Download - Aegon

38 Business overview Overview AmericasIn the small business retirement plan segment and the multiple employer plansegment, Aegon USA’s main competitors are Principal Financial, John Hancock,American Funds, Fidelity, and ING. In the single premium group annuity market,Aegon USA’s main competitors are Mass Mutual, Prudential, John Hancock,MetLife and Mutual of Omaha.to cause capital strain for the life insurance industry. In volatile market conditions,funding for those reserves continues to be challenging.The NAIC amended its Model Holding Company Act and Regulation to enhancedisclosure to regulators about risk exposure t o insurers from within their holdingcompany system, for adoption by jurisdictions in 2012 and 2013. Existing insuranceAegon USA has been a leading issuer of synthetic GICs 1 .holding company statutes and the regulations of each insurer’s domiciliary state inthe United States already impose various limitations on investments in affiliates, andrequire prior approval of the payment of dividends above certain threshold levels byRegulation and supervisionthe licensed insurer to Aegon or its affiliates. In response to internationalAegon USAdevelopments, the NAIC also passed a new Own Risk and Solvency ProtectionThe Aegon USA insurance companies are subject to regulation and supervision inModel Act and Guidance Manual, which may come into effect as early as 2013. Thethe states and jurisdictions in which they transact business, maintain offices orNAIC revised the Model Standard Valuation Law (SVL) and completed a newotherwise have a business presence. Supervisory agencies in each of those states Valuation Manual, which together established Principles-Based Reserving (PBR) inand jurisdictions have broad powers to do any of the following: grant or revoke2012. A few states are considering passage of the SVL in 2013, but implementationlicenses to transact business, regulate trade and marketing practices, licenseof PBR is not expected until 2016 or later. NAI C will continue to consider changes toagents, approve policy forms and certain premium rates, set reserve and capital corporate governance and insurers ’ use of captives through 2013.requirements, determine the form and content of required financial reports, examinethe insurance companies, prescribe the type and amount of investments permitted,levy fines and seek restitution for failure to comply with applicable regulations. Theinternational businesses of Aegon USA are governed by the laws and regulations ofthe countries in which they transact business, maintain offices or otherwise have abusiness presence.Insurance companies are subject to a mandatory audit every three to five years bytheir domestic regulatory authorities, and every year by their independent auditors.In addition, examinations by non-domestic state insurance departments areconducted, on a targeted, random or cyclical basis. Some state Att orneys Generalhave also commenced investigations into certain insurers’ business practices.Within the insurance industry, substantial liability has been incurred by insurancecompanies based on their past sales, marketing and operational practices. AegonUSA continues its focus on these compliance issues, and costs can increase as aresult of these activities.In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act(Dodd-Frank Act), enacted in 2010, established the Federal Insurance Office (FIO).A FIO director was appointed in June of 2011. While the FIO does not have anydirect regulatory authority over US insurers, it does have certain authority torepresent the US government in establishing international regulatory standards forinsurers, and to represent the US insurance industry in international matters. TheDodd-Frank Act also established the Consumer Financial Protection Bureau, whichhas the authority to regulate the marketing practices of credit insurance as well asother financial products sold through banks. The Federal Reserve Board has alsoestablished certain disclosures relating to credit insurance sold in connection with abank loan. The activities of the FIO and other federal agencies under the Dodd­Frank Act will likely haveStates have risk-based capital (RBC) standards for life insurance companies,established by the National Association of Insurance Commissioners (NAIC). TheRBC Model Act (Model Act) provides for various actions should an insurer’sadjusted capital, based on statutory accounting principles, fall below certainprescribed levels (defined in terms of its risk-based capital). The adjusted capitallevels of the Aegon USA insurance companies currently exceed all of the regulatoryaction levels as defined by the Model Act. Any modifications of these adjustedcapital levels by the regulators or rating agency capital models may impact AegonUSA. States previously adopted conservative reserving requirements for term anduniversal life products that continueAlthough the US federal government has not historically regulated the insurancebusiness, many federal laws impact the insurance business in a variety of ways. USfederal and state privacy laws and regulations impose restrictions on financialinstitutions’ use and disclosure of customer information. Legislation is sometimesintroduced - in the US Congress or state governments - that would either imposeadditional restrictions on the use and disclosure of customer information or wouldrequire financial institutions to enhance the security of personal information andimpose new obligations in the event of data security breaches.1 Source: Reports from LIMRA International and the Stable Value Investment Association’s Stable Value and Funding Agreement Products as of the first three quarters of 2012.