Aegon Annual Report 2012

Annual Report 201233specialty accident and membership products are offered througha variety of direct response marketing channels, including mail,phone, digital, direct response TV and point-of-sale.Agency GroupTransamerica Agency Group includes Transamerica AgencyNetwork - Independent Group, Transamerica Agency Network -Career Agency, Transamerica Senior Markets, Carillon FinancialNetwork, ORBA Financial Management and several independentmarketing organizations. This group provides life insurance,health insurance and securities products, as well as marketingservices to closely tied distribution groups serving the middleincome and small business markets.BrokerageTransamerica Brokerage offers life and long-term careinsurance products and services through independent brokeragedistributors to high-net-worth, affluent, emerging affluentand middle income individuals, families and businesses. Theseproducts are designed for family protection, business needs, andestate and legacy planning.International MarketsTransamerica also sells its producs both in the United States andabraod through direct marketing and abroad to high-net-worthindividuals through international brokers and bankassurances.The Direct Marketing group makes its products and directresponse marketing expertise available through brokers andalliances with financial institutions, retailers, telecommunicationsproviders, insurance companies and other database owners inEurope and Latin America. The High-Net-Worth unit offers lifeinsurance products underwritten by Transamerica Life (Bermuda)Ltd., through international brokers and bankassurances.These products are tailored to meet both individual and businessneeds of affluent customers who reside in Asia, Europe, andLatin America.Broker-dealerTransamerica Financial Advisors, Inc. (TFA) is a full service,Financial Industry Regulatory Authority (FINRA) registeredindependent broker-dealer and Securities and ExchangeCommission (SEC) Registered Investment Adviser withapproximately 5,000 Registered Representatives. TFA focuseson creating, growing and protecting wealth through a range offinancial products and services.Individual Savings & RetirementThrough its insurance companies, broker-dealers and investmentadvisers, Aegon USA offers a wide range of savings andretirement products and services, including mutual funds, fixedand variable annuities. The Individual Savings & Retirementdivision administers and distributes these products througha variety of channels: including wirehouse firms, banks,regional broker dealers, independent financial planners anddirect to consumer.ProductsVariable annuitiesVariable annuities are sold to individuals and retirement plansin the United States. Variable annuities allow a policyholder toprovide for their financial future on a tax-deferred basis andto participate in equity or bond market performance. Variableannuities allow a policyholder to select payout options designedto help meet the policyholder’s need for income upon maturity;this includes lump sum payment, income for life or for a periodof time.Premiums paid on variable annuity contracts are invested inunderlying funds chosen by the policyholder, including bond andequity funds as well as various types of asset-allocation funds.A fixed interest account is available on most products and theunderlying funds are selected by a policyholder, within certainboundaries, based on the policyholder’s preferred level of risk.The assets and liabilities related to this product are legallysegregated in separate accounts of the insurance company forthe benefit of variable annuity policyholders. These separateaccounts are classified as investments for the account ofpolicyholders on Aegon’s statement of financial position.Variable annuity contracts contain riders such as guaranteedminimum death, maturity, withdrawal, accumulation orincome benefits.The account value of variable annuities reflects the performanceof the underlying funds. Aegon USA earns mortality and expensecharges as well as various types of rider fees for providingguarantees and benefits. Surrender charges are generally nota large form of revenue as policyholder surrender rates aretypically lower when a surrender charge penalty is still present.Any surrender charges collected are typically used to recoupunamortized deferred acquisition costs. A guaranteed minimumwithdrawal benefit is offered on some variable annuity productsAegon USA either issued or assumed from a ceding company.This benefit guarantees a policyholder can withdraw a certainpercentage of the account value, starting at a certain age orduration, for either a fixed period or the life of the policyholder.Certain variable annuity contracts also provide guaranteedminimum death benefits and guaranteed minimum incomebenefits. Under a guaranteed minimum death benefit, thebeneficiaries receive the greater of the account balance orthe guaranteed amount upon the death of the insured. Theguaranteed minimum income benefit feature (which is no longeroffered on new business since 2003) provides for minimumpayments if the policyholder elects to convert to an immediatepayout annuity. The guaranteed amount is calculated using thetotal deposits made by the policyholder, less any withdrawalsand sometimes includes a roll-up or step-up feature that