 6,058,236


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General Account ReserveDistribution (000) 2011 2010 2009 2008 2007

Industrial life 455,291 467,716 480,413 24,647 506,842Ordinary life 4,994,348 4,851,083 4,685,951 1,264,749 5,264,340Group life 604,718 632,380 654,766 668,321 683,263Credit life 2,852 37,613 62,665 101,919 142,968Supplementary contracts 78,064 72,658 92,510 140,638 117,410Individual annuities 2,867,737 2,916,274 2,960,483 3,094,841 3,218,884Group annuities 992,916 1,126,679 1,284,215 1,357,102 1,712,268Deposit type contracts 917,274 964,280 1,170,859 2,505,054 2,179,743Individual A&H 431,747 393,987 351,470 321,091 336,742Credit A&H 8,266 32,104 46,876 70,054 85,731Group A&H 80,622 78,627 75,741 67,176 73,824

Total 11,433,836 11,573,401 11,865,950 9,615,592 14,322,017

Geographical breakdown of direct premium writings ($000): Florida,$132,337 (7.4%); New Jersey, $123,304 (6.9%); California, $120,731 (6.7%);Kentucky, $118,490 (6.6%); Pennsylvania, $94,701 (5.3%); otherjurisdictions, $1,209,867 (67.2%).

RISK MANAGEMENTThe following text is derived from the report of AEGON USA Group.

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 arisk management culture. SBU’s are liability experts, engaging SBU CRO’smore globally and moving operational risk from Internal Audit to the CRO’s.The Group Risk and Capital Committee (GRCC) provides independentoversight of the group’s operations. The GRCC covers all risk types, includingcredit and market risk, pricing and underwriting risk, operational risk,corporate risk as well as the management of the overall capital position, andreports to the group’s executive board.

·

Country Risk: AEGON USA has a limited amount of country risk exposureas the company’s operations are based in the U.S. However, the company has amodest amount of country risk exposure with its foreign life insuranceoperations in Canada (through Canadian Premier Life and Transamerica LifeCanada) and Latin America with Mexico and Brazil. In 2006, AEGONacquired 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 ownedpension fund company, Afore Argos. In 2009, AEGON acquired a 50%interest in Mongeral S.A. Seguros e Previdencia, Brazil’s 6th largestindependent life insurer. The U.S. and Canada are considered “Tier 1" byA.M. Best’s Country Risk Group with Mexico and Brazil considered ”Tier 3"and “Tier 4" respectively.

OPERATING PERFORMANCEThe following text is derived from the report of AEGON USA Group.

Operating Results: AEGON USA is the largest of AEGON’s country unitsand produces approximately two-thirds of AEGON’s IFRS operatingearnings. AEGON USA has one of the more diversified earnings profiles inthe industry with a good balance of underwriting income from life insuranceproducts and fee-based income from variable and investment-type products.Boosted by the equity market recovery, AEGON USA’s consolidated statutoryearnings results improved markedly for both 2009 and 2010 after experiencinga $641 million net loss for 2008. However, 2011 consolidated statutoryearnings reported a $2.5 billion net loss, which is primarily attributed to theaccounting treatment related to the structure of its sale of TARe (lifereinsurance business) to SCOR SE. Nonetheless, AEGON USA continues toreport solid IFRS results. The AEGON Americas segment (which is largelymade up of AEGON USA but also includes operations in Canada and Mexico)recorded IFRS net income of $697 million (2009), $1.5 billion (2010) and$933 million (2011) compared to a loss of $2 billion for 2008. However, A.M.Best notes that AEGON USA’s statutory and IFRS results continue to bedampened by significant investment impairments as the group has takensignificant, albeit declining IFRS writedowns of $1.4 billion (2009), $506million (2010) and $352 million (2011).

PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep

Comm &Exp toNPW& Dep

NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 30.2 13.4 0.8 7.4 29.4 6.23 6.522008 41.6 16.9 1.4 -99.9 53.7 5.27 4.452009 105.2 5.4 1.2 6.2 32.6 4.53 3.082010 113.4 41.5 0.1 1.0 1.7 4.23 4.262011 109.9 3.4 1.6 19.1 47.4 4.36 4.17

PROFITABILITY ANALYSISNet Operating Gain (000) 2011 2010 2009 2008 2007

Industrial life -1,041 1,183 5,341 25,811 27,964Ordinary life 307,457 -36,667 197,224 217,311 108,015Group life -2,959 9,043 29,464 28,811 37,739Credit life 14,006 8,446 16,259 39,306 35,040Supplementary contracts -9,574 1,097 6,934 499 14,100Individual annuities -56,951 -81,646 -100,365 16,169 61,185Group annuities 181,174 77,709 224,393 99,660 -14,215Individual A&H 33,052 13,722 29,200 43,035 -32,693Credit A&H 7,245 3,986 7,599 4,207 4,631Group A&H 38,143 25,447 19,788 53,983 43,262

Total 510,550 22,320 435,836 528,792 285,028

ACCIDENT AND HEALTH STATISTICS ($000)

Year

NetPremiumsWritten

NetPremiums

EarnedLoss

RatioExp.Ratio

Under-writingResults

2007 654,492 664,397 59.5 41.2 -40,3452008 664,641 693,710 44.0 41.2 135,9922009 609,054 631,283 54.7 35.5 67,2582010 615,553 627,135 53.0 36.2 72,3662011 593,850 606,640 55.0 37.7 48,758Current Year Experience:Group 419,681 418,043 53.7 38.0 34,199Credit -13,584 157 -99.9 28.7 5,833Collectively renew 0 0 -23.3 27.3 0Non-can 50,593 50,786 49.5 39.7 5,559Guaranteed renew 129,471 129,872 65.6 28.4 7,924Non-renew, S.R. 195 197 37.4 40.6 44Other accident 6,139 6,214 13.1 40.2 2,934Other 1,355 1,370 7.3 664.8 -7,736

BALANCE SHEET STRENGTHThe following text is derived from the report of AEGON USA Group.

Capitalization: AEGON USA’s overall risk-based capitalization is adequateto support its current insurance and investment risks and AEGON N.V. hascontributed capital when necessary. A.M. Best believes that AEGON USAhas good statutory earnings capacity to support its capital position goingforward, and that AEGON N.V. is likely to provide additional capital, ifneeded.

AEGON USA’s regulatory capital ratio at year-end 2011 increased by 91percentage points from year-end 2008 due to several capital initiatives. Theseinclude asset de-risking, continued run-off of institutional spread-basedbalances and tax-related initiatives. Furthermore, AEGON USA hascontinued to accelerate capital release through fixed annuity coinsurancetransactions in 2011 and the sale of its reinsurance book of business.

LEVERAGE TESTS

Year

C&Sto

LiabilitiesSurplusRelief

ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 4.7 11.6 226.7 7.3 38.8 -23.72008 5.8 3.9 509.0 4.1 -28.3 26.02009 6.6 32.7 397.7 1.3 -67.6 2.82010 6.6 -2.0 476.6 1.1 -27.9 -12.12011 6.3 54.0 468.6 1.2 0.2 -12.3

Current BCAR: 202


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SOURCES OF CAPITAL GROWTH ($000)

YearNet

Gain

RealizedCapitalGains

UnrealizedCapitalGains

ChangeAVR

OtherChanges

Changein

C&S2007 285,028 76,354 -12,236 -113,128 -710,598 -474,5802008 528,792 -185,128 -26,319 201,284 -14,255 504,3742009 435,836 -244,158 -100,340 159,091 -49,996 200,4332010 22,320 -22,857 33,627 -79,326 -215,927 -262,1632011 510,550 -28,842 -12,831 -30,847 -631,600 -193,570

CAPITAL TRENDS ($000)

Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 731,779 160,000 1,200,000 1,492 432,726 89,5892008 1,236,153 160,000 … 1,484 231,442 8,4342009 1,436,586 160,000 393,700 1,444 72,351 58,9032010 1,174,423 160,000 500,000 1,388 151,677 207,0772011 980,853 160,000 300,000 1,342 182,524 156,586


Liquidity: AEGON USA’s investment portfolio provides ample liquidity as amajority of the group’s assets are in highly liquid public bonds. AEGONUSA’s liquidity is also supported by $1.5 billion in committed bank linesthrough AEGON N.V., with whom it has a standing line of credit.

LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital

Delnq &ForeclsdMtg toCapital

Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 2,508,347 40.8 57.7 110.6 0.9 279.0 42.52008 547,940 49.3 63.5 119.2 0.7 213.7 74.92009 -2,221,992 62.5 74.9 120.0 0.5 177.7 61.92010 -2,963,484 44.4 59.6 118.5 0.6 178.5 77.92011 -1,734,800 42.3 56.6 121.9 0.7 183.8 68.6

INVESTMENT YIELDS

YearNet

Yield Bonds StocksMort-gages

Cash &ShortTerm

Real EstateInvest.Exp.RatioGross Net

2007 6.23 6.37 6.19 7.20 61.73 15.21 -4.57 4.032008 5.27 5.52 5.59 6.42 2.63 15.33 -0.75 3.532009 4.53 5.19 0.68 5.67 0.85 12.82 -4.41 3.812010 4.23 5.03 4.43 5.83 0.25 15.67 0.97 4.502011 4.36 4.88 6.35 5.57 0.23 15.49 -1.22 4.11


Investments: With $115.4 billion in general account assets at December 31,2011 (IFRS amortized cost basis, excluding policy loans), AEGON USAmaintains an investment portfolio that is well diversified and generally of highquality, however holdings in structured securities and alternative asset classesexpose the portfolio to potentially higher realized losses and impairmentsgiven the continued economic slowdown. The AEGON Americas segment(which is largely made up of AEGON USA but also includes operations inCanada and Latin America) recorded IFRS net impairments of $352 millionduring 2011.

Bonds represent approximately three-fourths of AEGON USA’s investmentportfolio and more than 90% are of investment grade quality. However,approximately 18% of the bond investments are in the form of structuredsecurities including non-agency mortgage-backed securities, asset-backedsecurities and commercial mortgage-backed securities. Although most of thestructured portfolio is rated investment grade with approximately 60% beingrated AAA, A.M. Best believes that mortgage and consumer related loans arelikely to experience further defaults in light of the recessionary U.S. economicclimate.

Direct commercial mortgage loans comprise approximately 9% of totalassets and are backed principally by office, retail, industrial and apartmentproperties. The commercial loan portfolio is performing well with the vastmajority of loans in good standing. Nevertheless, A.M. Best expects somedefaults as a result of the persistently weak economic conditions.

AEGON USA’s exposure to alternative assets represents additional risk tothe 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. Bestnotes that the alternative asset exposure has been reduced from prior years andis currently about 4% of the investment portfolio. Remaining assets includeinvestments in common stock and preferred stock, cash and short-terminvestments.

INVESTMENT DATACurrent Year Distribution of Bonds by Maturity

——————Years—————— Yrs-AvgMaturity0-1 1-5 5-10 10-20 20-

Government 0.3 1.0 2.1 0.7 2.1 13Gov’t Agencies & Muni 0.2 0.4 0.3 0.3 0.2 9Industrial & Misc 10.6 25.5 18.7 10.4 21.5 11Hybrid Securities 0.2 0.2 … 1.9 3.0 20Affiliated 0.1 0.3 0.1 … … 3

Total 11.3 27.4 21.2 13.3 26.8 11

2011 2010 2009 2008 2007

Bonds (000) 13,926,055 14,724,167 15,486,018 17,962,223 19,489,466

US Government 5.0 4.4 4.4 4.2 1.8Foreign Government 1.5 1.4 1.4 1.6 1.9Foreign - All Other 19.2 18.9 19.2 18.6 18.0State/Special Rev. - US 1.5 1.5 1.2 1.3 0.9Public Utilities - US … … … 5.8 5.7Industrial & Misc - US 66.8 67.3 67.5 68.0 71.1Hybrid Securities 5.6 5.8 5.7 … …Credit Tenant Lns - US … 0.2 0.2 0.2 0.2Affiliated 0.5 0.4 0.4 0.4 0.3

Private Issues 27.3 30.7 22.7 25.4 27.6Public Issues 72.7 69.3 77.3 74.6 72.4

Bond Quality (%) 2011 2010 2009 2008 2007

Class 1 59.3 60.4 59.2 57.5 56.3Class 2 31.0 29.7 31.2 33.5 37.1Class 3 4.8 4.4 5.0 5.2 4.0Class 4 3.2 3.1 2.9 1.8 1.8Class 5 1.4 2.0 1.1 1.7 0.5Class 6 0.4 0.5 0.6 0.3 0.3

2011 2010 2009 2008 2007

Mortgages (000) 2,131,124 2,321,498 2,634,705 3,091,985 3,194,935

Commercial 95.8 94.8 94.8 94.4 94.3Residential 0.4 1.2 1.3 1.3 1.5Farm 3.8 3.9 3.9 4.4 4.3

Mortgage Quality (%) 2011 2010 2009 2008 2007

90 Days Delinquent 0.0 0.1 0.1 0.0 0.0In Process of Forecl 0.0 0.0 0.0 0.0 0.0Total Delinquencies 0.1 0.1 0.1 0.1 0.0

2011 2010 2009 2008 2007

Real Estate (000) 7,432 6,708 6,920 9,676 10,905

Property Held for Inc 5.9 5.9 6.9 12.2 11.1Property Held for Sale 94.1 94.1 93.1 87.8 88.9

2011 2010 2009 2008 2007

Stocks (000) 128,684 70,099 64,291 1,012,855 1,103,349

Unaffiliated Common 63.5 68.5 70.9 3.0 1.2Affiliated Common 17.4 31.1 28.7 1.3 0.8Unaffiliated Preferred 19.0 0.4 0.4 95.6 97.7Affiliated Preferred … … … … 0.2


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2011 2010 2009 2008 2007

Other Inv Assets (000) 2,458,298 3,303,915 4,933,996 3,619,134 1,482,869

Cash 14.2 26.4 1.6 3.9 -0.3Short-Term 13.7 16.3 72.9 52.9 10.4Schedule BA Assets 37.8 28.3 14.1 22.8 57.1All Other 34.2 29.1 11.4 20.4 32.9

HISTORYDate Incorporated: 03/05/1858 Date Commenced: 05/22/1860

Domicile: IA

Originally incorporated as a mutual company under the title MarylandMutual Life and Fire Insurance Company, the title was changed in 1870 toMutual Life Insurance Company of Baltimore. In 1928, the company wasconverted to the stock basis. During 1935 the present title was adopted. Thecompany redomesticated from Maryland to Iowa during 2007.

Mergers: Capital Security Life Insurance Company, North Carolina, 1998;Commonwealth Life Insurance Company, Kentucky, 1998; Peoples SecurityLife Insurance Company, North Carolina, 1998; Pension Life InsuranceCompany of America, New Jersey, 2004; Peoples Benefit Life InsuranceCompany, Iowa, 2007.

MANAGEMENT

Officers: Chairman of the Board, President and Chief Executive Officer,Brenda K. Clancy; Chief Investment Officer, Joel L. Coleman; Executive VicePresident and Chief Financial Officer, Darryl D. Button; Senior VicePresident and General Counsel, Craig D. Vermie; Vice President andSecretary, H. Stacey Boyer; Treasurer, Karen R. Wright.

Directors: Ralph L. Arnold, Darryl D. Button, Brenda K. Clancy, Robert J.Kontz, Mark W. Mullin, Arthur C. Schneider, Craig D. Vermie.

REGULATORYAn examination of the financial condition was made as of December 31,

2009, by the insurance departments of Iowa, Maryland, Ohio and Vermont.The 2010 annual independent audit of the company was conducted by Ernst &Young, LLP. The annual statement of actuarial opinion is provided by DonaldKrouse.

Territory: The company is licensed in the District of Columbia, Guam, PuertoRico, 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 foreigncountries.

Reserve basis: (Current ordinary business): 1980 CSO 4%, 4 1/2% and 5%;CRVM and Net Level valuation. (Current annuity business): 5.50% and 5.75%CARVM deferred; 83a 6%, 6.25% and 6.50% CARVM immediate; A20006.5% both, 5.50% and 5.75% deferred; Greater of AV or CARVM.

FINANCIAL INFORMATIONBALANCE SHEET ($000) - December 31, 2011

Assets Liabilities*Total bonds 13,926,055 +Net policy reserves 10,516,561*Total preferred stocks 24,514 Policy claims 195,561*Total common stocks 104,171 Deposit type contracts 917,274Mortgage loans 2,131,124 Interest maint reserve 156,586Real estate 7,432 Comm taxes expenses 64,140Contract loans 487,043 Asset val reserve 182,524Cash & short-term inv 686,406 Funds held reinsurance 5,889,102Other invested assets 930,134 Other liabilities 733,195Prems and consids due 210,050Accrued invest income 181,264 Tot liab w/o sep accts 18,654,944Other assets 947,605 Separate account bus 11,471,551

Total Liabilities 30,126,495Tot assets w/o sep accts 19,635,797 Common stock 10,137

Separate account bus 11,471,551 Surplus notes 160,000Paid in & contrib surpl 620,791Unassigned surplus 68,805Other surplus 121,120

Assets 31,107,348 Total 31,107,348

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $5,813,050; annuities $3,840,063; supplementarycontracts with life contingencies $98,654; accidental death benefits $21,956; disability activelives $23,115; disability disabled lives $107,885; miscellaneous reserves $91,203; accident &health $520,636.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 183,623Ordinary life 197,702 Matured endowments 9,812Individual annuities 429,079 Annuity benefits 275,877Credit life -876 Disability benefits 0Group life 54,635 Surrender benefits 731,102Group annuities 117,400 Acc & health benefits 305,136Acc & health group 419,519 Int on policy funds 40,624Acc & health credit -13,584 Supplementary contracts 17,016Acc & health other 187,830 Incr life reserves -108,479Industrial 8 Incr a & h reserves 15,919Total premiums 1,391,713 Res adj reins assumed -21

Supplementary contracts 11,509 Commissions 253,225Net investment income 842,041 Comm exp reins assumed 67,337Amort interest maint res 4,412 Reinsurance expenses 6Comm & exp reins ceded 529,883 Interest expenses 9,600Res adj on reins ceded -151,484 Insur taxes lic & fees 28,925Other income 39,545 General ins expenses 219,655Mgt and/or service fee 1,147 Net transf to sep acct -136,670

Misc operating expense 1,139Other disbursements 211,468

Total 2,668,767 Total 2,125,295

Gain from operations before FIT & div to policyholders....................................... 543,472

Dividends to policyholders: life......................................................................... 1,342

Gains from operations after dividends to policyholders ........................................ 542,130

Federal income taxes incurred........................................................................... 31,580

Net gain from operations after FIT and dividends................................................ 510,550

CASH FLOW ANALYSIS ($000)

Funds Provided Funds AppliedGross cash from oper 2,889,715 Benefits paid 1,594,795Long-term bond proceeds 2,889,949 Comm, taxes, expenses 782,498Other invest proceeds 528,785 Long-term bonds acquired 2,112,595Other cash provided 140,631 Other cash applied 2,681,197Decr cash & short-term 722,004

Total 7,171,085 Total 7,171,085


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SEPARATE ACCOUNT DATA

2011 2010 2009 2008 2007Sep Acct Assets 11,471,551 11,512,136 10,396,423 8,811,340 11,757,527% Growth -0.4 10.7 18.0 -25.1 7.9S/A Assets/Adm Assets 36.9 35.0 29.9 24.8 31.0

Sep Acct Reserves 11,457,333 11,479,325 10,357,375 8,752,381 11,729,881% Ordinary Life 0.1 0.1 0.1 0.1 0.1% Individual Annuities 84.9 85.0 86.2 88.6 88.6% Group Annuities 15.1 14.9 13.7 11.3 11.3Other Liabilities 14,218 32,811 39,048 58,960 27,646

S/A Prems & Deposits 402,855 358,366 331,601 697,522 691,977% Individual Annuities 100.0 99.4 99.2 75.6 127.1% Group Annuities 0.0 0.6 0.8 24.4 -27.1

Sep Acct Fees & Charges 34,847 32,602 29,143 34,249 37,678% Ordinary Life 0.7 0.8 0.8 0.3 0.4% Individual Annuities 98.5 98.5 98.4 98.9 98.2% Group Annuities 0.8 0.8 0.8 0.8 1.4Fees & Chgs to Assets% 0.3 0.3 0.3 0.3 0.3

Sep Acct Ben & Wdrwls 541,072 546,053 593,623 592,586 520,932% Ordinary Life 0.2 0.1 0.1 0.1 0.0% Individual Annuities 99.7 99.6 99.6 99.6 88.3% Group Annuities 0.2 0.3 0.4 0.4 11.7Ben & Wdrwl to Assets% 4.7 5.0 6.2 5.8 4.6

ORDINARY LIFE STATISTICS

Year

Ord.LapseRatio

%

AverageOrd. Policy(in dollars)

Avg.Prem($/M)

1st YrPrem /TotalPrem

1st YrComm /1st YrPrem

Gen.Exp. /

PoliciesIn ForceIssued In Force

2007 4.8 30,855 20,289 11.50 8.4 81.3 37.842008 9.1 29,706 20,317 11.43 7.2 81.1 34.802009 7.9 32,100 20,559 11.44 6.6 73.5 38.162010 9.0 33,093 24,751 9.98 6.7 91.0 33.302011 9.5 26,671 20,583 11.46 8.8 113.3 38.54

Year

# PoliciesIssued(000)

# Policiesin Force

(000)

First YearPremium

(000)

Gen’l Exp /Reserves

(%)

Return onReserves

(%)2007 165 3,098 59,038 2.22 2.052008 135 3,000 49,741 8.21 17.082009 113 2,882 44,189 2.34 4.202010 106 2,956 43,257 2.03 -0.752011 140 2,709 55,675 2.09 6.15

INDIVIDUAL ANNUITY STATISTICS

YearNPW &

Dep (000)

Res &Dep Liab

(000)

Exp toRes & DepLiab (%)*

Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)

Benefits &Wdrwls toRes & DepLiab (%)*

2007 925,491 14,350,089 0.1 1.4 111.6 7.22008 602,097 11,585,726 0.1 2.9 168.1 8.72009 390,318 12,545,396 0.1 -3.1 248.1 7.72010 411,612 13,285,460 0.2 4.2 209.0 6.52011 446,946 13,190,820 0.2 3.9 187.6 6.4

* Includes Separate Account reserves.

GROUP ANNUITY STATISTICS

YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 6,180,236 4,587,496 10.8 7.7 10.9 14.72008 4,162,268 4,249,481 11.6 11.4 14.2 13.92009 251,165 3,304,232 0.7 4.9 116.6 8.92010 144,635 3,257,704 0.5 -2.2 173.5 7.72011 130,129 3,107,738 0.4 -2.5 149.8 6.3


TOTAL ANNUITY ACTUARIAL RESERVES & DEPOSIT TYPELIABILITIES BY WITHDRAWAL CHARACTERISTICS

Year

Total AnnuityRes & DepLiab (000)

Min or NoSurrender

Charge (%)*

WithSurrenderCharge 5%or more (%)*

WithMVA(%)*

NoSurrenderAllowed

(%)*2007 33,466,276 39.5 0.7 3.5 56.22008 28,683,085 35.1 0.6 0.2 64.22009 27,316,606 54.0 2.0 0.3 43.72010 24,319,612 64.4 2.1 0.4 33.22011 23,797,989 64.9 1.7 0.3 33.0


NEW LIFE BUSINESS ISSUED ($000)

YearWhole Life& Endow. Term Credit Group

Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 2,464,733 2,637,825 1,010,539 795,462 … 6,908,559 100 …2008 2,077,812 1,936,043 2,244,399 445,558 … 6,703,812 100 …2009 1,842,101 1,783,465 607,534 366,206 … 4,599,305 100 …2010 1,948,665 1,553,316 759,870 446,785 … 4,708,636 100 02011 2,494,451 1,242,148 1,678,479 375,263 … 5,790,341 100 …

LIFE INSURANCE IN FORCE ($000)

Year

Whole LifeEndow. &

Adds Term Credit Group Industrial

TotalInsuranceIn Force

2007 39,482,983 23,370,775 5,968,719 9,636,023 856,804 79,315,3042008 39,069,494 21,887,163 5,302,910 8,368,577 821,593 75,449,7372009 38,188,134 21,063,919 3,579,243 7,426,929 788,996 71,047,2222010 37,206,937 35,964,246 7,197,140 6,702,413 757,088 87,827,8232011 36,826,523 18,938,266 2,139,276 6,085,806 726,666 64,716,537

—— � ——


STONEBRIDGE LIFE INSURANCE COMPANY29 South Main Street

Rutland, VT 05701-5014Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA 52499

Web: www.aegonins.comTel.: 319-355-8511 Fax: 319-355-2825AMB#: 006594 NAIC#: 65021Ultimate Parent#: 085244 FEIN#: 03-0164230



RATING RATIONALE


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 thestrong and diverse business profile of the overall operation, largemulti-channel distribution platform, diversified sources of earnings andstrong cash flow generation. The group also benefits from meaningfuleconomies of scale, strong brand recognition and effective asset/liability and


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liquidity management. The ratings of AEGON USA also reflect A.M. Best’sassessment of the financial strength and support of the parent, AEGON N.V.(AEGON). Partially offsetting these strengths is the group’s exposure tohigher-risk investments (structured securities, direct commercial mortgageloans and various alternative strategies) as well as the equity market sensitivityof its earnings.

AEGON USA’s business profile remains strong, with competitive marketpositions in the U.S. life and annuity arena (top 10 life insurance and variableannuity writer), pensions (top 15 defined contribution plan provider) andmutual funds. The group’s market positions are supported by a large anddiversified distribution system that is made up of independent and careeragents, financial institutions, wirehouses and direct response methods.Through both acquisitions and organic growth, AEGON USA enjoys theefficiencies 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, fixedannuities, variable life, variable annuities, mutual funds, pensions andaccident and health insurance. Following the 2008-2009 global financialcrisis, one of AEGON USA’s strategic priorities has been to reduce itsearnings sensitivity to financial markets in order to realize better earningsstability. To accomplish this, AEGON USA undertook various initiatives tode-risk its balance sheet and improve its risk profile. The quality of theinvestment portfolio was upgraded by reducing hedge fund holdings andincreasing positions in cash and U.S. Treasuries and other short-terminvestments. The institutional spread-based business (primarily guaranteedinterest contracts, funding agreements and funding agreement-backedsecurities) is being run-off to reduce exposure to credit risk, lower requiredcapital and shift to a more balanced mix of business between spread andfee-based products. The group also reduced its exposure to equity market riskby increasing the size of its macro equity hedge covering its variable annuitybusiness. Lastly, AEGON USA’s ratings reflect A.M. Best’s assessment of thefinancial strength and support of the parent, AEGON. As a result, thestand-alone ratings of AEGON USA receive rating enhancement inconsideration of AEGON’s overall creditworthiness and the strategic andfinancial importance of the U.S. operations to AEGON.





Best’sFSR

04/13/12 A+ 04/23/09 A04/27/11 A+ 06/18/08 A+06/29/10 A+ 05/30/07 A+


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 2,206,086 241,534 19,352 534,995 96,976 110,8232008 2,138,240 172,446 19,200 518,714 110,218 211,0392009 2,024,829 182,141 13,894 509,900 91,037 135,0142010 2,157,569 368,533 15,691 -297,210 96,898 136,8212011 1,749,650 161,091 15,723 372,757 127,736 163,427



AEGON USA uses a variety of distribution channels, each of whichconducts business through one or more of the AEGON USA life insurancecompanies. The channels are both owned and non-owned and includeapproximately 1,500 career agents as well as financial planners, banks,brokers and independent consultants. It is also prominent in the home servicemarket and in the direct marketing of life and supplemental accidental deathand dismemberment (AD&D) insurance. The AEGON USA companies arepresent in three main lines of business: Life & Protection (L&P), IndividualSavings and Retirement, and Employer Solutions and Pensions. TheInstitutional Markets Division is no longer considered core to the group andthe Life Reinsurance was sold to SCOR SE in August 2011.


The Individual Savings & Retirement division offers a wide range ofsavings and retirement products, including mutual funds, investment advice aswell as fixed and variable annuities. Transamerica Capital Management(TCM) is the underwriting and wholesaling broker/dealer for variableannuities and mutual funds. TCM builds relationships with independentfinancial professionals, agents affiliated with regional broker/dealers or majorwirehouse firms and representatives through a large bank network. TCMserves these distribution channels through company-owned and externalwholesalers. In 2007, AEGON USA acquired Merrill Lynch Life InsuranceCompany and ML Life Insurance Company of New York (since renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York) as part of a strategic distributionrelationship with Merrill Lynch with respect to variable annuities. Theacquisition of the Merrill Lynch insurance companies served to place AEGONUSA in the top ten of variable annuity sellers in the wirehouse and


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broker/dealer segment. Starting in late 2009, AEGON USA reduced its salesof fixed annuities in response to lower market interest rates and lowerinvestment returns available in the environment. Similar market conditionscontinued in 2010 and continue to restrict sales of fixed annuities. As a result,AEGON USA recently decided to de-emphasize the sale of fixed annuities.


The former Institutional Markets Division offered institutional spreadproducts such as traditional fixed rate guarantee investment contracts (GICs),funding agreements (FAs), FA-backed notes as well as fee-based productssuch as synthetic GICs. On February 17, 2009, AEGON announced its plan torun-off its instructional spread based business to reduce capital requirementsand credit risk. However, AEGON USA continues to be a market participantand has a leading market position in synthetic GICs which has been moved tothe Employer Solutions and Pensions division. The institutional line ofbusiness also included structured product transactions, such as credit defaultswaps, synthetic collateralized debt obligations, affordable housing tax creditguarantees and hedge fund principal protection. Going forward, AEGON USAwill only continue to offer affordable housing tax credit guarantees.


Ordinary life 83,614 82,772 83,799 83,111 87,758Group life 133,727 122,529 127,265 134,867 140,257Credit life 2,139 2,394 2,812 3,330 3,602Individual A&H 41,874 42,808 39,311 36,411 35,975Credit A&H 2,368 2,672 3,218 3,989 4,361Group A&H 224,067 237,263 254,213 301,524 302,362

Total 487,790 490,438 510,619 563,232 574,314


Ordinary life 101 132 -101 346 366Group life … … -1 544 604Individual A&H 30 30 31 71 87Group A&H 49,027 42,271 38,099 3,773 5,118

Total 49,158 42,433 38,028 4,734 6,175


Ordinary life 42,778 361,950 4,915 1,974 9,787Group life 89,440 434,146 4,207 4,003 9,231Individual A&H 17,792 18,599 15,585 12,006 11,810Group A&H 14,182 15,387 14,040 31,270 14,666

Total 164,191 830,082 38,747 49,252 45,494


Ordinary life 40,938 -279,045 78,784 81,483 78,336Group life 44,287 -311,617 123,058 131,408 131,630Credit life 2,139 2,394 2,812 3,330 3,602Individual annuities 233 243 242 103 39Group annuities 765 4,134 5,534 6,300 56,088Individual A&H 24,112 24,239 23,757 24,476 24,252Credit A&H 2,368 2,672 3,218 3,989 4,361Group A&H 258,913 264,147 278,271 274,028 292,813

Total 373,754 -292,833 515,675 525,117 591,122Deposits (incl. above) 997 4,377 5,775 6,403 56,127


Ordinary life 112,842 113,618 472,513 478,272 511,794Group life 77,698 77,033 605,734 601,255 589,531Supplementary contracts 12 13 13 14 14Individual annuities … 7 7 8 19Group annuities 34 33 31 30 29Deposit type contracts 19,789 24,425 28,175 31,823 44,885Individual A&H 59,004 58,417 58,210 67,766 58,001Credit A&H 259 402 540 595 622Group A&H 497,394 495,794 483,114 481,066 500,189

Total 767,032 769,742 1,648,339 1,660,830 1,705,085

Geographical breakdown of direct premium writings ($000): California,$56,655 (11.9%); Texas, $53,999 (11.3%); Florida, $27,556 (5.8%);Pennsylvania, $25,180 (5.3%); Ohio, $22,245 (4.7%); other jurisdictions,$290,297 (61.0%).



·



Operating Results: AEGON USA is the largest of AEGON’s country unitsand produces approximately two-thirds of AEGON’s IFRS operatingearnings. AEGON USA has one of the more diversified earnings profiles inthe industry with a good balance of underwriting income from life insuranceproducts and fee-based income from variable and investment-type products.Boosted by the equity market recovery, AEGON USA’s consolidated statutoryearnings results improved markedly for both 2009 and 2010 after experiencinga $641 million net loss for 2008. However, 2011 consolidated statutoryearnings reported a $2.5 billion net loss, which is primarily attributed to theaccounting treatment related to the structure of its sale of TARe (lifereinsurance business) to SCOR SE. Nonetheless, AEGON USA continues to


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report solid IFRS results. The AEGON Americas segment (which is largelymade up of AEGON USA but also includes operations in Canada and Mexico)recorded IFRS net income of $697 million (2009), $1.5 billion (2010) and$933 million (2011) compared to a loss of $2 billion for 2008. However, A.M.Best notes that AEGON USA’s statutory and IFRS results continue to bedampened by significant investment impairments as the group has takensignificant, albeit declining IFRS writedowns of $1.4 billion (2009), $506million (2010) and $352 million (2011).

PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 41.5 41.9 5.1 17.1 53.1 4.87 2.422008 50.1 27.0 9.7 32.6 101.4 5.73 6.002009 48.4 34.7 6.8 22.6 79.6 5.00 -1.592010 -70.9 -80.6 6.7 -61.3 50.7 5.20 5.402011 37.5 47.9 8.4 29.4 62.2 7.36 7.76


Ordinary life 5,427 -70,972 12,639 43,122 -22,232Group life 6,203 151,838 28,710 34,123 6,200Credit life 430 397 512 586 824Supplementary contracts 3,049 951 777 1,297 1,755Individual annuities -9 -1 0 7 -11Group annuities 4 1 0 1 0Individual A&H 6,971 1,910 22,922 2,841 6,399Credit A&H 583 434 766 912 1,106Group A&H 141,992 55,135 74,886 127,053 117,927

Total 164,650 139,692 141,210 209,942 111,967


Year

NetPremiumsWritten

NetPremiums

EarnedLoss

RatioExp.Ratio


2007 321,431 322,276 35.2 31.2 120,9222008 302,482 302,560 31.3 28.4 121,4172009 305,225 306,338 31.1 37.4 93,0012010 291,039 291,831 39.3 43.3 51,0142011 285,382 285,362 33.1 49.9 43,015Current Year Experience:Group 258,905 258,927 32.8 46.2 52,003Credit 2,368 2,368 13.3 67.0 439Non-can 20,445 20,409 38.6 66.0 -945Guaranteed renew 3,407 3,427 33.9 66.0 -3,172Non-renew, S.R. 87 62 … 66.0 4Other accident 168 168 32.3 66.0 3Other 2 2 73.1 999.9 -5,317




LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 13.4 3.9 91.8 2.3 -2.6 32.02008 9.8 8.8 144.3 2.7 -11.2 -26.52009 10.7 7.6 123.3 2.6 -1.8 2.32010 21.7 -14.0 310.7 -0.8 -99.9 96.02011 11.2 29.2 695.0 2.1 227.6 -54.0

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 111,967 -1,144 -53,348 -1,979 5,784 61,2802008 209,942 1,096 -375 152 -279,904 -69,0882009 141,210 -6,196 -126,274 5,306 -4,351 9,6952010 139,692 -2,871 362 -1,797 51,005 186,3912011 164,650 -1,224 1,250 -31 -372,086 -207,442


Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 241,534 … 25,000 … 19,352 39,2642008 172,446 … 265,000 … 19,200 49,7692009 182,141 … 85,000 … 13,894 49,8302010 368,533 … 107,000 … 15,691 38,5122011 161,091 … 339,000 … 15,723 38,621



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 41,699 62.6 74.2 35.6 1.0 93.0 27.72008 -69,691 53.9 64.4 58.5 … 124.4 37.02009 -40,569 55.0 67.3 49.1 … 109.0 49.32010 218,471 53.5 67.3 19.9 … 51.2 16.72011 -404,514 55.2 68.2 34.7 … 101.2 35.5

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 4.87 5.71 8.58 5.37 7.67 18.51 -3.62 12.212008 5.73 6.02 6.48 5.98 5.74 21.13 -5.37 10.722009 5.00 5.60 0.05 6.37 1.29 14.49 -5.42 10.082010 5.20 5.57 999.90 5.96 0.67 15.64 -5.24 9.652011 7.36 5.33 999.90 6.62 … 16.43 -5.53 7.29




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Government 0.2 0.6 2.6 0.7 0.2 8Gov’t Agencies & Muni 0.0 0.0 0.0 0.0 0.0 4Industrial & Misc 9.2 38.2 34.8 3.3 8.3 7Hybrid Securities … 0.3 … … 1.5 22

Total 9.5 39.1 37.4 4.0 10.0 7

2011 2010 2009 2008 2007

Bonds (000) 1,238,622 1,537,257 1,394,348 1,562,299 1,522,451

US Government 3.1 1.6 1.9 7.5 5.5Foreign Government 1.5 1.2 1.3 2.6 2.7Foreign - All Other 18.4 17.8 20.6 15.5 16.2State/Special Rev. - US 0.0 1.1 1.6 5.4 5.2Public Utilities - US … … … 7.3 7.4Industrial & Misc - US 75.2 76.2 69.9 61.8 63.1Hybrid Securities 1.8 2.1 4.7 … …


Bond Quality (%) 2011 2010 2009 2008 2007


2011 2010 2009 2008 2007

Mortgages (000) 148,699 165,365 181,271 204,756 205,580

Commercial 100.0 100.0 100.0 100.0 100.0

2011 2010 2009 2008 2007

Real Estate (000) 30,184 31,187 32,405 33,614 36,922

Property Occupied by Co 100.0 100.0 100.0 100.0 92.7Property Held for Sale … … … … 7.3

2011 2010 2009 2008 2007

Stocks (000) 628 769 519 63,522 64,040

Unaffiliated Common 1.3 21.5 1.3 0.4 0.2Affiliated Common 96.5 76.7 96.0 0.6 0.4Unaffiliated Preferred 2.2 1.8 2.7 99.1 99.5

2011 2010 2009 2008 2007

Other Inv Assets (000) 160,675 252,796 190,885 55,402 191,175

Cash -0.5 -2.1 -4.9 -3.3 -1.5Short-Term 39.0 2.7 52.5 6.0 62.6Schedule BA Assets 11.1 6.8 9.0 37.4 12.2All Other 50.3 92.6 43.5 59.8 26.7


Domicile: VT

Originally incorporated as The Vermont Accident Insurance Company, thepresent title was adopted in 2002.

Mergers: J. C. Penney Insurance Company, California, 1979; Veterans LifeInsurance Company, Illinois, 2007.

MANAGEMENT

Officers: President, Edward H. Walker III; Chief Operating Officer, BrendaK. Clancy; Chief Financial Officer, Darryl D. Button; Chief InvestmentOfficer, Joel L. Coleman; Senior Vice President, Secretary and GeneralCounsel, 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.



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 alsolicensed in Canada.

Reserve basis: (Current ordinary business): 1980 CSO 4 1/2% CARVM andnet level, 5% and 5 1/2%; CRVM valuation. (Current group business): 1980CSO 4 1/2% and 5%; CRVM valuation.

REINSURANCEThe company maintains reinsurance agreements with several non-affiliated

insurance companies. Only nominal amounts of ordinary life and A&Hinsurance in-force are ceded. Approximately 15% of group life insurancein-force is ceded. Maximum net retention on any one life is $1,000,000 forboth ordinary life and group life policies.


Assets Liabilities*Total bonds 1,238,622 +Net policy reserves 747,243*Total preferred stocks 14 Policy claims 57,182*Total common stocks 614 Deposit type contracts 19,789Mortgage loans 148,699 Interest maint reserve 38,621Real estate 30,184 Comm taxes expenses 36,404Contract loans 31,018 Asset val reserve 15,723Cash & short-term inv 61,930 Funds held reinsurance 577,554Securities-colltrl assts 49,865 Payable for securities lending 49,865Net deferred tax asset 101,487 Other liabilities 46,178Prems and consids due 21,021 Total Liabilities 1,588,559Accrued invest income 16,621 Common stock 2,500Other assets 49,575 Paid in & contrib surpl 33,083

Unassigned surplus 66,917Other surplus 58,591

Assets 1,749,650 Total 1,749,650


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*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $181,577; annuities $34; supplementary contractswith life contingencies $12; accidental death benefits $3,019; disability active lives $97;disability disabled lives $5; miscellaneous reserves $5,843; accident & health $556,657.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 44,073Ordinary life 40,938 Matured endowments 6Credit life 2,139 Annuity benefits 1Group life 44,287 Surrender benefits 3,579Acc & health group 258,913 Acc & health benefits 92,304Acc & health credit 2,368 Int on policy funds 88Acc & health other 24,112 Incr life reserves -118Total premiums 372,757 Incr a & h reserves 2,044

Net investment income 127,736 Commissions 22,755Amort interest maint res 7,318 Comm exp reins assumed 17,040Comm & exp reins ceded 47,113 Reinsurance expenses 9,600Other income 5,666 Insur taxes lic & fees 14,898

General ins expenses 161,661Misc operating expense 26Other disbursements 24,006

Total 560,591 Total 391,963



Net gain from operations after federal income taxes............................................. 164,650


Funds Provided Funds AppliedGross cash from oper 534,302 Benefits paid 147,107Long-term bond proceeds 554,385 Comm, taxes, expenses 233,940Other invest proceeds 188,083 Long-term bonds acquired 247,810Other cash provided 2,143 Div to stockholders 339,000

Other cash applied 250,612Incr cash & short-term 60,444

Total 1,278,913 Total 1,278,913


Year

Ord.LapseRatio

%


Avg.Prem($/M)



Gen.Exp. /


2007 8.1 14,945 9,265 27.19 8.0 2.1 66.782008 13.6 32,723 11,378 23.08 9.0 35.0 62.322009 14.5 28,798 13,874 19.64 14.5 59.9 72.972010 12.2 24,759 15,049 18.62 13.3 47.3 62.622011 12.4 16,176 15,337 18.54 13.7 34.9 60.10

Year


# Policiesin Force

(000)

First YearPremium

(000)


(%)

Return onReserves

(%)2007 24 350 7,056 4.56 -4.342008 31 318 7,497 4.14 9.022009 48 307 12,152 4.74 2.672010 38 296 11,000 16.31 -62.462011 49 294 11,432 15.68 4.81



Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 39,132 321,247 3,755 1,372,843 … 1,736,977 100 …2008 182,856 818,193 3,554 1,047,436 … 2,052,039 100 …2009 262,554 1,131,255 2,791 762,715 … 2,159,314 100 …2010 245,373 695,093 2,321 584,451 … 1,527,238 100 …2011 180,310 610,252 1,818 492,575 … 1,284,955 100 …


Year

Whole LifeEndow. &



2007 1,589,327 1,651,447 331,208 7,592,389 … 11,164,3712008 1,454,139 2,161,288 287,399 7,091,102 … 10,993,9282009 1,483,850 2,778,660 237,870 6,594,891 … 11,095,2702010 1,443,876 3,009,363 209,911 6,176,387 … 10,839,5372011 1,451,339 3,063,684 191,724 5,858,295 … 10,565,043

—— � ——


TRANSAMERICA ADVISORS LIFE INSURANCECOMPANY

425 West Capital Avenue, Suite 1800Little Rock, AR 72201

Exec. Office: 4333 Edgewood Road NE, Cedar Rapids, IA 52499Web: www.aegonins.com




RATING RATIONALE


Transamerica Advisors Life Insurance Company has sold non-participatingannuity products, including variable annuities, modified guaranteed annuitiesand immediate annuities. The company’s annuity products were sold bylicensed agents of Merrill Lynch Life Agency, Inc. (MLLA), pursuant to ageneral agency agreement by and between the company and MLLA.



AEGON USA’s business profile remains strong, with competitive marketpositions in the U.S. life and annuity arena (top 10 life insurance and variableannuity writer), pensions (top 15 defined contribution plan provider) andmutual funds. The group’s market positions are supported by a large anddiversified distribution system that is made up of independent and careeragents, financial institutions, wirehouses and direct response methods.Through both acquisitions and organic growth, AEGON USA enjoys theefficiencies 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, fixedannuities, variable life, variable annuities, mutual funds, pensions and


Back to Top

accident and health insurance. Following the 2008-2009 global financialcrisis, one of AEGON USA’s strategic priorities has been to reduce itsearnings sensitivity to financial markets in order to realize better earningsstability. To accomplish this, AEGON USA undertook various initiatives tode-risk its balance sheet and improve its risk profile. The quality of theinvestment portfolio was upgraded by reducing hedge fund holdings andincreasing positions in cash and U.S. Treasuries and other short-terminvestments. The institutional spread-based business (primarily guaranteedinterest contracts, funding agreements and funding agreement-backedsecurities) is being run-off to reduce exposure to credit risk, lower requiredcapital and shift to a more balanced mix of business between spread andfee-based products. The group also reduced its exposure to equity market riskby increasing the size of its macro equity hedge covering its variable annuitybusiness. Lastly, AEGON USA’s ratings reflect A.M. Best’s assessment of thefinancial strength and support of the parent, AEGON. As a result, thestand-alone ratings of AEGON USA receive rating enhancement inconsideration of AEGON’s overall creditworthiness and the strategic andfinancial importance of the U.S. operations to AEGON.





Best’sFSR

04/13/12 A+ 06/18/08 A+04/27/11 A+ 01/11/08 A+06/29/10 A+ 08/15/07 A u04/23/09 A


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 13,911,027 366,011 10,618 743,982 121,104 108,7912008 10,341,871 356,135 1,654 431,339 124,693 -259,8622009 11,102,780 599,014 8,400 282,704 115,835 225,2872010 11,139,706 813,142 11,572 28,260 119,323 181,2422011 10,050,750 438,047 12,023 16,195 121,006 -340,218

BUSINESS PROFILEOn December 28, 2007, Merrill Lynch Life Insurance Company and its

affiliate, ML Life Insurance Company of New York (since renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York), were acquired by AEGON USA, Inc.for $1.12 billion and $130 million respectively. Transamerica Advisors LifeInsurance Company is licensed to sell life insurance and annuity contracts inall 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 aremarketed exclusively through Transamerica Advisors Life InsuranceCompany of New York. The companies primarily market variable annuitiesand distribute their products exclusively through Merrill Lynch’s network ofover 15,000 financial advisors.






The Employer Solutions and Pensions (ES&P) division includesfull-service retirement plan investments and services in addition to guaranteedsavings and investment products directed at various segments of the pensionindustry. The group sells a full range of products and services to small andmid-size corporate, non-profit and government sponsored plans through


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brokers, agents, consultants, third-party administrators and accounting firms.Diversified Investment Advisors serves almost 4,000 mid-sized to largecompanies while Transamerica Retirement Services serves more than 15,500small to mid-sized companies across the U.S. ES&P offers a number ofspecialized services, including innovative plan design, a wide array ofinvestment choices, extensive education programs and online investmenteducation. ES&P is also a leading provider of single premium group annuities(Terminal Funding), which are used by companies to decrease the liability ofthe defined benefit plans. BOLI-COLI products were distributed through aselect number of niche brokers (including an affiliate, Clark Consulting)however, on December 1, 2010, AEGON announced its plan to discontinuenew sales in the executive non-qualified benefits market and relatedBOLI-COLI business. Through Transamerica Worksite Marketing, AEGONUSA offers voluntary payroll deduction life and supplemental healthinsurance to employees at their place of work and are designed to supplementemployees’ existing benefit plans.



Ordinary life 10,392 10,742 10,603 12,688 16,040Individual annuities 17,206 30,042 281,437 435,504 754,176Group annuities … … … 108 1,319

Total 27,599 40,784 292,039 448,300 771,535


Individual annuities 159 343 266 687 739

Total 159 343 266 687 739


Ordinary life 7,252 7,942 4,335 11,887 22,165Individual annuities 4,310 4,925 5,267 5,761 6,127

Total 11,563 12,867 9,602 17,648 28,292


Ordinary life 3,140 2,801 6,268 801 -6,125Individual annuities 33,206 42,163 290,535 454,273 750,248Group annuities … … … 108 1,319

Total 36,346 44,964 296,802 455,182 745,442Deposits (incl. above) 20,151 16,704 14,099 23,843 1,460


Ordinary life 1,302,921 1,362,422 1,430,948 1,520,861 1,610,318Supplementary contracts 111,414 115,034 114,531 … …Individual annuities 724,036 308,052 430,511 803,729 396,990Group annuities 23,103 25,465 27,975 12,881 …Deposit type contracts 87,112 90,408 99,200 117,551 129,219

Total 2,248,586 1,901,382 2,103,166 2,455,022 2,136,526

Geographical breakdown of direct premium writings ($000): Florida,$6,768 (24.5%); California, $2,759 (10.0%); Texas, $2,264 (8.2%); Alabama,$2,051 (7.4%); Illinois, $1,552 (5.6%); other jurisdictions, $12,204 (44.2%).



·




PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 264.2 12.2 0.8 9.5 27.4 5.07 5.192008 317.9 20.7 -2.4 -40.1 -81.6 5.15 6.512009 377.5 31.5 2.6 47.0 59.2 4.62 2.412010 999.9 123.7 1.9 56.5 29.6 4.67 3.742011 999.9 139.6 -3.0 -90.7 -51.4 4.45 3.87


Ordinary life 44,237 44,765 42,999 78,535 35,934Supplementary contracts 3,449 6,651 -232,327 … …Individual annuities -374,963 150,693 448,776 -348,598 75,141Group annuities 5,726 7,019 23,215 -24,548 -3,580

Total -321,551 209,128 282,663 -294,611 107,494


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LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 18.8 … 1.5 2.0 -2.1 -12.32008 15.4 … 2.4 1.3 -38.9 -5.02009 30.2 … 0.7 0.5 -34.8 69.82010 40.9 0.0 0.4 0.1 -84.9 35.82011 18.2 0.0 0.7 0.1 -19.2 -45.4

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 107,494 1,296 -107 720 -161,492 -52,0892008 -294,611 34,749 -2,301 8,964 243,323 -9,8752009 282,663 -57,376 -1,103 -6,746 25,440 242,8782010 209,128 -27,886 1,683 -3,173 34,376 214,1292011 -321,551 -18,668 748 -451 -35,175 -375,096


Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 366,011 … 193,731 … 10,618 11,9832008 356,135 … … … 1,654 8,4852009 599,014 … … … 8,400 7,1122010 813,142 … … … 11,572 9,9332011 438,047 … … … 12,023 13,743



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 -203,865 54.9 63.7 2.8 … … …2008 336,750 55.3 65.2 21.0 … 21.5 …2009 -166,438 69.8 78.1 9.2 … 11.7 6.62010 181,812 63.9 74.2 5.0 … 7.6 …2011 10,867 50.8 59.8 10.5 … 9.9 …

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 5.07 4.84 6.14 … 5.40 … … 1.712008 5.15 5.36 10.53 … 2.22 … … 1.652009 4.62 5.17 3.71 6.23 0.56 … … 1.962010 4.67 5.43 6.63 6.41 0.14 … … 2.082011 4.45 4.96 6.49 6.24 0.22 … … 1.89








Government 1.0 1.1 11.1 0.1 6.7 13Gov’t Agencies & Muni 0.7 1.0 0.4 0.2 0.0 4Industrial & Misc 9.6 17.6 41.6 1.2 7.1 7Hybrid Securities 0.3 … … … 0.2 11

Total 11.7 19.8 53.2 1.5 14.0 8

2011 2010 2009 2008 2007

Bonds (000) 1,576,709 1,468,536 1,198,100 1,305,604 1,182,105

US Government 20.9 11.4 18.7 18.1 6.2Foreign Government 0.5 0.6 0.8 0.9 1.4Foreign - All Other 10.7 10.2 13.9 10.3 10.2State/Special Rev. - US 2.6 3.7 4.8 7.2 12.8Public Utilities - US … … … 4.7 3.7Industrial & Misc - US 64.8 71.4 58.4 57.6 65.8Hybrid Securities 0.5 1.9 2.3 … …Credit Tenant Lns - US … 0.7 0.9 0.9 …



Back to Top

Bond Quality (%) 2011 2010 2009 2008 2007

Class 1 81.3 82.7 80.2 76.8 77.8Class 2 15.9 14.8 16.1 18.4 21.4Class 3 1.4 1.0 1.8 2.8 0.8Class 4 0.8 1.0 1.1 1.3 …Class 5 0.4 0.5 0.7 0.6 …Class 6 0.1 0.1 0.1 0.1 …

2011 2010 2009 2008 2007

Mortgages (000) 44,355 50,816 57,752 63,157 …

Commercial 100.0 100.0 100.0 94.4 …Farm … … … 5.6 …

2011 2010 2009 2008 2007

Stocks (000) 34,292 13,350 13,350 51,876 30,329

Unaffiliated Preferred 100.0 100.0 100.0 100.0 100.0

2011 2010 2009 2008 2007

Other Inv Assets (000) 1,150,237 1,151,917 1,203,900 1,170,867 1,086,992

Cash 3.7 -0.3 1.7 4.8 8.9Short-Term 5.5 13.7 25.4 15.9 2.1Schedule BA Assets 0.7 0.8 0.9 1.2 1.7All Other 90.1 85.8 72.0 78.1 87.3


Domicile: AR

Originally incorporated in Washington, the company redomesticated toArkansas in 1991 just prior to merging with Tandem Insurance Group, Inc.Prior to 1988, activities of Merrill Lynch Life had involved the sale of anominal volume of ordinary life insurance, but beginning in 1989, substantialgrowth in net premium income resulted from a new corporate emphasis on thesale of single premium deferred annuities and modified guaranteed annuities.During 1990, MLLIC assumption reinsured all of Family Life InsuranceCompany’s (its former parent and a then indirect wholly owned subsidiary ofML & Co.) life insurance and annuity business which had been marketedthrough the ML & Co. retail distribution network. This transaction occurred inanticipation of the June 1991 sale of Family Life and its traditional mortgageprotection business to Financial Industries Corporation. During October 1991,MLLIC and Tandem Insurance Group, Inc., merged, with the former being thesurviving entity. These transactions, combined with the assumption of a largeblock of ML & Co. sold variable life insurance business from Monarch Life,contributed significantly to the growth in company assets from 1989 to 1991.The general account asset base has experienced declines since 1991 resultingfrom a significant part of MLLIC’s general account annuity contracts reachingthe end of their initial interest rate guarantee periods. MLLIC has offset thisdecline by conversion of a large portion of this business into its modifiedguaranteed annuity and variable annuity products. During the first quarter of2003 MLLIC discontinued manufacturing and selling single premiumvariable life insurance products. In 2010, the present title was adopted.

Mergers: Tandem Insurance Group, Inc., Illinois, 1991.

MANAGEMENT

Officers: President, Thomas A. Swank; Chief Investment Officer, Joel L.Coleman; Secretary, Darin D. Smith; Treasurer and Chief Financial Officer,Eric J. Martin; Chief Actuary, Darin Zimmerman.

Directors: Robert R. Frederick, John T. Mallett, Eric J. Martin, Darin D.Smith, Thomas A. Swank.


2009, by the insurance department of Arkansas. The 2010 annual independentaudit of the company was conducted by Ernst & Young, LLP. The annualstatement of actuarial opinion is provided by Donald Krouse.

Territory: The company is licensed in the District of Columbia, Guam, U.S.Virgin Islands, 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, WIand WY.

Reserve basis: (Current ordinary business): None. (Individual annuitybusiness): Deferred variable annuities Market Value CSV. Immediateannuities 2000 Table “a” 5.5%. (Modified Guarantee Annuity): Market valueCARVM.

REINSURANCEThe maximum net retention on any one life is $500,000 for ordinary and

variable life business.


Assets Liabilities*Total bonds 1,576,709 +Net policy reserves 2,161,474*Total preferred stocks 34,292 Policy claims 38,344Mortgage loans 44,355 Deposit type contracts 87,112Contract loans 792,602 Interest maint reserve 13,743Cash & short-term inv 105,824 Comm taxes expenses 6,830Securities-colltrl assts 243,891 Asset val reserve 12,023Prems and consids due 62 Payable for securities lending 243,891Accrued invest income 37,360 Other liabilities -75,445Other assets 90,922

Tot liab w/o sep accts 2,487,972Tot assets w/o sep accts 2,926,018 Separate account bus 7,124,732

Separate account bus 7,124,732 Total Liabilities 9,612,704Common stock 2,500Paid in & contrib surpl 414,698Unassigned surplus 3,269Other surplus 17,580

Assets 10,050,750 Total 10,050,750

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $1,302,865; annuities $724,036; supplementarycontracts with life contingencies $134,518; disability active lives $8; disability disabled lives$31; miscellaneous reserves $17.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 166,161Ordinary life 3,140 Annuity benefits 189,839Individual annuities 13,055 Surrender benefits 794,623Total premiums 16,195 Int on policy funds 5,071

Supplementary contracts 12,259 Supplementary contracts 24,810Net investment income 121,006 Incr life reserves 350,501Amort interest maint res 1,960 Res adj reins assumed -21,909Comm & exp reins ceded -15 Commissions 41,618Other income 202,936 Comm exp reins assumed 1,184Mgt and/or service fee 2 Insur taxes lic & fees -3,007

General ins expenses 10,930Net transf to sep acct -881,153Misc operating expense 5

Total 354,342 Total 678,673

Gain from operations before FIT & div to policyholders....................................... -324,331

Federal income taxes incurred........................................................................... -2,780

Net gain from operations after federal income taxes............................................. -321,551


Back to Top


Funds Provided Funds AppliedGross cash from oper 357,948 Benefits paid 1,162,181Transf from sep account 907,537 Comm, taxes, expenses 37,388Long-term bond proceeds 228,585 Long-term bonds acquired 350,714Other cash provided 117,771 Other invest acquired 103,290Decr cash & short-term 48,436 Other cash applied 6,703

Total 1,660,276 Total 1,660,276


2011 2010 2009 2008 2007Sep Acct Assets 7,124,732 8,299,985 8,485,194 7,658,789 11,527,304% Growth -14.2 -2.2 10.8 -33.6 -1.6S/A Assets/Adm Assets 70.9 74.5 76.4 74.1 82.9

Sep Acct Reserves 7,024,585 8,179,236 8,306,923 7,462,115 11,328,381% Ordinary Life 21.1 20.5 20.7 22.7 22.1% Individual Annuities 77.5 78.0 77.5 75.0 75.8% Group Annuities 1.4 1.5 1.7 2.3 2.1Deposit Type Liabilities 19 26 27 … …Other Liabilities 100,127 120,723 178,244 196,674 198,923

S/A Prems & Deposits 26,444 39,849 281,983 388,915 768,199% Ordinary Life 36.1 24.8 3.4 3.0 1.9% Individual Annuities 63.9 75.2 96.6 97.0 97.9% Group Annuities … … … 0.0 0.2

Sep Acct Fees & Charges 174,039 179,518 167,099 142,756 225,148% Ordinary Life 35.5 34.7 32.3 10.0 35.8% Individual Annuities 64.5 65.3 67.7 90.0 64.2Fees & Chgs to Assets% 2.3 2.1 2.1 1.5 1.9

Sep Acct Ben & Wdrwls 929,147 886,648 825,908 1,133,373 1,669,369% Ordinary Life 15.5 18.1 21.7 14.2 11.9% Individual Annuities 81.7 78.9 73.7 79.6 84.5% Group Annuities 2.8 3.0 4.5 6.1 3.6Ben & Wdrwl to Assets% 12.0 10.6 10.2 11.8 14.4


YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 750,248 9,115,497 0.2 10.8 206.1 17.02008 454,273 6,520,436 0.3 18.4 233.0 16.22009 290,535 7,084,064 0.5 28.2 245.5 10.12010 42,163 6,894,861 0.2 117.9 999.9 11.42011 33,206 6,369,922 0.1 145.9 999.9 13.3



YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 1,319 240,332 0.4 133.5 999.9 24.72008 108 184,371 0.4 999.9 999.9 37.02009 … 172,509 0.4 … … 21.82010 … 149,577 0.2 … … 18.02011 … 121,608 0.1 … … 21.5



Year


Min or NoSurrender

Charge (%)*


WithMVA(%)*

NoSurrenderAllowed

(%)*2007 9,355,829 94.0 0.0 2.9 3.12008 6,704,806 86.9 … 3.0 10.12009 7,256,573 89.3 … 2.2 8.52010 7,044,438 91.0 … 1.9 7.12011 6,491,530 84.4 … 1.7 14.0




Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 1,184 … … … … 1,184 100 …2008 1,807 … … … … 1,807 100 …2009 988 … … … … 988 100 …2010 1,100 … … … … 1,100 100 …2011 1,050 … … … … 1,050 100 …


Year

Whole LifeEndow. &



2007 9,376,330 5,706 … … … 9,382,0362008 7,953,359 5,452 … … … 7,958,8112009 7,251,048 5,157 … … … 7,256,2062010 6,780,833 4,458 … … … 6,785,2912011 6,212,855 4,236 … … … 6,217,091

—— � ——


TRANSAMERICA ADVISORS LIFE INSURANCECOMPANY OF NEW YORK

4 Manhattanville RoadPurchase, NY 10577

Exec. Office: 4333 Edgewood Road NE, Cedar Rapids, IA 52499Web: www.aegonins.com




RATING RATIONALE


Transamerica Advisors Life Insurance Company of New York has soldnon-participating annuity products, including variable annuities, modifiedguaranteed annuities and immediate annuities. The company’s annuityproducts were sold by licensed agents of Merrill Lynch Life Agency, Inc.(MLLA), pursuant to a general agency agreement by and between thecompany and MLLA. As of September 30, 2009, the company, in addition tono longer issuing life insurance products, no longer issues variable annuityand market value adjusted annuity products.


Back to Top

On December 28, 2007, the company and its affiliate, TransamericaAdvisors Life Insurance Company, formerly known as Merrill Lynch LifeInsurance Company, were acquired by AEGON USA, Inc., for $0.13 billionand $1.12 billion, respectively, for a total price for both entities of $1.25billion. Prior to the acquisition date, the company was a wholly ownedsubsidiary of Merrill Lynch Insurance Group, Inc., which was an indirectwholly owned subsidiary of Merrill Lynch & Co., Inc.



AEGON USA’s business profile remains strong, with competitive marketpositions in the U.S. life and annuity arena (top 10 life insurance and variableannuity writer), pensions (top 15 defined contribution plan provider) andmutual funds. The group’s market positions are supported by a large anddiversified distribution system that is made up of independent and careeragents, financial institutions, wirehouses and direct response methods.Through both acquisitions and organic growth, AEGON USA enjoys theefficiencies 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, fixedannuities, variable life, variable annuities, mutual funds, pensions andaccident and health insurance. Following the 2008-2009 global financialcrisis, one of AEGON USA’s strategic priorities has been to reduce itsearnings sensitivity to financial markets in order to realize better earningsstability. To accomplish this, AEGON USA undertook various initiatives tode-risk its balance sheet and improve its risk profile. The quality of theinvestment portfolio was upgraded by reducing hedge fund holdings andincreasing positions in cash and U.S. Treasuries and other short-terminvestments. The institutional spread-based business (primarily guaranteedinterest contracts, funding agreements and funding agreement-backedsecurities) is being run-off to reduce exposure to credit risk, lower requiredcapital and shift to a more balanced mix of business between spread andfee-based products. The group also reduced its exposure to equity market riskby increasing the size of its macro equity hedge covering its variable annuitybusiness. Lastly, AEGON USA’s ratings reflect A.M. Best’s assessment of thefinancial strength and support of the parent, AEGON. As a result, thestand-alone ratings of AEGON USA receive rating enhancement inconsideration of AEGON’s overall creditworthiness and the strategic andfinancial importance of the U.S. operations to AEGON.





Best’sFSR

04/13/12 A+ 06/18/08 A+04/27/11 A+ 01/11/08 A+06/29/10 A+ 08/15/07 A u04/23/09 A


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 1,169,230 76,871 449 34,849 8,260 19,9692008 835,362 51,928 547 9,139 8,155 -13,1122009 882,568 81,728 314 1,588 7,570 22,2572010 877,182 95,501 512 1,071 8,137 14,0902011 759,740 58,111 626 289 7,897 -13,012

BUSINESS PROFILEOn December 28, 2007, Merrill Lynch Life Insurance Company and its

affiliate, ML Life Insurance Company of New York (since renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York), were acquired by AEGON USA, Inc.for $1.12 billion and 130 million respectively. Transamerica Advisors LifeInsurance Company is licensed to sell life insurance and annuity contracts inall states except New York, as well as the District of Columbia, Guam and theU.S. Virgin Islands. Life insurance and annuity products sold in New York aremarketed exclusively through Transamerica Advisors Life InsuranceCompany of New York. The companies primarily market variable annuitiesand distribute their products exclusively through Merrill Lynch’s network ofover 15,000 financial advisors.




Historically, the largest contributor to before-tax earnings has been is theL&P division, which includes the career agency operations, conductedthrough Monumental Life, selling individual life and supplemental healthproducts to the middle income market. Also included in the L&P division isTransamerica Insurance & Investments Group (TIIG), Long Term Care and


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AEGON Direct Marketing Services (ADMS). TIIG markets life insurance inthe retail high net worth market through independent general agents withapproximately 400 general agencies and 116,000 contract producers. ADMSspecializes in marketing life insurance and supplemental health insuranceproducts to consumers through direct channels such as telemarketing, directmail, television advertising and the Internet. This group also markets creditlife, mortgage life and other life insurance and supplemental health products.Lastly, Transamerica Long Term Care offers products and services aimed atmeeting the long-term care insurance needs of its customers. Policies are soldthrough independent brokerage and at the worksite to individuals and groups.





Ordinary life 95 79 115 130 126Individual annuities 610 516 3,598 9,721 36,595

Total 705 596 3,713 9,852 36,721


Ordinary life 26 -899 1,684 232 1,387Individual annuities 391 424 441 480 485

Total 416 -475 2,125 713 1,872


Ordinary life 69 978 -1,569 -102 -1,261Individual annuities 1,901 2,783 4,554 11,766 36,110

Total 1,970 3,761 2,985 11,664 34,849Deposits (incl. above) 1,681 2,691 1,397 2,525 …


Ordinary life 65,095 71,614 76,733 85,231 80,817Supplementary contracts 11,787 12,089 12,490 … …Individual annuities 33,648 12,500 16,812 44,212 27,295Deposit type contracts 7,579 7,950 7,187 7,939 7,709

Total 118,110 104,153 113,222 137,382 115,820

Geographical breakdown of direct premium writings ($000): New York,$397 (56.2%); Florida, $299 (42.3%); other jurisdictions, $11 (1.5%).



·



Operating Results: AEGON USA is the largest of AEGON’s country unitsand produces approximately two-thirds of AEGON’s IFRS operatingearnings. AEGON USA has one of the more diversified earnings profiles inthe industry with a good balance of underwriting income from life insuranceproducts and fee-based income from variable and investment-type products.Boosted by the equity market recovery, AEGON USA’s consolidated statutoryearnings results improved markedly for both 2009 and 2010 after experiencinga $641 million net loss for 2008. However, 2011 consolidated statutoryearnings reported a $2.5 billion net loss, which is primarily attributed to theaccounting treatment related to the structure of its sale of TARe (lifereinsurance business) to SCOR SE. Nonetheless, AEGON USA continues toreport solid IFRS results. The AEGON Americas segment (which is largelymade up of AEGON USA but also includes operations in Canada and Mexico)recorded IFRS net income of $697 million (2009), $1.5 billion (2010) and


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$933 million (2011) compared to a loss of $2 billion for 2008. However, A.M.Best notes that AEGON USA’s statutory and IFRS results continue to bedampened by significant investment impairments as the group has takensignificant, albeit declining IFRS writedowns of $1.4 billion (2009), $506million (2010) and $352 million (2011).

PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 463.2 16.3 1.7 31.2 29.9 4.87 4.882008 903.3 51.2 -1.4 -44.9 -21.3 4.79 5.132009 999.9 202.6 2.8 99.2 35.8 4.35 3.402010 999.9 138.3 1.7 58.7 16.6 4.57 4.302011 999.9 229.7 -1.5 -52.9 -16.2 4.58 4.37


Ordinary life 3,613 5,207 4,703 445 3,676Supplementary contracts 222 596 -18,146 … …Individual annuities -16,256 8,877 37,383 -14,189 16,293

Total -12,422 14,680 23,940 -13,744 19,969




LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 76.0 … 1.2 0.5 -41.3 34.92008 39.9 … 1.0 0.2 -66.5 -32.12009 75.8 … 0.3 0.0 -74.4 56.32010 94.0 0.0 0.1 0.0 26.0 17.02011 49.0 … 0.0 0.0 -47.6 -38.8

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 19,969 0 … 139 28 20,1362008 -13,744 632 … -98 -11,732 -24,9422009 23,940 -1,683 … 233 7,310 29,8002010 14,680 -590 … -198 -119 13,7742011 -12,422 -591 0 -114 -24,264 -37,391


Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 76,871 … 5,453 … 449 3472008 51,928 … 7,000 … 547 2092009 81,728 … … … 314 2892010 95,501 … … … 512 1,0062011 58,111 … 25,000 … 626 1,419



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 -5,604 121.5 131.6 0.6 … … …2008 7,715 77.2 91.1 3.5 … … …2009 -1,167 113.5 126.9 1.2 … … …2010 6,217 104.3 126.2 0.6 … … …2011 -20,709 67.9 82.6 0.5 … … …

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 4.87 5.08 5.15 … 4.82 … … 1.882008 4.79 5.39 16.02 … 3.35 … … 1.622009 4.35 5.95 … … 0.44 … … 1.882010 4.57 6.24 … … 0.11 … … 1.792011 4.58 5.21 … … 0.28 … … 2.02








Government 0.0 1.2 3.4 1.8 1.9 12Gov’t Agencies & Muni 0.0 0.1 0.0 … … 2Industrial & Misc 11.9 30.9 43.6 … 4.5 6Hybrid Securities … … … … 0.6 25

Total 11.9 32.2 47.0 1.8 7.0 7


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2011 2010 2009 2008 2007

Bonds (000) 101,543 97,689 70,191 76,574 60,286



Bond Quality (%) 2011 2010 2009 2008 2007

Class 1 91.0 91.9 90.5 86.2 90.7Class 2 8.7 7.6 8.6 12.1 8.8Class 3 … 0.2 0.6 0.6 0.5Class 4 0.3 0.2 0.3 0.7 …Class 5 … … … 0.4 …

2011 2010 2009 2008 2007

Stocks (000) 608 … … 1,592 535

Unaffiliated Preferred 100.0 … … 100.0 100.0

2011 2010 2009 2008 2007

Other Inv Assets (000) 61,599 86,037 105,713 97,099 107,706

Cash 5.5 10.3 12.2 13.2 27.5Short-Term 7.7 21.3 28.2 17.4 8.3All Other 86.7 68.4 59.6 69.4 64.2


Domicile: NY

Originally incorporated as Agway Life Insurance Company, in 1986 thename was changed to Royal Tandem Life Insurance Company, in 1991 thename was changed to ML Life Insurance Company of New York and in 2010the present title was adopted.

MANAGEMENT

Officers: Chairman of the Board and President, Thomas A. Swank; ChiefInvestment Officer, Joel L. Coleman; Secretary, Darin D. Smith; Treasurerand Chief Financial Officer, Eric J. Martin.

Directors: William Brown, Jr., Marc Cahn, Steven E. Frushtick, John T.Mallett, Peter P. Post, Darin D. Smith, Thomas A. Swank.


2009, by the insurance department of New York. The 2010 annual independentaudit of the company was conducted by Ernst & Young, LLP. The annualstatement of actuarial opinion is provided by Donald Krouse.

Territory: The company is licensed in CT, DE, ME, MA, NH, NJ, NY, RI andVT.

Reserve basis: (Current ordinary business): None. (Individual annuitybusiness): Deferred variable annuities Market Value CSV. Immediateannuities 2000 Table “a” 5.5%. (Modified Guarantee Annuity): Book valueCARVM.


Assets Liabilities*Total bonds 101,543 +Net policy reserves 110,531*Total preferred stocks 608 Policy claims 3,441Contract loans 53,433 Deposit type contracts 7,579Cash & short-term inv 8,166 Interest maint reserve 1,419Net deferred tax asset 9,494 Comm taxes expenses 935Prems and consids due 4 Asset val reserve 626Accrued invest income 2,585 Other liabilities -4,053Other assets 2,758

Tot liab w/o sep accts 120,478Tot assets w/o sep accts 178,589 Separate account bus 581,152

Separate account bus 581,152 Total Liabilities 701,630Common stock 2,200Paid in & contrib surpl 82,102Unassigned surplus -31,869Other surplus 5,677

Assets 759,740 Total 759,740

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $65,095; annuities $33,648; supplementarycontracts with life contingencies $11,787; disability active lives $1.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 10,820Ordinary life 69 Annuity benefits 10,498Individual annuities 219 Surrender benefits 73,543Total premiums 289 Int on policy funds 406

Supplementary contracts 1,289 Supplementary contracts 2,289Net investment income 7,897 Incr life reserves 14,328Amort interest maint res 216 Commissions 2,731Other income 13,781 Insur taxes lic & fees 268

General ins expenses 1,527Net transf to sep acct -79,979

Total 23,471 Total 36,430


Federal income taxes incurred........................................................................... -538



Funds Provided Funds AppliedGross cash from oper 24,025 Benefits paid 95,590Transf from sep account 81,796 Comm, taxes, expenses 4,329Long-term bond proceeds 52,471 Long-term bonds acquired 55,563Other cash provided 5,672 Div to stockholders 25,000Decr cash & short-term 19,033 Other cash applied 2,516

Total 182,997 Total 182,997


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2011 2010 2009 2008 2007Sep Acct Assets 581,152 679,040 692,282 651,402 990,120% Growth -14.4 -1.9 6.3 -34.2 -4.9S/A Assets/Adm Assets 76.5 77.4 78.4 78.0 84.7

Sep Acct Reserves 574,110 669,177 680,935 641,370 969,419% Ordinary Life 27.5 25.9 25.9 26.2 24.7% Individual Annuities 72.5 74.1 74.1 73.8 75.3Other Liabilities 6,600 9,336 11,015 9,200 19,694

S/A Prems & Deposits 698 589 2,898 9,082 36,694% Ordinary Life 12.6 12.4 3.6 1.4 0.4% Individual Annuities 87.4 87.6 96.4 98.6 99.6

Sep Acct Fees & Charges 12,257 12,749 11,650 10,710 18,427% Ordinary Life 41.6 40.7 34.9 12.7 38.9% Individual Annuities 58.4 59.3 65.1 87.3 61.1Fees & Chgs to Assets% 1.9 1.9 1.7 1.3 1.8

Sep Acct Ben & Wdrwls 82,230 68,179 64,721 93,951 149,242% Ordinary Life 15.9 17.8 18.4 12.1 16.0% Individual Annuities 84.1 82.2 81.6 87.9 84.0Ben & Wdrwl to Assets% 13.1 9.9 9.6 11.4 14.7


YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 36,110 765,320 0.6 13.1 353.4 16.72008 11,766 525,460 1.0 43.1 736.8 16.52009 4,554 541,380 0.2 81.9 999.9 11.02010 2,783 528,069 0.1 118.7 999.9 11.12011 1,901 469,500 0.1 169.3 999.9 15.6



Year


Min or NoSurrender

Charge (%)*


WithMVA(%)*

NoSurrenderAllowed

(%)*2007 765,329 90.0 0.0 7.4 2.52008 525,460 83.7 … 9.6 6.72009 541,380 86.0 … 8.5 5.62010 528,069 87.3 … 7.7 5.12011 469,500 81.7 … 8.1 10.2



Year

Whole LifeEndow. &



2007 562,829 297 … … … 563,1262008 453,281 297 … … … 453,5782009 429,889 297 … … … 430,1862010 411,554 297 … … … 411,8512011 371,454 297 … … … 371,751

—— � ——

Ultimate Parent: AEGON N.V.TRANSAMERICA FINANCIAL LIFE INSURANCE

COMPANY440 Mamaroneck Avenue

Harrison, NY 10528Mailing Address: 440 Mamaroneck Avenue, Harrison, NY 10528Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA 52499

Web: www.aegonins.comTel.: 319-355-8511 Fax: 319-355-2825AMB#: 007267 NAIC#: 70688Ultimate Parent#: 085244 FEIN#: 36-6071399



RATING RATIONALE


Transamerica Financial Life Insurance Company primarily sells fixed andvariable pension and annuity products, group life coverages, life insurance,investment contracts, structured settlements and guaranteed interest contractsand funding agreements. The company is licensed in 50 states and the Districtof Columbia. Sales of the company’s products are primarily through brokers.





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Best’sFSR

04/13/12 A+ 04/23/09 A04/27/11 A+ 06/18/08 A+06/29/10 A+ 05/30/07 A+


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 17,771,745 813,295 101,179 3,538,953 427,355 124,7602008 18,792,373 806,474 83,891 4,594,008 465,217 -296,8512009 20,937,072 911,627 88,989 4,327,163 505,584 274,8992010 24,312,485 794,667 110,118 5,143,777 506,127 70,3492011 25,478,445 692,141 101,956 4,424,725 463,530 -266,780










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Ordinary life 121,434 152,599 107,653 103,927 92,025Group life 12,257 11,591 11,544 11,653 11,212Credit life 4,652 4,435 3,780 1,387 1,507Individual annuities 293,236 195,105 572,412 809,175 46,988Group annuities 4,434,751 4,457,165 3,286,224 3,333,545 3,039,509Individual A&H 37,424 34,149 31,955 30,501 30,878Credit A&H 6,228 6,444 5,487 2,123 1,878Group A&H 38,810 31,918 32,500 21,013 20,225

Total 4,948,792 4,893,407 4,051,555 4,313,323 3,244,223


Ordinary life 606,148 617,705 655,287 615,471 637,440Group life 2,389 2,754 3,226 2,521 990Credit life 517 624 400 3,994 3,139Individual annuities 10,478 11,899 11,663 17,994 22,749Group annuities 473 824 1,354 769 620Individual A&H 417 4,154 152 180 208Credit A&H -269 -591 -1,111 778 1,065Group A&H 1,504 10,693 2,621 1,170 1,039

Total 621,657 648,061 673,591 642,877 667,249


Ordinary life 1,126,639 405,650 396,244 373,326 371,825Group life 259 173 44 31 32Credit life 663 593 548 91 150Individual annuities 134 232 208 291 338Individual A&H 3,091 … … … …Credit A&H 847 746 552 124 155Group A&H 14,092 387 387 17 19

Total 1,145,724 407,780 397,983 373,878 372,519


Ordinary life -399,057 374,743 366,696 357,758 357,641Group life 14,387 14,172 14,726 14,143 12,170Credit life 4,506 4,466 3,631 5,291 4,496Individual annuities 306,455 209,884 588,562 837,500 70,919Group annuities 4,435,303 4,460,569 3,288,729 3,402,106 3,101,425Individual A&H 34,750 38,303 32,107 30,681 31,086Credit A&H 5,112 5,107 3,824 2,777 2,788Group A&H 26,223 42,224 34,733 22,166 21,245

Total 4,427,679 5,149,469 4,333,008 4,672,423 3,601,769Deposits (incl. above) 2,954 5,692 5,845 78,415 62,816


Ordinary life 726,418 1,104,162 1,022,319 961,618 888,681Group life 37,777 34,053 29,833 22,543 17,418Credit life 10,644 14,196 19,079 25,924 29,322Supplementary contracts 10,648 11,059 10,679 10,320 6,643Individual annuities 2,157,153 2,117,132 2,176,931 2,156,807 1,207,957Group annuities 4,751,536 4,598,163 4,757,882 4,710,841 4,502,353Deposit type contracts 64,049 124,817 160,093 306,717 284,489Individual A&H 26,026 25,796 18,520 18,101 16,556Credit A&H 9,250 9,767 10,348 10,982 12,350Group A&H 85,377 83,348 81,818 77,568 7,028

Total 7,878,879 8,122,493 8,287,503 8,301,420 6,972,797

Geographical breakdown of direct premium writings ($000): Florida,$1,101,593 (22.3%); New York, $1,067,338 (21.6%); California, $365,701(7.4%); Missouri, $182,100 (3.7%); Michigan, $167,502 (3.4%); otherjurisdictions, $2,063,703 (41.7%).



·




PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 85.7 4.7 0.7 2.8 13.7 5.50 5.832008 67.4 5.1 -1.8 -6.2 -40.0 5.51 7.432009 60.7 5.1 2.3 9.2 53.5 5.54 2.242010 67.2 4.4 0.6 2.3 15.9 5.40 4.882011 88.8 8.5 -0.9 -4.4 -30.1 4.94 5.17


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Ordinary life -261,657 18,541 22,724 8,921 28,657Group life 3,674 2,419 295 7,411 2,674Credit life 3,177 3,353 5,920 5,707 -935Supplementary contracts 363 239 459 154 1,140Individual annuities -102,254 58,159 362,632 -340,565 8,590Group annuities 131,134 46,012 52,841 33,259 73,421Individual A&H -3,078 -3,322 4,813 -1,138 1,667Credit A&H 437 868 1,675 1,211 174Group A&H 4,428 9,577 8,542 -39,021 1,435

Total -223,776 135,847 459,902 -324,063 116,823


Year

NetPremiumsWritten

NetPremiums

EarnedLoss

RatioExp.Ratio


2007 55,205 54,075 63.3 38.2 1,2762008 55,660 56,752 196.1 38.3 -75,8902009 70,576 72,810 60.1 29.7 5,2912010 85,680 86,731 67.8 31.4 1,1022011 65,974 66,937 53.0 52.1 -2,884Current Year Experience:Group 26,143 26,236 41.2 52.8 1,623Credit 5,112 5,931 71.7 37.1 -220Non-can 284 286 17.9 21.3 174Guaranteed renew 32,537 32,589 57.6 40.0 803Non-renew, S.R. 1,426 1,423 107.7 57.6 -931Other accident 463 465 8.5 -4.4 446Other 8 8 -32.8 999.9 -4,780




LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 12.3 7.4 159.9 3.9 37.7 -6.52008 10.1 7.3 168.6 5.2 29.7 -2.62009 11.5 6.2 161.8 4.3 -7.3 12.42010 9.9 7.6 205.2 5.7 18.8 -9.62011 9.0 -7.6 325.7 5.6 -14.0 -12.2

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 116,823 7,937 12,415 -10,695 -201,262 -74,7822008 -324,063 27,212 134,817 17,288 137,924 -6,8212009 459,902 -185,003 -129,137 -5,098 -35,511 105,1532010 135,847 -65,499 4,775 -21,129 -170,955 -116,9592011 -223,776 -43,004 48,801 1,914 113,539 -102,527


Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 813,295 … 200,000 6 101,179 38,4542008 806,474 150,000 300,000 3 83,891 40,9582009 911,627 150,000 … 17 88,989 52,3582010 794,667 150,000 200,000 … 110,118 86,0842011 692,141 150,000 300,000 … 101,956 80,537



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 121,511 57.6 74.7 41.3 … 128.4 20.12008 1,083,020 60.3 73.9 60.4 0.6 132.5 19.02009 238,675 57.5 71.7 64.1 … 96.6 16.52010 224,297 54.8 68.8 56.8 … 85.0 9.72011 -446,960 56.9 70.8 53.1 … 78.7 7.4

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 5.50 5.72 5.78 6.40 2.47 … … 3.652008 5.51 5.87 6.71 6.31 1.47 … … 2.882009 5.54 5.26 1.28 6.26 1.30 … … 2.812010 5.40 5.15 1.97 6.43 0.90 … … 2.782011 4.94 5.00 11.02 6.40 0.59 … … 2.74







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Government 0.0 0.6 2.6 1.8 2.8 15Gov’t Agencies & Muni 0.5 0.9 0.4 0.1 0.3 7Industrial & Misc 9.0 33.3 33.2 3.2 9.8 7Hybrid Securities 0.0 0.1 0.0 0.1 1.3 23

Total 9.5 34.9 36.1 5.2 14.2 8

2011 2010 2009 2008 2007

Bonds (000) 7,790,711 8,064,065 7,954,681 6,460,209 5,748,314

US Government 6.2 6.0 9.0 6.9 2.9Foreign Government 1.8 1.8 1.6 1.3 1.9Foreign - All Other 17.5 18.3 17.9 13.5 13.3State/Special Rev. - US 2.2 1.2 0.5 3.3 2.1Public Utilities - US … … … 6.8 6.9Industrial & Misc - US 70.7 70.8 68.7 68.2 72.8Hybrid Securities 1.6 1.9 2.3 … …Affiliated … … … … 0.1


Bond Quality (%) 2011 2010 2009 2008 2007


2011 2010 2009 2008 2007

Mortgages (000) 625,301 769,469 966,783 1,174,686 1,174,369

Commercial 91.8 91.7 91.5 90.1 90.0Farm 8.2 8.3 8.5 9.9 10.0

2011 2010 2009 2008 2007

Real Estate (000) … … … 5,006 …

Property Held for Sale … … … 100.0 …

2011 2010 2009 2008 2007

Stocks (000) 12,116 14,201 11,688 184,023 174,075

Unaffiliated Common 34.6 49.6 33.9 0.7 9.3Affiliated Common 47.0 39.0 40.1 1.9 1.2Unaffiliated Preferred 18.4 11.3 26.0 97.5 89.5

2011 2010 2009 2008 2007

Other Inv Assets (000) 932,145 840,207 434,280 1,377,728 902,359

Cash 11.3 9.7 -1.5 6.4 25.3Short-Term 7.9 6.8 51.1 61.9 56.7Schedule BA Assets 9.9 12.2 25.9 9.5 11.7All Other 71.0 71.3 24.5 22.3 6.2


Domicile: NY

Originally incorporated as Zurich Life Insurance Company, in 1982 thename was changed to Dreyfus Life Insurance Company. During 1993 thename was changed to AUSA Life Insurance Company, Inc., and in 2003 thepresent title was adopted.

Mergers: International Life Investors Insurance Company, New York, 1996;First Providian Life and Health Insurance Company, New York, 1998;Transamerica Life Insurance Company of New York, New York, 2003.

MANAGEMENT

Officers: Chairman of the Board and President, Peter G. Kunkel; ChiefFinancial Officer, Kelly J. Adams; Vice President and Treasurer, Karen R.Wright; Secretary, Craig D. Vermie; Chief Actuary, Darin Zimmerman.

Directors: Elizabeth Belanger, William Brown, Jr., Marc Cahn, Steven E.Frushtick, Peter G. Kunkel, John T. Mallett, Peter P. Post.


2009, by the insurance department of New York. The 2010 annual independentaudit of the company was conducted by Ernst & Young, LLP. The annualstatement of actuarial opinion is provided by Donald Krouse.

Territory: The company is licensed in the District of Columbia and all states.

Reserve basis: (Current ordinary business): 1980 CSO 3%, 4% and 4 1/2%;CRVM valuation. (Current annuity business): 5.25% CARVM Deferred.


Assets Liabilities*Total bonds 7,790,711 +Net policy reserves 7,814,830*Total preferred stocks 2,228 Policy claims 35,604*Total common stocks 9,888 Deposit type contracts 64,049Mortgage loans 625,301 Interest maint reserve 80,537Contract loans 55,858 Comm taxes expenses 58,541Cash & short-term inv 178,103 Asset val reserve 101,956Securities-colltrl assts 476,053 Payable for securities lending 476,053Prems and consids due 10,587 Other liabilities 276,371Accrued invest income 96,954Other assets 354,339 Tot liab w/o sep accts 8,907,941

Separate account bus 15,878,363Tot assets w/o sep accts 9,600,021 Total Liabilities 24,786,305

Separate account bus 15,878,424 Common stock 2,058Preferred stock 442Surplus notes 150,000Paid in & contrib surpl 849,460Contingency reserve 4,796Unassigned surplus -342,546Other surplus 27,930

Assets 25,478,445 Total 25,478,445

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $736,160; annuities $6,908,679; supplementarycontracts with life contingencies $10,659; accidental death benefits $1,037; disability activelives $228; disability disabled lives $2,308; miscellaneous reserves $35,106; accident & health$120,653.


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SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 112,572Ordinary life -399,057 Matured endowments 5Individual annuities 303,579 Annuity benefits 105,868Credit life 4,506 Surrender benefits 3,671,197Group life 14,387 Acc & health benefits 32,939Group annuities 4,435,225 Int on policy funds 6,097Acc & health group 26,223 Supplementary contracts 2,051Acc & health credit 5,112 Incr life reserves -186,232Acc & health other 34,750 Incr a & h reserves 1,742Total premiums 4,424,725 Res adj reins assumed -3,608

Supplementary contracts 1,745 Commissions 82,876Net investment income 463,530 Comm exp reins assumed 70,088Amort interest maint res 16,416 Interest expenses 9,375Comm & exp reins ceded -52,546 Insur taxes lic & fees 18,065Res adj on reins ceded -927 General ins expenses 143,351Reinsurance income 13,086 Net transf to sep acct 1,143,898Other income 234,068 Other expenses 85,372Mgt and/or service fee 16,656 Misc operating expense 83

Other disbursements 0

Total 5,116,752 Total 5,295,739





Funds Provided Funds AppliedGross cash from oper 5,557,891 Benefits paid 4,032,966Long-term bond proceeds 1,767,840 Comm, taxes, expenses 337,782Other invest proceeds 250,360 Transfer to sep account 1,246,079Other cash provided 56,663 Long-term bonds acquired 1,486,259

Other cash applied 489,914Incr cash & short-term 39,754

Total 7,632,755 Total 7,632,755


2011 2010 2009 2008 2007Sep Acct Assets 15,878,424 14,267,158 11,234,250 9,108,569 9,431,392% Growth 11.3 27.0 23.3 -3.4 10.2S/A Assets/Adm Assets 62.3 58.7 53.7 48.5 53.1

Sep Acct Reserves 15,331,599 13,895,160 10,991,459 8,899,681 9,260,751% Ordinary Life 0.4 0.4 0.4 0.5 0.6% Individual Annuities 5.9 5.0 4.6 4.2 5.6% Group Annuities 93.8 94.6 95.0 95.3 93.8Other Liabilities 506,537 364,658 242,481 208,620 166,249Sep Acct Surplus 61 921 8,701 17,958 2,701

S/A Prems & Deposits 4,219,624 4,117,193 2,761,964 2,674,704 1,919,366% Ordinary Life 0.2 0.3 0.4 0.4 0.7% Individual Annuities 6.7 4.0 2.4 1.6 1.6% Group Annuities 93.1 95.7 97.2 98.0 97.7


Sep Acct Ben & Wdrwls 2,962,934 2,105,031 1,420,953 1,773,039 1,538,831% Ordinary Life 0.1 0.1 0.1 0.1 0.1% Individual Annuities 1.4 1.8 2.0 2.1 4.1% Group Annuities 98.5 98.1 97.9 97.8 95.8Ben & Wdrwl to Assets% 19.7 16.5 14.0 19.1 17.1


YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 70,919 1,804,938 1.1 30.3 567.8 22.32008 837,500 2,620,919 1.1 7.4 35.8 11.52009 588,562 2,766,122 1.2 9.5 29.3 6.22010 209,884 2,886,827 1.2 22.3 78.4 5.72011 306,455 3,130,016 1.3 20.1 70.6 6.9



YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 3,101,425 13,399,059 0.5 2.6 76.6 17.72008 3,402,106 13,423,341 0.6 2.9 73.1 18.52009 3,288,729 15,285,356 0.5 2.9 64.9 14.02010 4,460,569 17,800,540 0.4 2.2 66.4 16.62011 4,435,303 19,127,073 0.5 2.6 79.8 18.5



Year


Min or NoSurrender

Charge (%)*


WithMVA(%)*

NoSurrenderAllowed

(%)*2007 15,205,619 51.1 7.4 7.0 34.52008 16,046,856 43.1 12.1 7.0 37.92009 18,053,678 42.8 13.5 5.7 38.02010 20,689,056 42.4 11.3 4.9 41.42011 22,258,055 47.1 6.5 4.6 41.9




Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 785,377 722,325 163,251 44,512 … 1,715,465 100 …2008 779,759 764,440 306,912 31,229 … 1,882,340 100 …2009 767,571 1,783,811 534,277 59,161 … 3,144,820 100 …2010 794,538 2,586,850 378,227 100,713 … 3,860,328 100 …2011 1,077,965 1,672,394 2,545,376 103,406 … 5,399,141 100 …


Year

Whole LifeEndow. &



2007 6,441,627 284,650,860 900,563 1,090,842 … 293,083,8922008 7,004,802 287,382,527 890,279 1,139,596 … 296,417,2042009 7,380,209 287,768,952 883,066 1,071,279 … 297,103,5062010 7,584,871 266,785,842 703,783 1,027,368 … 276,101,8642011 8,208,191 266,112,947 693,764 1,135,416 … 276,150,318

—— � ——


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TRANSAMERICA LIFE INSURANCE COMPANY4333 Edgewood Road N.E.

Cedar Rapids, IA 52499Web: www.aegonins.com




RATING RATIONALE


Transamerica Life Insurance Company (TLIC) sells individualnon-participating whole life, endowment and term contracts, structuredsettlements, pension products and reinsurance, as well as a broad line of singlefixed and flexible premium annuity products, guaranteed interest contractsand funding agreements. In addition, TLIC offers group life, universal life,credit life and individual and specialty health coverages. The company islicensed in 49 states and the District of Columbia, Guam, Puerto Rico and USVirgin Islands. Sales of the company’s products are primarily through anetwork of agents, brokers and financial institutions.









Best’sFSR

04/13/12 A+ 04/23/09 A04/27/11 A+ 06/18/08 A+06/29/10 A+ 05/30/07 A+


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 112,802,514 4,324,562 1,545,768 8,254,881 4,212,323 262,6392008 103,871,552 4,926,874 1,273,354 -3,379,872 3,886,850 -528,4682009 101,455,188 5,026,824 868,688 8,085,118 3,073,157 -99,4712010 106,886,676 4,298,124 896,004 9,145,443 2,919,171 417,6792011 102,718,295 5,121,642 879,479 9,844,953 2,615,858 -2,459,266

Note: Net premiums written include annuity and other fund deposits.





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Ordinary life 2,256,139 2,588,648 2,430,748 2,418,567 3,931,712Group life 110,073 112,753 117,835 143,222 163,017Credit life 25,737 23,176 20,890 26,932 42,814Individual annuities 4,676,093 3,543,521 6,571,744 6,905,132 3,114,859Group annuities 5,367,770 3,653,620 2,741,153 2,936,653 3,317,865Individual A&H 502,704 504,160 511,769 534,690 529,926Credit A&H 32,330 32,003 28,701 38,884 62,334Group A&H 307,084 285,885 272,076 276,734 293,107

Total 13,277,930 10,743,766 12,694,917 13,280,814 11,455,634


Ordinary life 1,734,420 1,887,536 1,618,449 1,526,216 1,429,918Group life 28,360 26,854 28,620 33,217 61,470Credit life 410 206 945 1,637 3,148Individual annuities 48,866 68,507 40,266 91,691 360,278Group annuities … … … 9,169 46,593Individual A&H 118,901 110,200 118,601 131,661 140,680Credit A&H 225 31 786 1,789 2,975Group A&H 1,856 -7,421 1,122 -1,665 4,252

Total 1,933,039 2,085,913 1,808,788 1,793,716 2,049,314


Ordinary life 3,780,471 3,099,577 2,790,371 2,052,559 3,621,321Group life 43,794 27,171 24,009 12,094 35,911Credit life 12,617 4,925 8,678 18,787 24,206Individual annuities 1,232,499 317,556 3,335,745 5,174,576 1,173,862Group annuities 15,125 16,960 19,552 67,740 67,201Individual A&H 191,242 140,775 172,397 154,767 167,234Credit A&H 24,337 13,256 17,021 50,564 52,840Group A&H 65,930 60,760 50,815 71,715 107,494

Total 5,366,015 3,680,981 6,418,587 7,602,802 5,250,068


Ordinary life 212,941 1,376,343 1,261,888 1,913,004 1,743,745Group life 94,639 112,436 122,446 166,246 188,576Credit life 13,531 18,457 13,157 9,794 21,757Individual annuities 3,539,767 3,359,163 3,348,065 -5,174,637 2,397,031Group annuities 5,467,209 4,296,546 4,076,449 9,040,830 9,573,363Individual A&H 430,363 473,586 457,972 511,590 503,372Credit A&H 8,218 18,779 12,466 -9,883 12,469Group A&H 243,010 217,703 222,383 204,401 189,864

Total 10,009,678 9,873,013 9,514,826 14,194,729 14,630,178Deposits (incl. above) 164,724 727,569 1,429,708 6,702,541 6,375,297


Ordinary life 13,385,495 13,570,707 13,430,000 13,587,623 14,070,631Group life 1,024,673 1,016,316 1,023,549 1,041,162 1,064,338Credit life 453 8,524 10,443 12,233 33,909Supplementary contracts 411,766 436,741 457,741 491,565 190,784Individual annuities 10,585,234 11,838,032 12,624,065 16,308,373 19,374,468Group annuities 6,055,856 6,155,866 6,458,819 7,105,969 7,483,144Deposit type contracts 5,995,687 6,496,776 8,259,686 13,945,417 15,334,519Individual A&H 3,073,189 2,971,092 2,866,688 2,730,754 2,572,966Credit A&H 17,870 38,268 50,841 66,371 116,359Group A&H 416,238 409,374 400,325 390,810 362,647

Total 40,966,460 42,941,695 45,582,157 55,680,278 60,603,764


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Geographical breakdown of direct premium writings ($000): California,$1,975,767 (14.8%); North Carolina, $1,264,481 (9.5%); Iowa, $1,072,269(8.1%); Florida, $1,006,726 (7.6%); Texas, $687,650 (5.2%); otherjurisdictions, $7,308,091 (54.9%).



·




PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 94.9 18.1 0.0 -0.3 -1.2 5.68 6.512008 82.0 21.5 -0.8 -8.2 -19.3 5.39 5.472009 83.4 12.8 0.6 4.9 12.1 4.50 2.942010 92.6 14.1 0.5 3.6 10.2 4.54 4.692011 92.5 35.0 -2.8 -24.5 -61.2 4.28 6.01


Ordinary life -2,407,339 139,966 191,694 -97,057 -275,205Group life 12,890 -14,859 36,645 66,859 16,855Credit life 1,291 8,328 299 -8,708 -3,486Supplementary contracts -37,209 23,354 14,400 -321,944 46,309Individual annuities -585,112 330,082 -234,412 -761,376 44,133Group annuities -25,934 -209,751 447,328 -242,479 64,107Individual A&H 100,388 145,732 121,928 135,205 48,302Credit A&H 21,482 12,424 13,840 14,686 3,579Group A&H 36,740 39,241 9,329 320,124 4,246

Total -2,882,802 474,517 601,050 -894,689 -51,160


Year

NetPremiumsWritten

NetPremiums

EarnedLoss

RatioExp.Ratio


2007 706,208 706,805 95.0 28.3 -163,1142008 704,286 744,580 89.2 29.1 -115,9252009 693,718 709,340 82.1 28.1 -77,4802010 709,949 723,670 84.4 24.8 -63,2742011 681,230 694,321 82.9 25.4 -54,232Current Year Experience:Group 242,911 242,995 58.7 30.7 25,766Credit 8,218 23,045 39.2 -19.6 15,618Non-can 97 97 -13.5 12.0 98Guaranteed renew 423,884 422,029 100.2 19.4 -83,020Non-renew, S.R. 1 1 -86.3 289.0 -1Other accident 5,145 5,163 20.3 26.6 2,749Other 975 992 17.7 999.9 -15,442




LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 8.3 3.1 395.1 2.5 6.8 0.42008 8.8 -6.6 462.0 2.3 -3.0 5.62009 9.4 16.8 618.9 1.6 -33.0 -4.92010 8.2 20.8 768.3 1.9 3.8 -11.92011 10.8 -31.2 713.6 1.7 1.4 15.5

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 -51,160 313,799 281,150 -100,808 -522,008 -79,0282008 -894,689 366,221 -337,435 255,121 1,213,093 602,3122009 601,050 -700,521 -381,912 398,394 181,280 98,2912010 474,517 -56,838 153,857 -27,316 -1,272,921 -728,7002011 -2,882,802 423,536 583,550 16,524 2,682,710 823,518


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Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 4,324,562 150,000 381,600 17,417 1,545,768 465,3592008 4,926,874 150,000 316,438 12,166 1,273,354 384,6132009 5,026,824 150,000 10,031 11,010 868,688 203,6692010 4,298,124 150,000 1,400,000 10,074 896,004 1,045,8602011 5,121,642 150,000 … 9,496 879,479 854,620



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 -4,632,770 42.8 57.6 56.7 0.5 202.7 63.62008 738,874 44.9 58.3 78.0 1.3 179.0 76.72009 -7,219,894 48.1 61.7 99.3 0.1 164.0 52.12010 -1,403,109 43.2 55.8 92.0 0.1 161.9 44.12011 -6,694,134 44.8 58.2 71.7 0.1 115.4 49.5

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 5.68 5.98 5.69 6.62 6.24 15.10 1.95 4.672008 5.39 5.79 5.79 6.13 3.28 14.19 0.23 4.132009 4.50 5.24 0.93 6.03 1.07 14.86 1.26 4.312010 4.54 5.26 3.86 6.12 0.40 16.87 1.41 4.522011 4.28 4.95 3.85 6.29 0.21 17.98 -0.69 4.35








Government 0.5 2.2 2.0 1.2 5.0 15Gov’t Agencies & Muni 0.5 0.9 0.5 0.2 0.1 5Industrial & Misc 12.9 24.7 21.7 8.2 16.8 9Hybrid Securities 0.0 0.1 0.1 1.0 1.3 20Affiliated 0.0 0.1 0.0 … 0.0 7

Total 13.9 28.0 24.3 10.6 23.2 10

2011 2010 2009 2008 2007

Bonds (000) 39,785,207 46,991,870 47,161,769 51,459,354 51,947,736

US Government 10.2 8.3 6.0 4.7 3.9Foreign Government 1.3 1.5 1.1 1.6 1.3Foreign - All Other 14.8 15.1 16.2 15.6 16.1State/Special Rev. - US 2.3 2.3 2.9 4.1 2.9Public Utilities - US … … … 6.1 6.0Industrial & Misc - US 68.7 68.9 69.3 67.4 68.1Hybrid Securities 2.6 3.3 3.8 … …Credit Tenant Lns - US … 0.4 0.4 0.1 0.2Affiliated 0.2 0.2 0.3 0.5 1.5


Bond Quality (%) 2011 2010 2009 2008 2007


2011 2010 2009 2008 2007

Mortgages (000) 6,830,030 8,107,498 9,357,158 10,877,725 11,664,602

Commercial 96.4 96.7 96.6 94.8 95.4Residential 0.0 0.0 0.0 0.0 0.0Farm 3.6 3.3 3.4 5.2 4.6

Mortgage Quality (%) 2011 2010 2009 2008 2007

90 Days Delinquent 0.0 0.0 0.0 0.0 0.0In Process of Forecl … … … 0.4 …Total Delinquencies 0.0 0.0 0.0 0.4 0.0

2011 2010 2009 2008 2007

Real Estate (000) 95,749 120,965 125,806 153,441 147,168

Property Occupied by Co 71.9 65.9 66.7 55.9 52.6Property Held for Inc 21.4 28.7 28.3 23.8 27.1Property Held for Sale 6.7 5.4 5.0 20.3 20.2

2011 2010 2009 2008 2007

Stocks (000) 1,805,025 1,203,810 1,206,797 2,851,498 2,845,047

Unaffiliated Common 12.7 29.8 32.3 11.9 12.5Affiliated Common 79.2 59.3 54.4 24.0 16.1Unaffiliated Preferred 7.7 10.3 12.7 63.7 71.0Affiliated Preferred 0.4 0.6 0.6 0.3 0.4

2011 2010 2009 2008 2007

Other Inv Assets (000) 10,082,816 8,868,466 7,402,305 7,665,315 6,835,668

Cash 22.0 8.5 15.3 9.0 4.1Short-Term 8.9 9.2 37.6 34.8 23.0Schedule BA Assets 24.4 27.7 35.0 40.6 61.9All Other 44.7 54.5 12.2 15.6 11.0


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Domicile: IA

Originally incorporated as American Public Life Insurance Company, Inc.,the company was renamed NN Investors Life Insurance Company, Inc. in1968. In early 1991, as part of the assumption of essentially all the assets,liabilities and operations of Pacific Fidelity Life Insurance Company andNational Old Line Insurance Company, the company was renamed PFL LifeInsurance Company. During 2001, the present title was adopted.

Mergers: Investors Fidelity Life Insurance Company, Alabama, 1982;Investors Life of Florida Insurance Company, 1986; Transamerica AssuranceCompany, Missouri, 2004; Transamerica Life Insurance & Annuity Company,North Carolina, 2005; Transamerica Occidental Life Insurance Company,Iowa, 2008; Life Investors Insurance Company of America, Iowa, 2008.

Reinsurances: United Group Insurance Company, Texas, 1983.

MANAGEMENT

Officers: Chairman of the Board, Mark W. Mullin; President, Brenda K.Clancy; Chief Investment Officer, Joel L. Coleman; Executive Vice Presidentand Chief Financial Officer, Darryl D. Button; Senior Vice President,Secretary and General Counsel, Craig D. Vermie.

Directors: Darryl D. Button, Brenda K. Clancy, Mark W. Mullin, Arthur C.Schneider, Craig D. Vermie.



Territory: The company is licensed in the District of Columbia, Guam, PuertoRico, U.S. Virgin Islands, 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.

Reserve basis: (Current ordinary business): 1980 CSO 3%, 4%, and 4 1/2%;CRVM and Net Level valuation. (Current annuity business): 5.50%. 6.25%,6.75%; 83a, 6.35% immediate.

REINSURANCEMaximum net retention on any one life is $500,000 for ordinary life

business and $500,000 for group life contracts.


Assets Liabilities*Total bonds 39,785,207 +Net policy reserves 34,970,773*Total preferred stocks 145,758 Policy claims 396,619*Total common stocks 1,659,267 Deposit type contracts 5,995,687Mortgage loans 6,830,030 Interest maint reserve 854,620Real estate 95,749 Comm taxes expenses 269,479Contract loans 727,684 Asset val reserve 879,479Cash & short-term inv 3,116,452 Funds held reinsurance 7,583,358Securities-colltrl assts 3,520,304 Payable for securities lending 3,520,304Other invested assets 2,460,085 Other liabilities 1,720,225Prems and consids due 131,183Accrued invest income 475,813 Tot liab w/o sep accts 56,190,544Other assets 2,297,292 Separate account bus 41,406,109

Total Liabilities 97,596,652Tot assets w/o sep accts 61,244,822 Common stock 6,762

Separate account bus 41,473,473 Preferred stock 1,597Treas stock preferred -58,000Surplus notes 150,000Paid in & contrib surpl 3,326,311Unassigned surplus 1,262,405Other surplus 432,568

Assets 102,718,295 Total 102,718,295

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $13,875,970; annuities $16,637,184;supplementary contracts with life contingencies $415,671; accidental death benefits $2,088;disability active lives $13,566; disability disabled lives $44,862; miscellaneous reserves$474,134; accident & health $3,507,297.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 993,834Ordinary life 210,088 Matured endowments 10Individual annuities 3,492,459 Annuity benefits 1,082,923Credit life 13,531 Coup endow/similar ben 8Group life 94,639 Surrender benefits 6,511,118Group annuities 5,352,645 Acc & health benefits 473,566Acc & health group 243,010 Int on policy funds 131,302Acc & health credit 8,218 Supplementary contracts 68,028Acc & health other 430,363 Incr life reserves -1,554,507Total premiums 9,844,953 Incr a & h reserves 88,563

Supplementary contracts 19,102 Res adj reins assumed -218,566Net investment income 2,615,858 Commissions 894,588Amort interest maint res 71,742 Comm exp reins assumed 237,993Net gain from sep acct 0 Interest expenses 9,000Comm & exp reins ceded -1,597,611 Insur taxes lic & fees 83,034Res adj on reins ceded -159,096 General ins expenses 684,318Reinsurance income 307,904 Net transf to sep acct 4,359,684Other income 639,907 Other expenses -158,138

Misc operating expense -27Other disbursements 1,104,252

Total 11,742,760 Total 14,790,983

Gain from operations before FIT & div to policyholders....................................... -3,048,224

Dividends to policyholders: life......................................................................... 9,496

Gains from operations after dividends to policyholders ........................................ -3,057,719

Federal income taxes incurred........................................................................... -174,917

Net gain from operations after FIT and dividends................................................ -2,882,802


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Funds Provided Funds AppliedGross cash from oper 13,948,384 Benefits paid 9,265,482Long-term bond proceeds 16,891,112 Comm, taxes, expenses 332,606Other invest proceeds 3,025,561 Transfer to sep account 4,563,220Other cash provided 311,465 Long-term bonds acquired 9,541,749

Other cash applied 8,930,092Incr cash & short-term 1,543,371

Total 34,176,521 Total 34,176,521


2011 2010 2009 2008 2007Sep Acct Assets 41,473,473 38,370,952 33,205,532 27,404,629 36,041,715% Growth 8.1 15.6 21.2 -24.0 13.9S/A Assets/Adm Assets 40.4 35.9 32.7 26.4 32.0

Sep Acct Reserves 39,007,225 36,139,333 31,116,040 24,295,162 33,244,584% Ordinary Life 15.0 16.6 20.4 26.3 21.0% Individual Annuities 50.6 48.4 45.1 41.2 43.5% Group Annuities 34.4 35.0 34.6 32.5 35.5Deposit Type Liabilities 151,407 147,638 147,056 449,424 779,442Other Liabilities 2,223,583 1,992,015 1,871,123 2,606,439 1,917,041Sep Acct Surplus 67,364 70,878 59,957 46,654 86,513

S/A Prems & Deposits 9,372,736 6,361,614 3,843,163 3,909,451 5,957,135% Ordinary Life 0.2 0.6 1.8 4.1 29.3% Individual Annuities 48.0 49.5 51.0 40.3 25.6% Group Annuities 51.7 49.9 47.2 55.6 45.2


Sep Acct Ben & Wdrwls 4,566,708 4,660,347 2,684,938 3,855,412 4,276,654% Ordinary Life 2.2 10.7 8.3 3.0 0.4% Individual Annuities 32.9 27.7 36.2 34.6 45.4% Group Annuities 64.9 61.6 55.5 62.4 54.2Ben & Wdrwl to Assets% 11.4 13.0 8.9 12.2 12.6


Year

Ord.LapseRatio

%


Avg.Prem($/M)



Gen.Exp. /


2007 4.2 291,534 108,888 5.26 8.8 72.2 33.332008 6.1 276,945 94,913 3.65 14.3 74.4 25.892009 7.3 301,814 84,570 3.58 13.4 62.5 22.542010 5.4 308,426 80,581 3.74 18.5 52.5 29.512011 6.1 334,519 90,801 3.36 14.4 63.9 26.04

Year


# Policiesin Force

(000)

First YearPremium

(000)


(%)

Return onReserves

(%)2007 98 9,365 347,934 2.20 -1.942008 92 11,381 346,161 2.15 -0.712009 140 13,379 326,690 2.23 1.422010 149 14,860 480,040 3.21 1.022011 104 13,089 325,994 2.53 -17.85


YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 2,397,031 35,136,850 -0.1 8.6 290.2 19.82008 1,932,150 27,861,729 2.1 48.8 270.6 18.82009 3,348,065 28,051,334 0.4 9.1 92.4 11.02010 3,359,163 30,616,916 0.3 9.9 80.0 8.82011 3,539,767 31,493,862 0.3 20.5 83.7 9.4



YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 9,573,363 34,187,609 2.2 8.2 50.1 14.02008 9,467,427 28,249,529 0.4 1.8 45.4 15.22009 4,076,449 24,561,792 0.5 3.7 67.1 11.12010 4,296,546 24,506,664 0.6 4.0 94.0 16.52011 5,467,209 24,758,832 0.6 3.6 78.5 17.3



Year


Min or NoSurrender

Charge (%)*


WithMVA(%)*

NoSurrenderAllowed

(%)*2007 76,706,458 55.1 7.1 7.4 30.42008 68,073,378 47.3 13.3 3.6 35.82009 71,376,289 54.1 16.9 3.3 25.72010 73,291,120 60.2 15.1 2.8 21.92011 75,600,227 70.2 4.7 2.4 22.7




Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 7,783,173 20,870,831 4,094,240 3,165,077 … 35,913,321 100 …2008 6,509,168 18,939,856 3,019,916 2,117,190 … 30,586,130 100 02009 7,461,124 34,798,889 2,607,775 1,701,272 … 46,569,060 100 02010 5,581,206 40,268,119 1,967,142 1,513,777 … 49,330,244 100 02011 12,889,418 21,999,545 12,609,140 1,256,680 … 48,754,783 100 0


Year

Whole LifeEndow. &



2007 146,211,644 873,499,276 5,136,354 28,644,394 … 1,053,491,6682008 146,038,599 934,143,809 3,874,130 23,227,017 … 1,107,283,5552009 145,649,164 985,780,800 3,480,140 20,913,513 … 1,155,823,6182010 154,051,057 1,043,374,499 3,033,779 18,457,879 … 1,218,917,2132011 144,951,318 1,043,511,175 1,977,607 22,278,074 … 1,212,718,174

—— � ——


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WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO366 East Broad StreetColumbus, OH 43215

Exec. Office: 4333 Edgewood Road N.E., Cedar Rapids, IA 52499Web: www.aegonins.com




RATING RATIONALE


Western Reserve Life Insurance Company of Ohio operates predominantlyin the variable universal life and variable annuity areas of the life insurancebusiness. The company is licensed in 49 states, District of Columbia, PuertoRico and Guam. Sales of the company’s products are through financialplanners, independent representatives, financial institutions and stockbrokers.The majority of the company’s new life insurance and a portion of newannuities are written through an affiliated marketing organization. Thecompany entered the A&H market in 2008.









Best’sFSR

04/13/12 A+ 04/23/09 A04/27/11 A+ 06/18/08 A+06/29/10 A+ 05/30/07 A+


Year Assets

CapitalSurplusFunds


NetPremiumsWritten

NetInvest

IncomeNet

Income2007 11,768,905 488,703 7,096 1,013,065 68,832 131,6552008 8,127,643 280,092 4,380 787,853 71,623 -59,1282009 8,821,381 363,146 8,484 654,623 48,371 115,6552010 9,497,886 511,264 9,217 524,953 64,487 123,1392011 8,423,143 275,198 8,838 479,670 80,031 -11,946





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Ordinary life 611,706 576,864 584,838 647,372 646,039Group life 10,009 4,552 1,968 530 585Individual annuities 28,029 49,233 110,258 306,844 408,479Group annuities 5,731 9,136 58,291 30,478 28,627Group A&H 13,881 12,282 12,819 4,503 …

Total 669,356 652,066 768,173 989,727 1,083,730


Ordinary life 763 3,307 3,557 3,730 3,852

Total 763 3,307 3,557 3,730 3,852


Ordinary life 165,675 100,619 87,785 77,458 66,766Group life 807 651 657 602 540Individual annuities 11,516 18,089 17,121 123,489 7,212Group A&H 12,452 11,061 11,544 4,056 …

Total 190,449 130,420 117,107 205,604 74,518


Ordinary life 446,810 479,567 500,627 573,661 583,143Group life 9,202 3,901 1,310 -72 46Individual annuities 18,146 33,218 93,943 185,603 405,389Group annuities 8,106 17,107 70,955 34,738 35,969Group A&H 1,428 1,222 1,275 447 …

Total 483,693 535,015 668,110 794,378 1,024,545Deposits (incl. above) 4,023 10,062 13,487 6,525 11,480


Ordinary life 1,174,855 1,114,421 1,084,886 1,091,986 1,035,304Group life 24,081 18,655 16,830 16,223 15,550Supplementary contracts 7,513 6,833 6,235 5,406 4,888Individual annuities 518,927 487,278 561,018 609,452 526,639Group annuities 21,425 33,989 47,626 12,333 69,390Deposit type contracts 13,018 15,179 15,141 14,520 16,119Group A&H 518 560 811 39 …

Total 1,760,337 1,676,916 1,732,548 1,749,960 1,667,890

Geographical breakdown of direct premium writings ($000): California,$237,717 (35.5%); Texas, $57,363 (8.6%); Illinois, $28,848 (4.3%); Florida,$25,439 (3.8%); Oregon, $22,648 (3.4%); other jurisdictions, $298,103(44.5%).




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PROFITABILITY TESTS

Year

Ben Paidto NPW& Dep


NOGto TotAssets

NOG toTot Rev

OperatingReturn on

EquityNet

YieldTotal

Return2007 130.0 28.9 1.2 10.4 28.1 5.81 5.612008 158.2 290.7 -0.6 -2.0 -15.5 5.46 5.582009 121.3 29.6 1.7 12.8 43.5 3.47 1.772010 153.5 26.4 1.4 13.2 30.3 4.02 3.552011 146.5 59.7 0.0 0.1 0.1 4.61 3.78


Ordinary life 37,619 110,562 101,086 41,001 106,442Group life 168 -90 -753 22 -605Supplementary contracts -8,559 -912 -113 0 3,070Individual annuities -29,851 21,837 40,018 -100,508 21,514Group annuities 885 521 -398 -82 3,857Individual A&H 0 0 … … …Group A&H 223 345 78 70 …

Total 485 132,262 139,919 -59,497 134,278




LEVERAGE TESTS

Year

C&Sto


ReinsLeverage

NPW& Dep

toCapital

Changein NPW& Dep

Changein

Capital2007 55.1 2.4 27.8 2.1 -13.0 4.82008 18.1 -4.0 103.4 2.8 -22.5 -42.62009 28.9 12.1 92.8 1.8 -15.9 30.62010 33.0 21.2 69.7 1.0 -19.9 40.12011 17.5 -15.2 236.2 1.7 -9.6 -45.4

Current BCAR: 202


YearNet

Gain



ChangeAVR

OtherChanges

Changein

C&S2007 134,278 -2,623 639 -1,238 -109,450 21,6052008 -59,497 368 1,738 2,716 -153,937 -208,6112009 139,919 -24,264 161 -4,104 -28,658 83,0542010 132,262 -9,123 783 -732 24,929 148,1182011 485 -12,431 -3,721 378 -220,778 -236,066


Year

YearendC&S

SurplusNotes

Stock-holderDivs

Policy-holderDivs

AssetValuation

Reserve

InterestMaintenance

Reserve2007 488,703 … 110,000 27 7,096 …2008 280,092 … 200,000 27 4,380 19,5862009 363,146 … 65,000 26 8,484 25,8792010 511,264 … 100,000 25 9,217 27,0702011 275,198 … 250,000 24 8,838 26,504



LIQUIDITY TESTS

Year

OperatingCash

Flow ($000)Quick

LiquidityCurrent

Liquidity

Non-InvGrade

Bonds toCapital


Mtg & CredTen Lns

& REto Cap

AffilInvest

toCapital

2007 72,629 59.4 70.8 5.9 … 12.7 14.62008 137,610 45.5 58.7 15.5 … 17.8 22.52009 -25,980 53.9 65.9 14.6 … 13.3 25.92010 452,941 55.4 71.1 8.3 … 9.5 13.52011 -81,418 50.2 61.4 13.9 … 30.2 23.4

INVESTMENT YIELDS

YearNet


Cash &ShortTerm


2007 5.81 4.99 22.59 6.00 12.48 18.57 6.65 11.302008 5.46 5.51 27.95 9.16 2.58 11.95 -0.72 8.962009 3.47 3.73 12.26 5.75 0.60 12.18 -0.41 12.562010 4.02 4.72 29.65 5.78 0.18 12.31 -0.39 10.302011 4.61 4.56 58.59 4.84 0.19 12.51 -0.03 8.36


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Government 0.6 2.0 5.4 0.2 2.1 10Gov’t Agencies & Muni 0.6 1.1 0.3 0.0 0.5 7Industrial & Misc 20.9 26.3 30.7 2.1 5.5 6Hybrid Securities … 0.7 … … 0.9 15

Total 22.1 30.2 36.4 2.4 9.0 6

2011 2010 2009 2008 2007

Bonds (000) 888,551 941,187 781,754 619,733 696,849



Bond Quality (%) 2011 2010 2009 2008 2007


2011 2010 2009 2008 2007

Mortgages (000) 49,646 12,416 12,505 12,754 24,493

Commercial 100.0 100.0 100.0 100.0 100.0

2011 2010 2009 2008 2007

Real Estate (000) 36,015 37,041 37,082 37,806 38,574

Property Occupied by Co 100.0 100.0 100.0 100.0 100.0

2011 2010 2009 2008 2007

Stocks (000) 30,479 33,238 32,187 30,637 29,070

Affiliated Common 100.0 100.0 100.0 85.2 83.9Unaffiliated Preferred … … … 14.8 16.1

2011 2010 2009 2008 2007

Other Inv Assets (000) 674,704 831,696 534,196 724,276 466,835

Cash 14.9 20.9 11.2 32.5 -2.0Short-Term 10.4 8.2 16.7 6.1 11.8Schedule BA Assets 0.5 0.5 1.2 1.2 2.2All Other 74.2 70.4 70.9 60.3 88.0


Domicile: OH

Mergers: Harrison National Life Insurance Company, Indiana, 1964; FirstSecurity Life Insurance Company, Mississippi, 1966; PWC Life InsuranceCompany, Ohio, 1980.

Reinsurances: American Investment Life Insurance Company, Tennessee,1963; Kinder Life Insurance Company, Alabama, 1986.

MANAGEMENT

Officers: Chairman of the Board and President, Brenda K. Clancy; ChiefExecutive Officer, Charles T. Boswell; Chief Investment Officer, Joel L.Coleman; Vice President and Treasurer, Karen R. Wright; Secretary, WilliamH. Geiger.

Directors: Charles T. Boswell, Darryl D. Button, Brenda K. Clancy, John R.Hunter, Arthur C. Schneider.



Territory: The company is licensed in the District of Columbia, Guam, PuertoRico, 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.

Reserve basis: (Current ordinary business): 1980 CSO 3%, 4% and 4.50%;CRVM valuation. (Current annuity business): 1983 IAM 6 1/4%; CARVMvaluation.

REINSURANCEReinsurance agreements are maintained with several primary reinsurers for

the ceding of life business. Maximum net retention on any one life is$1,000,000 for ordinary business and $1,000,000 for group contracts.


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Assets Liabilities*Total bonds 888,551 +Net policy reserves 1,747,319*Total common stocks 30,479 Policy claims 29,314Mortgage loans 49,646 Deposit type contracts 13,018Real estate 36,015 Interest maint reserve 26,504Contract loans 406,037 Comm taxes expenses 11,238Cash & short-term inv 170,354 Asset val reserve 8,838Securities-colltrl assts 89,624 Funds held reinsurance 33,628Net deferred tax asset 124,543 Payable for securities lending 89,624Prems and consids due 3,061 Other liabilities -329,623Accrued invest income 11,823Other assets 94,925 Tot liab w/o sep accts 1,629,862

Separate account bus 6,518,084Tot assets w/o sep accts 1,905,060 Total Liabilities 8,147,945

Separate account bus 6,518,084 Common stock 2,500Paid in & contrib surpl 149,627Unassigned surplus 55,568Other surplus 67,503

Assets 8,423,143 Total 8,423,143

*Securities are reported on the bases prescribed by the National Association of InsuranceCommissioners. +Analysis of reserves; Life $1,148,567; annuities $540,352; supplementarycontracts with life contingencies $7,513; accidental death benefits $20; disability active lives$2,190; disability disabled lives $4,755; miscellaneous reserves $43,404; accident & health$518.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 64,792Ordinary life 446,795 Matured endowments 21Individual annuities 16,513 Annuity benefits 25,824Group life 9,202 Surrender benefits 614,466Group annuities 5,731 Acc & health benefits 1,215Acc & health group 1,428 Int on policy funds 798Total premiums 479,670 Supplementary contracts 1,333

Supplementary contracts 929 Incr life reserves 85,625Net investment income 80,031 Incr a & h reserves -42Amort interest maint res 1,326 Commissions 138,136Comm & exp reins ceded -41,716 Interest expenses 10,066Res adj on reins ceded -31,044 Insur taxes lic & fees 14,478Other income 329,901 General ins expenses 84,143Mgt and/or service fee 2,279 Net transf to sep acct -258,667

Misc operating expense 1Other disbursements 29,300

Total 821,376 Total 811,489


Dividends to policyholders: life......................................................................... 24

Gains from operations after dividends to policyholders ........................................ 9,864


Net gain from operations after FIT and dividends................................................ 485


Funds Provided Funds AppliedGross cash from oper 837,684 Benefits paid 698,717Transf from sep account 371,180 Comm, taxes, expenses 250,591Long-term bond proceeds 263,103 Long-term bonds acquired 212,794Other invest proceeds 110,695 Div to stockholders 250,000Other cash provided 5,295 Other cash applied 247,640Decr cash & short-term 71,785

Total 1,659,742 Total 1,659,742


2011 2010 2009 2008 2007Sep Acct Assets 6,518,084 7,401,665 7,165,201 6,275,403 10,373,595% Growth -11.9 3.3 14.2 -39.5 1.7S/A Assets/Adm Assets 77.4 77.9 81.2 77.2 88.1

Sep Acct Reserves 6,130,256 6,897,546 6,546,141 5,556,306 9,485,165% Ordinary Life 44.0 41.9 38.2 34.2 35.3% Individual Annuities 55.6 57.5 61.2 65.0 63.9% Group Annuities 0.4 0.6 0.6 0.7 0.8% Group Life 0.0 0.0 0.0 … 0.0Deposit Type Liabilities 39 46 45 … …Other Liabilities 387,788 504,073 619,014 719,097 888,430

S/A Prems & Deposits 349,006 378,158 455,701 731,603 909,554% Ordinary Life 87.5 86.8 78.6 59.9 55.2% Individual Annuities 11.0 11.4 19.5 38.4 42.8% Group Annuities 1.4 1.7 1.9 1.8 2.0% Group Life 0.1 0.0 0.0 0.0 0.0

Sep Acct Fees & Charges 336,023 344,182 342,329 113,994 137,410% Ordinary Life 80.2 79.7 80.3 25.2 24.5% Individual Annuities 19.6 20.1 19.5 73.9 74.5% Group Annuities 0.2 0.2 0.2 0.8 1.0% Group Life 0.0 0.0 0.0 … 0.0Fees & Chgs to Assets% 4.8 4.7 5.1 1.4 1.3

Sep Acct Ben & Wdrwls 658,659 696,529 608,470 992,805 1,180,880% Ordinary Life 27.0 24.5 29.3 24.6 16.0% Individual Annuities 70.3 73.9 68.0 72.9 81.2% Group Annuities 2.7 1.6 2.7 2.4 2.8% Group Life 0.0 0.0 0.0 0.1 0.0Ben & Wdrwl to Assets% 9.5 9.6 9.1 11.9 11.5


Year

Ord.LapseRatio

%


Avg.Prem($/M)



Gen.Exp. /


2007 5.6 310,161 302,282 5.53 22.5 74.6 218.982008 10.4 316,124 302,309 5.44 20.0 79.9 198.272009 8.7 312,725 305,443 4.80 16.3 87.8 206.782010 7.1 290,507 306,408 4.62 16.6 87.3 200.712011 6.6 279,791 276,914 5.37 17.9 87.7 203.93

Year


# Policiesin Force

(000)

First YearPremium

(000)


(%)

Return onReserves

(%)2007 54 389 145,569 8.22 10.272008 54 396 129,362 7.19 3.752009 47 401 95,355 7.63 9.312010 46 409 95,994 7.37 9.912011 51 412 109,536 7.15 3.20


YearNPW &

Dep (000)

Res &Dep Liab

(000)


Comm &Exp to

NPW &Dep (%)

Benefits &Wdrwls to

NPW &Dep (%)


2007 405,389 6,601,434 0.4 17.3 259.7 15.92008 185,603 4,236,266 48.1 999.9 454.0 19.92009 93,943 4,579,134 0.3 14.3 519.9 10.72010 33,218 4,466,745 0.5 79.4 999.9 11.82011 18,146 3,939,789 0.2 65.2 999.9 12.4



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Year


Min or NoSurrender

Charge (%)*


WithMVA(%)*

NoSurrenderAllowed

(%)*2007 6,790,246 97.1 1.2 0.3 1.42008 4,461,916 92.4 1.6 0.7 5.32009 4,862,726 92.9 1.6 0.6 4.92010 4,718,411 93.8 1.3 0.5 4.52011 4,398,403 86.7 0.9 0.4 12.0




Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2007 10,150,929 6,707,228 … … … 16,858,157 100 02008 8,525,869 8,593,834 … 27,549 … 17,147,252 100 …2009 6,285,059 8,357,329 … 165,262 … 14,807,650 100 …2010 7,463,159 5,775,227 … 286,182 … 13,524,568 100 02011 9,564,600 4,695,506 … 634,282 … 14,894,388 100 0


Year

Whole LifeEndow. &



2007 94,816,771 22,767,470 … 102,130 … 117,686,3712008 91,662,223 28,135,299 … 125,181 … 119,922,7032009 89,560,581 32,945,177 … 277,665 … 122,783,4222010 89,236,297 36,229,696 … 542,828 … 126,008,8212011 75,291,110 38,857,498 … 1,145,572 … 115,294,180


A Rating Report from the A.M. Best Company represents an independentopinion from the leading provider of insurer ratings of a company's financialstrength and ability to meet its obligations to policyholders.

The A.M. Best Company is the oldest, most experienced rating agency in theworld and has been reporting on the financial condition of insurancecompanies since 1899. The Best's Financial Strength Rating opinionaddresses the relative ability of an insurer to meet its ongoing insuranceobligations. The rating is not assigned to specific insurance policies orcontracts and does not address any other risk, including, but not limited to, aninsurer's claims-payment policies or procedures; the ability of an insurer todispute or deny claims payment on grounds of misrepresentation or fraud; orany specific liability contractually borne by the policy or contract holder. ABest's Financial Strength Rating is not a recommendation to purchase, holdor terminate any insurance policy, contract or any other financial obligationissued by an insurer, nor does it address the suitability of any particular policyor contract for a specific purpose or purchaser.

The company information appearing in this pamphlet is an extract from thecomplete company report prepared by the A.M. Best Company.

A Best's Financial Strength Rating is assigned after a comprehensivequantitative and qualitative evaluation of a company's balance sheet strength,operating performance and business profile.

Best'sFinancial Strength Ratingsareassigned according to the following scale:Secure Best's Financial Strength Ratings

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