Best’s Rating Report - Transamerica. best aegon usa...Best’s Rating Report Ultimate Parent:...

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Best’s Rating Report

TRANSAMERICA LIFE INSURANCE COMPANY A+

TRANSAMERICA PREMIER LIFE INSURANCE COMPANY A+

TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY A+

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY A+

A+


Ultimate Parent: Aegon N.V.

TRANSAMERICA LIFE INSURANCE COMPANY4333 Edgewood Road N.E.

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

Tel.: 800-797-2643AMB#: 006095 NAIC#: 86231Ultimate Parent#: 085244 FEIN#: 39-0989781

BEST’S CREDIT RATING

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

RECENT DEVELOPMENTSEffective October 1, 2015, Stonebridge Life Insurance Company merged

with and into Transamerica Life Insurance Company. The company hasrecently divested itself of its BOLI/COLI and payout annuity businesses.

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.

Transamerica Life Insurance Company (TLIC) sells individualnon-participating whole life, endowment and term contracts, structuredsettlements and pension products, as well as a broad line of single fixed andflexible premium annuity products. In addition, TLIC offers group life,universal life, credit life and individual and specialty health coverages. Thecompany is licensed in 49 states and the District of Columbia, Guam, PuertoRico and US Virgin Islands. Sales of the company’s products are primarilythrough a network of agents, brokers and financial institutions.

The following text is derived from A.M. Best’s Credit Report on AegonUSA Group (AMB# 069707).

The ratings of the life insurance companies of Aegon USA reflect the strongbusiness profile, adequate risk-adjusted capitalization, strong enterprise riskmanagement, and an underlying trend of statutory and IFRS profitability. Theratings also reflect A.M. Best’s assessment of the financial strength andsupport of the parent, Aegon N.V. (Aegon). Partially offsetting these strengthsis the increasing focus on sales of products that have unfavorable riskcharacteristics from a product creditworthiness standpoint, as well as theequity market sensitivity of its earnings and significant reliance on captivereinsurance.

Aegon USA’s business profile is viewed as strong by A.M. Best, withcompetitive market positions in the U.S. life and annuity areas. The group’s

market positions are supported by a large and diversified distribution systemthat is made up of both independent and career agents, financial institutions,wirehouses and direct response channels. Subsequently, in late 2016 thecompany exited the Affinity, Direct TV, and Direct Mail channels that werepart of the accident and health (A&H) line of business in the US. Aegon USAenjoys the efficiencies and competitive advantages of meaningful economiesof scale, which have contributed favorably to its historical financialperformance. There should be lower dependency on release of requiredsurplus as the fee-based business grows. Aegon USA’s earnings profile is oneof the more diversified in the industry. Product lines that contribute to overallearnings include traditional life, variable life, variable annuities, mutual funds,pensions and A&H insurance. Additional rating consideration includes A.M.Best’s assessment of the financial strength and support of the parent, Aegon.As a result, Aegon USA receives rating enhancement in consideration ofAegon’s overall creditworthiness and the strategic and financial importance ofthe U.S. operations to Aegon.

Several years ago the company pursued a strategic shift to focus on sellingproducts such as variable annuities, mutual funds, and 401(k)s and hasde-emphasized sales of its spread-based products, especially fixed annuities.In a stable equity market, the required capital on variable annuities is generallyless than for fixed annuities and other spread-based products. However, from aproduct creditworthiness perspective, A.M. Best views variable annuities withliving benefits as displaying some of the highest risk characteristics and beingvulnerable to tail risks, which could lead to an increase in the required capitalto support this segment. The institutional spread-based business (primarilyguaranteed interest contracts, funding agreements and fundingagreement-backed securities) remains in run-off to reduce exposure to creditrisk, lower required capital and to shift to a more balanced mix of businessbetween spread- and fee-based products. The group has executed several fixedannuity coinsurance transactions, which have released capital and reduced itsspread-based liabilities. A.M. Best also notes that over recent years, AegonUSA has come to rely heavily on captive reinsurance to fund reservesgenerated by term life and universal life insurance with secondary guarantees.Aegon USA has also reduced its exposure to equity market risk by increasingthe size of its macro-equity hedge covering its variable annuity business.However, while the additional equity hedging will serve to reduce volatility insome financial metrics, the group’s earnings via fee income remain somewhatcorrelated to equity market performance.

A positive rating action could result from a material improvement in A.M.Best’s view of the credit profile of Aegon. A negative rating action couldresult if there is a significant and sustained decline in consolidatedrisk-adjusted capitalization as measured by Best’s Capital Adequacy Model. Asignificant and sustained decline in net operating performance could alsoresult in a negative rating action, as well as a further decline in A.M. Best’sview of Aegon’s credit profile, or a change in A.M. Best’s view of the strategicimportance of Aegon USA to Aegon.



FIVE YEAR RATING HISTORY

DateBest’sFSR Date

Best’sFSR

05/05/17 A+ 12/12/13 A+04/15/16 A+ 04/09/13 A+02/11/15 A+

KEY FINANCIAL INDICATORS ($000)Total Capital

Year Assets

CapitalSurplusFunds

AssetValuation

Reserve

NetPremiumsWritten

NetInvest

IncomeNet

Income2012 107,174,159 5,584,309 932,867 12,144,464 3,070,610 1,174,6672013 117,015,919 4,826,304 875,957 15,806,999 2,466,599 141,1082014 126,197,750 5,985,784 747,987 16,191,362 2,354,940 335,4232015 126,035,999 5,458,642 740,321 14,777,001 2,323,782 -250,8732016 131,790,027 5,234,756 813,683 13,943,320 2,453,819 471,091

(*) Within several financial tables of this report, this company is compared against the GroupAnnuity Composite.

(*) Data reflected within all tables of this report has been compiled from the company-filedstatutory statement.

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

BUSINESS PROFILEThe following text is derived from A.M. Best’s Credit Report on Aegon

USA Group (AMB# 069707).

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. Aegon USAwas founded 1989 when Aegon N.V. (Aegon) decided to bring all of itsoperating companies in the U.S. under a single financial services holdingcompany. Business is conducted through five primary insurance subsidiariesand includes Transamerica Life Insurance Company, Transamerica FinancialLife Insurance Company, Transamerica Advisors Life Insurance Company,Transamerica Premier Life Insurance Company, and Transamerica CasualtyInsurance Company. The Aegon USA group of companies is fully integratedand share senior and investment management along with support services.

Aegon USA uses a variety of distribution channels, each of which conductsbusiness through one or more of the Aegon USA life insurance companies.The channels are both owned and non-owned and include career agents as wellas financial planners, banks, brokers and independent consultants. It is alsoprominent in the home service market and focused on agent-sold business aswell as the worksite, employer-based market. Through 2015, the Aegon USAcompanies were divisionally organized into two primary business divisions:Life & Protection (L&P) and Investments & Retirement (I&R).

Beginning in 2016, Aegon USA has restructured into a functionallyorganized business centered around the Transamerica brand. As a result, thecompany has eliminated its previous divisional alignment and created aunified organization that is functionally aligned (i.e. distribution, operations,finance, etc.). As a result of its recently implemented reorganization in the

U.S., there has been a delayering of management via the elimination ofredundant processes and a restructuring of its U.S. distribution footprint. Thecurrent product lines sold through Aegon USA’s life companies include, life,accident & health, mutual funds, variable annuities, fixed annuities,retirement plans, and stable value solutions. The product lines are noworganized by distribution channel in order to ensure better alignment withcustomers, and fall into four main categories of brokerage, partner,institutional/worksite, and wholesale. The brokerage distribution channeloffers life insurance & long-term care products through third-party outlets ofbrokerage general agents or independent wholesale organizations. These aretypically non-registered products sold through independent insurance agentsand financial institutions. The Partner network known as the ‘TransamericaFinancial Network’, provides advice and guidance to individuals to meet theirprotection as well as investment needs including a ‘Transamerica AgencyNetwork’ of approximately 1,700 agents, and over 54,000 associates in the(World Financial Group). This channel provides the same life & healthproducts as the brokerage channel, with a focus on the middle and emergingaffluent markets. The Institutional/Worksite channel focuses on the sale ofproducts to consumers through the employer segment, also known as theworksite. The Wholesale channel consists of Independent broker-dealers thatwant a direct relationship with Aegon USA, and broken out into three areassuch as banks, wirehouses, and independent financial partners that arededicated to one product line, but work closely to refer advisers acrossAegon’s USA’s other multiple product lines. On 12/7/2016, Aegon alsoannounced that it was exiting the Affinity, Direct TV, and Direct Mailchannels, which were part of the accident & health line of business in the U.S.,which no longer fit with its strategic objectives. The newly restructuredorganization is now better aimed at meeting customer needs and creating aconsistent positive experience.

The former Life & Protection (L&P) division included the Agency Groupselling individual life and supplemental health products to the middle incomemarket. Also included in the L&P division were the Brokerage Group,Transamerica Employee Benefits, Long Term Care and the Affinity Group.The Brokerage Group marketed life insurance in the retail high net worthmarket through independent general agents and contract producers. TheAffinity Group specialized in marketing life insurance and supplementalhealth insurance products to consumers through direct channels such astelemarketing, direct mail, television advertising and the Internet. This groupalso marketed credit life, mortgage life and other life insurance andsupplemental health products. Transamerica Long Term Care offered productsand services aimed at meeting the long-term care insurance needs of itscustomers. Policies were sold through independent brokerage and at theworksite to individuals and groups. Through Transamerica EmployeeBenefits, L&P offered voluntary payroll deduction life and supplementalhealth insurance to employees at their place of work which are designed tosupplement employees’ existing benefit plans.

The former Investment & Retirement (I&R) division offered a wide rangeof savings and retirement products, including mutual funds, investment adviceas well 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 independent



financial 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 (renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York. Transamerica Advisors Life InsuranceCompany of New York was later merged with and into Transamerica FinancialLife Insurance Company, effective 7/1/14) 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 channels. In late 2009, I&R reduced its sales of fixed annuitiesin response to lower market interest rates and lower investment returnsavailable in the environment. Similar market conditions have continued overrecent years and restricted sales of fixed annuities. As a result, I&Rde-emphasized the sale of fixed annuities and executed several large fixedannuity coinsurance transactions in recent years.

Incorporated within the I&R division was the former Employer Solutionsand Pensions (ES&P) division. This business included full-service retirementplan investments and services in addition to guaranteed savings andinvestment products directed at various segments of the pension industry. Thegroup sold a full range of products and services to small and mid-sizecorporate, non-profit and government sponsored plans through brokers,agents, consultants, third-party administrators and accounting firms. Effective12/31/2015, Aegon USA acquired the defined contribution administrationbook of business of Mercer HR Services, LLC. The transaction propelled thecompany to a top ten defined contribution record-keeper based on planparticipants and assets, adding 917,000 and $71 billion, respectively.Transamerica Retirement Solutions (TRS) served mid-sized to largecompanies and small to mid-sized companies across the U.S. TRS offered anumber of specialized services, including innovative plan design, a wide arrayof investment choices, extensive education programs and online investmenteducation. In addition, ES&P provided synthetic guaranteed investmentcontracts primarily to various retirement plans. ES&P was also a leadingprovider of single premium group annuities (Terminal Funding), which areused by companies to decrease the liability of the defined benefit plans.BOLI/COLI products were distributed through a select number of nichebrokers (including an affiliate, Clark Consulting, which was sold inSeptember 2015); however, in December 2010, ES&P discontinued new salesin the executive non-qualified benefits market and related BOLI/COLIbusiness.

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. In 2009, Aegon announced its plan to run-off itsinstitutional spread based business to reduce capital requirements and creditrisk. The institutional line of business also included structured producttransactions, such as credit default swaps, synthetic collateralized debtobligations, affordable housing tax credit guarantees and hedge fund principal

protection. Going forward, Aegon USA will only continue to offer affordablehousing tax credit guarantees.

TOTAL PREMIUM COMPOSITION & GROWTH ANALYSISReinsurance

Period ————DPW———— ——Prem Assumed——Ending ($000) (% Chg) ($000) (% Chg)2012 13,872,056 0.8 1,986,361 0.22013 17,300,088 24.7 1,570,937 -20.92014 18,819,013 8.8 1,576,452 0.42015 17,589,954 -6.5 1,488,964 -5.52016 14,001,895 -20.4 1,511,388 1.5

5-Yr CAGR … 0.3 … -5.3

ReinsurancePeriod ———Prem Ceded——— —NPW & Deposits—Ending ($000) (% Chg) ($000) (% Chg)2012 3,713,954 -32.8 12,315,714 18.62013 3,064,026 -17.5 16,969,081 37.82014 4,204,103 37.2 16,494,852 -2.82015 4,301,055 2.3 15,352,173 -6.92016 1,569,963 -63.5 14,000,996 -8.8

5-Yr CAGR … -22.3 … 6.2

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.

2016 BY-LINE BUSINESS ($000)

——DPW——Reinsurance

—Prem Assumed—Product Line ($000) (%) ($000) (%)Ordinary life 2,413,687 17.2 1,430,379 94.6Group life 232,607 1.7 951 0.1Credit life 8,824 0.1 20 0.0Individual annuities 3,485,577 24.9 46,295 3.1Group annuities 6,718,967 48.0 … …Individual A&H 542,578 3.9 4,829 0.3Credit A&H 11,754 0.1 373 0.0Group A&H 587,901 4.2 28,541 1.9

Total 14,001,895 100.0 1,511,388 100.0



Reinsurance——Prem Ceded—— ——NPW——

Product Line ($000) (%) ($000) (%)Ordinary life 2,887,977 184.0 956,090 6.9Group life 83,484 5.3 150,075 1.1Credit life 2 0.0 8,842 0.1Individual annuities -1,762,459 -99.9 5,294,331 38.0Group annuities -190,768 -12.2 6,909,735 49.6Individual A&H 431,089 27.5 116,317 0.8Credit A&H 348 0.0 11,780 0.1Group A&H 120,290 7.7 496,151 3.6

Total 1,569,963 100.0 13,943,320 100.0

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Ordinary life 13,600,230 13,870,106 13,649,443 13,872,004 13,521,586Group life 1,020,180 1,013,137 1,112,446 1,120,835 1,113,029Credit life 7,357 6,436 153 222 321Supplementary contr 432,172 404,720 420,196 425,559 397,031Individual annuities 11,790,433 9,572,989 10,921,943 9,314,992 9,885,783Group annuities 5,414,009 5,182,270 5,431,048 5,752,137 5,985,678Deposit type contracts 3,370,720 2,738,140 3,068,610 3,736,779 5,203,952Individual A&H 4,185,433 3,910,450 3,565,465 3,428,931 3,294,574Credit A&H 13,263 16,335 12,114 13,669 15,836Group A&H 911,982 897,261 943,395 934,973 929,071

Total 40,745,779 37,611,842 39,124,813 38,600,102 40,346,862

LIFE POLICIES STATISTICS-Ordinary Policies- -Group Policies- -Group Certificates-

Year Issued In Force Issued In Force Issued In Force2012 162,539 9,304,293 728 15,258 127,968 856,4832013 168,634 7,732,441 728 15,325 138,394 810,3542014 186,637 6,719,736 … 12,567 134,322 825,4662015 176,544 6,524,240 7 12,496 86,689 777,2132016 145,002 6,336,862 5 12,002 80,926 744,005

LIFE INSURANCE IN FORCE ($000)

Year

Whole LifeEndow. &

Adds Term Credit Group Industrial

TotalInsuranceIn Force

2012 145,975,069 972,133,271 1,922,238 22,475,181 … 1,142,505,7592013 192,781,220 878,655,801 1,995,292 21,222,988 … 1,094,655,3012014 141,973,255 908,808,833 1,906,359 20,706,698 … 1,073,395,1442015 147,841,621 896,434,256 1,659,326 22,077,653 … 1,068,012,8562016 140,308,982 891,604,207 489,976 22,369,247 … 1,054,772,412

NEW LIFE BUSINESS ISSUED ($000)

YearWhole Life& Endow. Term Credit Group

Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2012 27,050,694 10,828,261 1,535,279 2,192,903 … 41,607,138 100.0 0.02013 41,851,810 260,567 1,749,800 1,818,139 … 45,680,317 100.0 0.02014 5,994,741 38,941,352 1,675,613 2,792,910 … 49,404,614 100.0 …2015 2,603,553 41,091,411 1,546,200 2,736,141 … 47,977,305 100.0 …2016 1,091,657 36,344,361 240,980 2,987,197 … 40,664,195 100.0 …

ORDINARY LIFE STATISTICSOrd. Renew Average 1st Yr 1st Yr Gen.

Lapse Premium Ord. Policy Avg Prem / Comm / Exp. /Ratio Persist (in dollars) Prem Total 1st Yr Policies

Year % % Issued In Force ($/M) Prem Prem In Force2012 6.4 84.9 233,045 120,171 3.75 18.0 64.9 32.562013 4.8 82.8 249,726 138,564 3.49 12.9 83.9 41.722014 5.8 92.2 240,767 156,373 3.83 18.2 60.9 51.482015 4.7 80.3 247,502 160,061 3.54 10.9 100.9 51.312016 4.1 96.0 258,176 162,843 3.73 6.8 123.1 64.57

First Year Gen’l Exp/ Return onNumber of Policies Premium Reserves Reserves

Year Issued In Force (000) (%) (%)2012 162,539 9,304,293 436,570 2.22 1.292013 168,634 7,732,441 298,100 2.31 0.182014 186,637 6,719,736 474,727 2.52 0.282015 176,544 6,524,240 254,734 2.40 -7.562016 145,002 6,336,862 163,049 2.99 -4.06

INDIVIDUAL ANNUITY STATISTICS

YearNPW(000)

Res(000)

Exp toRes(%)

Comm &Exp toNPW(%)

Benefits &Wdrwls toNPW (%)

Benefits &Wdrwls to

Res (%)2012 4,424,963 10,282,814 0.9 11.3 46.8 20.22013 7,190,145 9,740,551 1.3 8.6 32.4 23.92014 10,683,497 11,342,139 1.4 6.8 27.2 25.62015 5,870,210 9,977,708 1.6 11.8 59.8 35.22016 5,294,331 12,222,605 2.0 11.1 68.9 29.8

GROUP ANNUITY STATISTICS

YearNPW(000)

Res(000)

Exp toRes (%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 5,523,123 5,985,678 2.5 3.5 78.8 72.72013 6,303,280 5,752,137 3.0 3.4 80.5 88.32014 5,967,566 5,431,048 2.9 3.5 97.0 106.52015 7,048,152 5,182,270 3.0 2.9 98.0 133.22016 6,909,735 5,414,009 1.2 1.5 99.8 127.4



TOTAL ANNUITY ACTUARIAL RESERVESBY WITHDRAWAL CHARACTERISTICS

YearTotal Annuity

Res (000)

Min or NoSurrender

Charge (%)

WithSurrenderCharge 5%or more (%)

WithMVA (%)

NoSurrender

Allowed (%)2012 16,268,491 77.6 0.7 2.0 19.62013 15,492,688 82.9 0.9 1.9 14.32014 16,773,187 85.4 0.3 1.8 12.52015 15,159,978 86.0 0.3 1.4 12.42016 17,636,614 90.2 0.1 1.2 8.5

SEPARATE ACCOUNT DATA

2016 2015 2014 2013 2012Sep Acct Assets 73,774,288 72,130,155 70,574,605 61,020,158 48,684,223% Growth 2.3 2.2 15.7 25.3 17.4S/A Assets/Adm Assets 56.0 57.2 55.9 52.1 45.4

Sep Acct Reserves 70,769,562 67,204,016 65,776,928 57,186,910 44,062,076% Ordinary Life 5.4 5.6 5.8 6.6 8.1% Individual Annuities 59.2 59.8 58.9 56.1 54.3% Group Annuities 35.4 34.6 35.4 37.3 37.6Deposit Type Liabilities 60,039 79,241 108,540 124,775 150,693Other Liabilities 2,807,549 4,709,929 4,557,832 3,586,424 4,371,546Sep Acct Surplus 119,233 116,718 109,905 99,918 75,685

S/A Prems & Deposits 8,746,738 12,177,702 13,103,887 12,426,910 9,333,304% Ordinary Life 0.2 0.2 0.1 0.1 0.2% Individual Annuities 33.2 46.3 57.5 53.0 46.7% Group Annuities 66.6 53.6 42.4 46.9 53.1

Sep Acct Fees & Charges 1,327,694 1,282,183 1,087,005 867,298 712,130% Ordinary Life 3.7 3.9 4.0 5.0 7.1% Individual Annuities 81.0 80.0 78.1 75.5 72.6% Group Annuities 15.3 16.2 17.8 19.6 20.3Fees & Chgs to Assets% 1.8 1.8 1.7 1.6 1.6

Sep Acct Ben & Wdrwls 8,585,352 9,291,246 7,244,498 5,875,731 6,949,613% Ordinary Life 0.6 0.6 1.0 0.3 28.1% Individual Annuities 32.6 36.7 33.1 32.4 24.9% Group Annuities 66.9 62.6 65.9 67.3 47.0Ben & Wdrwl to Assets% 11.8 13.0 11.0 10.7 15.4

GEOGRAPHIC BREAKDOWN BYDIRECT PREMIUM WRITINGS ($000)

2016 2015 2014 2013 2012North Carolina 1,827,801 1,951,291 1,727,491 1,500,415 1,309,242California 1,725,961 2,036,986 1,896,548 1,853,495 1,746,660Iowa 1,447,296 2,522,242 1,835,123 2,978,227 1,187,129Texas 907,990 993,017 965,641 931,426 796,441Florida 873,298 1,166,509 1,394,369 1,260,808 937,668Illinois 520,156 604,055 648,436 589,842 537,889Pennsylvania 470,561 711,481 790,116 689,381 517,948New Jersey 409,358 635,830 918,930 979,571 570,718Ohio 375,202 434,909 479,993 467,151 435,450Michigan 374,466 533,479 640,251 577,392 387,681All Other 5,097,808 6,543,059 7,695,508 6,501,327 5,515,479

Total 14,029,895 18,132,858 18,992,408 18,329,037 13,942,303

RISK MANAGEMENTThe following text is derived from A.M. Best’s Credit Report on Aegon


Aegon USA has a fully integrated enterprise risk management (ERM)structure/program in place to assess current and emerging risk, as well governfuture decisions. The company’s risk management framework is representedacross all levels of the organization. This ensures a coherent and integratedapproach to risk management throughout the company. Within this program,objectives and risk tolerances are set and roles and responsibilities are clearlydefined across all levels of the organization. Aegon USA’s ERM program isoverseen by a governance structure that has three basic layers: A SupervisoryBoard Risk Committee, the Executive Board and an ERM & Group Risk &Capital Committee. Developed and re-established certain risk standards withenterprise wide held risk, controls, and SOx training, while implementing newrisk reporting. The governance structure has also been enhanced byestablishing the Market Compliance and Conduct Committee, and addingProduct & Distribution heads bringing stronger alignment amongst thefunctional leaders. In 2016 the company has begun a formal complianceattestation process on all risk policies with an intent on streamlining andstrengthening the new governance structure. A.M. Best views Aegon USA’sERM capabilities to be strong for its size and business profile.

Country Risk: Aegon USA has a limited amount of country risk exposure asthe company’s operations are based in the U.S. However, Aegon Americas —which includes all of the North American and Latin American operations ofAegon — has a modest amount of country risk exposure with its life insuranceoperations in Canada (through Canadian Premier Life and Transamerica LifeCanada (sold in July 2015)) and Latin America with Mexico and Brazil. In2006, Aegon acquired a 49% interest in Seguros Argos, a Mexican lifeinsurance company. As part of the joint venture, Aegon and Seguros Argos setup a jointly owned pension fund company, Afore Argos. In 2009, Aegonacquired a 50% interest in Mongeral S.A. Seguros e Previdencia, Brazil’s 6thlargest independent life insurer. The U.S. and Canada are considered “Tier 1"



by A.M. Best’s Country Risk Group with Mexico and Brazil both considered”Tier 3".

OPERATING PERFORMANCEThe following text is derived from A.M. Best’s Credit Report on Aegon


Operating Results: Aegon USA Group has one of the more diversifiedearnings profiles in the industry with earnings being generated from lifeinsurance products and increasingly from fee-based income from variable andinvestment-type products. Aegon USA Group reported a pre-tax statutoryoperating gain of approximately $1.4 billion in 2016 as compared to a 2015pre-tax statutory operating gain of approximately $0.6 billion. The strong2016 results were mainly driven by lower underwriting losses, along withhigher investment income, as well as aggressive expense reductions. Grossdeposits increased to $45.3 billion in 2016 compared with 2015, as a result ofthe deposits from the defined contribution business acquired from Mercerback in 2015, which offset lower variable annuity deposits. A.M. Best expectsthat Aegon USA Group will continue to maintain an underlying trend ofprofitability on both a statutory and IFRS basis. However, margins may bechallenged by the low interest rate environment.

PROFITABILITY ANALYSIS ($000)————————Company————————

Pre-tax NetPeriod Net Oper Operating Net TotalEnding Income Gain Income Return2012 1,407,726 1,556,695 1,174,667 1,176,7012013 1,143,403 1,422,552 141,108 -190,5092014 297,584 47,019 335,423 1,237,5972015 59,517 91,795 -250,873 -155,0002016 678,358 779,799 471,091 357,963

5-Yr Total 3,586,589 3,897,862 1,871,417 2,426,753

———Company——— —Industry Composite—Period Operating Operating Operating OperatingEnding ROR (%) ROE (%) ROR (%) ROE (%)2012 10.7 28.6 4.3 14.42013 7.1 27.3 8.6 21.82014 0.2 0.9 -0.3 -0.72015 0.5 1.6 6.2 10.12016 4.2 14.6 6.7 19.2

5-Yr Avg 4.1 14.4 5.0 12.9

PROFITABILITY TESTSComm & Pre-tax

Ben Paid Exp to NOG Operating Investto NPW NPW to Tot NOG to Return on Net Total

Year & Dep & Dep Assets Tot Rev Equity Yield Return2012 71.1 12.3 1.5 10.7 28.6 5.39 4.922013 56.6 10.1 1.3 7.1 27.3 4.58 1.292014 67.6 15.1 0.0 0.2 0.9 4.51 7.542015 83.1 11.6 0.1 0.5 1.6 4.56 4.012016 92.5 11.7 0.6 4.2 14.6 4.83 4.13

5-Year Avg 73.5 12.2 0.7 4.1 14.4 4.79 4.37

(*) Pre-Tax Invest Total Return quarterly calculation based on more limited quarterly data -see Calculation Specifications

NET OPERATING GAIN ($000)Product Line 2016 2015 2014 2013 2012Ordinary life -556,596 -1,056,567 38,105 24,455 175,691Group life -9,636 182,993 -38,332 -39,058 50,763Credit life -1,107 -4,171 806 -2,278 1,729Supplementary contr -45,418 -48,588 8,526 -50,979 -46,307Individual annuities 777,426 691,468 -129,230 1,224,249 860,936Group annuities 115,128 -5,890 -4,310 56,814 56,705Individual A&H 72,997 79,408 77,946 108,377 164,626Credit A&H 2,419 1,414 -1,534 5,275 14,109Group A&H 143,957 77,359 95,043 95,696 278,444Other 280,629 174,370 … … …

Total 779,799 91,795 47,019 1,422,552 1,556,695

ACCIDENT & HEALTH STATISTICS ($000)Net Premiums Net Premiums Loss Exp. Underwriting

Year Written Earned Ratio Ratio Results2012 996,766 996,302 74.6 35.7 -102,2252013 1,041,484 1,039,379 74.6 37.0 -121,1092014 -2,794,008 -2,798,628 -31.8 -27.8 -550,4052015 762,990 765,201 92.6 42.5 -267,5812016 632,417 629,964 96.4 34.7 -196,462Current Year Experience:Group 498,358 496,051 51.7 34.3 68,890Credit 11,780 12,032 37.0 63.1 147Non-can. 15,985 15,909 2.0 72.7 3,965Guarant renew 102,913 101,828 339.0 29.0 -273,216Non-renew, S.R. -111 -96 0.3 999.9 2,987Other accident 2,750 3,499 15.8 77.8 806Other 742 742 25.9 79.7 -41



INVESTMENT GAINS ($000)—————————Company—————————Net Realized UnrealizedInv Capital Capital

Year Income Gains Gains2012 3,070,610 -382,029 2,0352013 2,466,599 -1,281,444 -331,6172014 2,354,940 288,404 902,1742015 2,323,782 -342,668 95,8722016 2,453,819 -308,708 -113,128

5-Year Total 12,669,751 -2,026,445 555,336——————Company—————— -Industry Composite-

Pre-taxInvest

Inv Inc Inv Return on Total Inv Inc InvGrowth Yield Inv Assets Return Growth Yield

Year (%) (%) (%) (%) (%) (%)2012 11.9 5.4 4.8 4.9 -0.4 5.02013 -19.7 4.6 2.2 1.3 0.1 4.82014 -4.5 4.5 5.7 7.5 2.3 4.82015 -1.3 4.6 3.8 4.0 -4.7 4.62016 5.6 4.8 4.1 4.1 8.8 5.1

5-Yr Avg -2.2 4.8 4.1 4.4 1.1 4.8


BALANCE SHEET STRENGTHThe following text is derived from A.M. Best’s Credit Report on Aegon


Capitalization: Aegon USA’s overall risk-based capitalization is adequate tosupport its current insurance and investment risks. A.M. Best believes thatAegon USA has good statutory earnings capacity to support its capitalposition going forward. A.M. Best also notes that over recent years, AegonUSA has come to rely heavily on captive reinsurance to fund its reservesassociated with term life insurance and universal life with secondaryguarantees. Financing provided to these captives include, but are not limitedto, surplus notes, letters of credit and parental guarantees. As part of ourassessment of a rating unit’s balance sheet strength, A.M. Best considers notonly the capital adequacy ratios, but also the quality of capital supporting suchratios. A.M. Best believes that the quality of capital for an operating companythat has ceded XXX and/or AXXX reserves to a domestic or offshore captiveas not as strong as for an operating company with similar risk-adjusted capitalratios that self-funds its XXX and AXXX reserves. Finally, Aegon USA hasreceived capital contributions in the past from its ultimate parent, Aegon N.V.Given that Aegon USA is such an integral part of Aegon N.V., A.M. Bestbelieves that they would likely provide additional capital if needed in the

future. A.M. Best views the capital profile to be a material supporting factorto the rating of the group.

Current BCAR: 191

CAPITAL GENERATION ANALYSIS ($000)——————Source of Surplus Growth——————

Pre-Tax Net Realized UnrealizedAdjusted Capital Income Capital

Year Gain Gains Taxes Gains2012 1,407,726 -382,029 -148,969 2,0352013 1,143,403 -1,281,444 -279,149 -331,6172014 297,584 288,404 250,565 902,1742015 59,517 -342,668 -32,278 95,8722016 678,358 -308,708 -101,441 -113,128

5-Yr Total 3,586,589 -2,026,445 -311,273 555,336—————Source of Surplus Growth—————Change Change % Chg

in Other in inYear AVR Changes C&S C&S2012 -37,665 -837,460 301,576 5.72013 56,911 -624,407 -758,005 -13.62014 127,970 -206,087 1,159,480 24.02015 7,665 -393,153 -540,488 -8.82016 60,538 -632,955 -214,453 -4.1

5-Yr Total 215,419 -2,694,063 -51,891 -0.2

QUALITY OF SURPLUS ($000)Surplus Other Contributed Unassigned

Year Notes Debt Capital Surplus2012 150,000 1,597 3,330,410 2,102,3022013 150,000 1,597 3,359,296 1,315,4112014 150,000 1,597 3,364,848 2,469,3392015 150,000 1,597 3,051,463 2,255,5822016 150,000 1,282 2,738,274 2,345,199

Year-End Asset Valuation AdjustedYear C&S Reserve C&S2012 5,584,309 932,867 6,517,1762013 4,826,304 875,957 5,702,2602014 5,985,784 747,987 6,733,7712015 5,458,642 740,321 6,198,9632016 5,234,756 813,683 6,048,439



LEVERAGE ANALYSIS————————Company———————— -Industry Composite-C&S NPW & Dep Change C&S

to Surplus to Total in NPW to SurplusYear Liab(%) Relief(%) Capital & Dep(%) Liab(%) Relief(%)2012 12.5 10.0 1.9 18.6 10.3 4.42013 11.3 12.5 3.0 37.8 10.3 8.02014 13.7 1.5 2.4 -2.8 10.6 3.72015 13.0 10.7 2.5 -6.9 11.6 5.62016 11.6 8.6 2.3 -8.8 11.1 5.1

CEDED REINSURANCE ANALYSIS—————————Company————————— -Industry Composite-

Face Affil Unaffil Total TotalAmount Reins Reins Reins Surplus Reins Reins Reins

Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage2012 1,005,507,465 2.7 10.3 13.0 10.0 653.3 5.3 219.02013 909,761,589 3.2 11.3 14.5 12.5 700.7 5.1 235.82014 939,175,408 3.1 8.6 11.7 1.5 536.0 5.3 223.72015 883,895,940 3.5 10.9 14.4 10.7 611.5 6.6 323.92016 916,395,356 4.3 11.9 16.2 8.6 595.6 7.1 323.0

Loss Reserves: While loss reserving practices has not been a material concernfrom a ratings perspective, Aegon USA’s reserve profile is changing as thecompany focuses on selling fee-based products, especially variable annuitieswith living benefit riders, while de-emphasizing spread-based products,especially tradition fixed annuities. An additional aspect of this shift is thatmortality reserves also are playing a less dominant role than in the past. Somepositive trends as it relates to the improved risk profile of the company’s legacyblock of variable annuities with living benefit riders are noted. Managementactions, such as buyouts of variable annuities that are in the money, has causedthe related net amount at risk before hedging and reinsurance as a percent ofaccount value and surplus to decline significantly over the past several years.


Liquidity: Aegon USA has adequate cash and liquid assets to protect againstadverse liquidity scenarios. The company manages so that liquidityrequirements could be met in stress scenarios which factor in a combination ofevents over monthly horizon points over an extended period of time. Liquidityimpacts due to rating downgrades are also factored into the company’s stresstesting. The company manages liquidity so that a positive cash balance can bemaintained during the first 6 months of a modeled scenario with illiquid assetsales not allowed during this period. The company also forecasts liquidity tobe positive over a two year period. Aegon USA’s liquidity is also supported by$1.5 billion in available syndicated borrowings for emergency use only incommitted bank lines through the ultimate parent AEGON, N.V. The groupalso has available to them the ability to access the FHLB as well as othernormal operating lines of credit outside of emergency use funding. Liquidityis considered adequate and supports the level of business complexity in whichthe company operates.

LIQUIDITY ANALYSIS———————————Company———————————

Operating Non-Inv Delnq &Cash Quick Current Grade Bonds Foreclsd

Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital2012 298,887 49.1 91.2 60.8 0.12013 -79,671 45.1 86.0 54.5 …2014 2,083,357 48.4 82.2 37.2 0.32015 -1,470,829 43.8 80.6 35.5 0.52016 178,389 44.8 80.6 45.1 0.4

————Company———— ——Industry Composite——Mortgage Affil

& RE Invest Quick CurrentYear to Capital to Capital Liquidity Liquidity2012 91.8 46.1 38.8 74.02013 102.6 57.3 38.3 72.32014 83.8 51.3 37.3 70.92015 88.6 68.5 35.6 69.62016 95.3 60.0 35.0 69.6


Investments: Aegon USA employs an Asset Liability Management focusedinvestment strategy utilizing fixed income securities for a majority of itsinvested general account assets. However, a small portion of the investmentsare managed on a total return basis utilizing hedge funds for the most part.Almost the entire investment portfolio is managed in-house by Aegon AssetManagement.

As of year-end 2016, bonds represented 70.9% of Aegon USA’s investmentportfolio and 93.5% are of investment grade quality. Common stock accountsfor about 3.2% of the portfolio, of which a large portion is affiliated. Directcommercial mortgage loans comprise approximately 10% of invested assetsand are backed principally by office, retail, industrial and apartmentproperties. The commercial loan portfolio is performing well, with the vastmajority of loans in good standing. Aegon USA’s exposure to alternativeassets consists of investments in higher risk and less liquid assets, such ashedge funds, private equity, mezzanine debt and real estate. A.M. Best notesthat the alternative asset exposure is less than 5% of the investment portfolio.

Over recent years, Aegon has taken steps to improve the risk profile of itsinvestment portfolio with below investment grade (BIG) bonds and what A.M.Best deems as high risk assets playing less of a role. BIGs as a percent of totalcapital are about 41% as of year-end 2016, down from a high of 60% in 2012.



INVESTMENT YIELDSCash & Invest.

Net Short- —Real Estate— Exp.Year Yield Bonds Stocks Mortgages Term Gross Net Ratio2012 5.39 5.00 24.71 6.55 0.20 18.77 1.08 3.612013 4.58 4.92 1.09 6.76 0.13 16.42 -3.86 4.532014 4.51 4.89 1.98 6.21 0.12 17.38 -2.28 4.652015 4.56 4.94 0.49 5.77 0.24 17.46 -2.41 5.442016 4.83 4.92 0.81 5.17 0.81 17.91 -1.61 5.38

INVESTMENTS - SECURITIESCurrent Year Distribution of Bonds By Maturity

————Years———— Yrs-Avg0-1 1-5 5-10 10-20 20+ Maturity

Government 2.1 0.8 1.6 0.7 18.1 20Gov’t Agencies & Muni 0.4 0.2 1.2 0.1 1.7 15Industrial & Misc 6.0 17.9 17.3 13.7 16.5 11Hybrid Securities 0.0 0.0 0.2 0.4 1.0 20Affiliated … … … … 0.0 25

Total 8.4 19.0 20.3 14.9 37.3 14

2016 2015 2014 2013 2012Bonds (000) 38,632,034 34,097,070 35,685,611 37,493,217 37,957,060US Government 21.3 18.8 14.0 12.0 10.5Foreign Government 1.0 1.2 1.3 1.5 1.4State/Special Revenue - US 3.7 3.0 2.3 2.0 2.0Industrial & Misc - US 73.9 76.8 82.1 84.4 85.9Affiliated 0.0 0.2 0.2 0.1 0.1

Private Issues 22.9 25.0 24.7 23.9 28.0Public Issues 77.1 75.0 75.3 76.1 72.0

Bond Quality (%) 2016 2015 2014 2013 2012Class 1 64.4 64.0 63.4 59.3 61.1Class 2 28.7 29.9 30.0 32.6 29.5Class 3 3.6 3.5 3.6 4.2 4.2Class 4 2.2 1.7 2.0 2.7 3.4Class 5 0.8 0.7 0.6 0.9 1.7Class 6 0.2 0.3 0.4 0.2 0.3

INVESTMENTS - EQUITIES2016 2015 2014 2013 2012

Stocks (000) 2,650,404 2,193,931 2,074,898 1,770,537 1,780,784Unaffiliated Common 7.4 5.8 6.5 9.8 12.2Affiliated Common 88.8 89.4 87.7 82.1 80.9Unaffiliated Preferred 3.6 4.5 5.5 7.7 6.4Affiliated Preferred 0.3 0.3 0.3 0.4 0.4

INVESTMENTS - MORTGAGE LOANS & REAL ESTATE2016 2015 2014 2013 2012

Mortgages (000) 5,641,558 5,363,099 5,544,697 5,740,912 5,868,661Commercial 98.6 98.8 99.0 98.1 96.7Farm 1.4 1.2 1.0 1.9 3.3Mortgage Quality (%) 2016 2015 2014 2013 201290 Days Delinquent … … 0.2 … …In Process of Foreclosure … 0.1 … … …Total Delinquencies … 0.1 0.2 … …

2016 2015 2014 2013 2012Real Estate (000) 121,897 131,514 100,655 106,908 112,161Property Occupied by Co 69.5 71.7 85.6 86.3 89.1Property Held for Inc 6.7 6.2 8.0 6.2 7.2Property Held for Sale 23.9 22.1 6.4 7.5 3.7

Investments - Other Invested Assets: Aegon uses derivatives, such as swaps,options, futures and forward contracts to hedge some of the exposures relatedto both investments backing insurance products and company borrowings.A.M. Best notes as a positive Aegon’s use of equity futures contracts to hedgeliability risk with the equity sensitive products, such as variable annuities.While this strategy may help mitigate some of the tail risk associated withthese liabilities, there is still the presence of policyholder behavior risk, whichcannot be hedged. As a result, there is the possibility of hedge breakage in astressed market environment.

INVESTMENTS - OTHER INVESTED ASSETS2016 2015 2014 2013 2012

Other Inv Assets (000) 7,419,078 9,519,130 9,537,707 8,435,556 10,280,936Cash 4.7 10.8 13.6 8.1 29.5Short-Term 15.1 13.0 19.7 15.8 13.9Schedule BA Assets 26.0 27.9 18.2 24.0 22.4All Other 54.2 48.4 48.5 52.1 34.3

HISTORYDate Incorporated: 04/19/1961 Date Commenced: 03/19/1962

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, Blake S.Bostwick; Executive Vice President, Secretary and General Counsel, JasonOrlandi; Senior Vice President and Controller, Eric J. Martin.

Directors: Blake S. Bostwick, Mark W. Mullin, Jason Orlandi, David Schulz,C. Michiel van Katwijk.

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

2014, by the insurance department of Iowa. The 2016 annual independentaudit of the company was conducted by PricewaterhouseCoopers, LLP. Theannual statement of actuarial opinion is provided by Donald Krouse.

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.

FINANCIAL INFORMATIONBALANCE SHEET ($000) - YE 2016

Assets LiabilitiesTotal bonds 38,632,034 +Net policy reserves 37,375,059Total preferred stocks 102,709 Policy claims 549,053Total common stocks 2,547,696 Deposit type contracts 3,370,720Mortgage loans 5,641,558 Interest maint reserve 894,015Real estate 121,897 Comm taxes expenses 288,131Contract loans 607,746 Borrowed money 2,267,594Cash & short-term inv 1,470,814 Asset val reserve 813,683Securities-colltrl assts 2,303,603 Funds held reinsurance 2,035,070Other invested assets 1,927,635 Funds held coinsur 1,568,878Prems and consids due 149,211 Derivatives 1,314,458Accrued invest income 510,947 Payable for securities lending 2,303,603Other assets 3,999,892 Other liabilities 119,953

Tot assets w/o sep accts 58,015,739 Tot liab w/o sep accts 52,900,216Separate account bus 73,774,288 Separate account bus 73,655,055

Total liabilities 126,555,271Common stock 6,762Preferred stock 1,282Treas stock preferred -58,000Surplus notes 150,000Paid in & contrib surpl 2,789,512Unassigned surplus 1,767,263Other surplus 577,936

Assets 131,790,027 Total 131,790,027

+Analysis of reserves; Life $14,053,396; annuities $17,189,479; supplementary contractswith life contingencies $447,135; accidental death benefits $7,703; disability active lives$10,103; disability disabled lives $43,317; miscellaneous reserves $513,249; accident & health$5,110,678.


SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 1,543,390Ordinary life 956,090 Matured endowments 33Individual annuities 5,294,331 Annuity benefits 1,157,200Credit life 8,842 Surrender benefits 9,770,320Group life 150,075 Acc & health benefits 327,969Group annuities 6,909,735 Int on policy funds 79,184Acc & health group 496,151 Supplementary contracts 74,452Acc & health credit 11,780 Incr life reserves 1,259,920Acc & health other 116,317 Incr a & h reserves 286,632Total premiums 13,943,320 Res adj reins assumed -188,295

Supplementary contracts 79,332 Commissions 955,517Net investment income 2,453,819 Comm exp reins assumed 74,418Amort interest maint res 79,380 Interest expenses 9,000Comm & exp reins ceded 451,545 Insur taxes lic & fees 125,864Res adj on reins ceded 13,653 General ins expenses 886,561Reinsurance income 7,326 Net transf to sep acct 1,365,071Other income 1,522,047 Other expenses 147,647Mgt and/or service fee 8,788

Total 18,559,211 Total 17,874,884

Gain from operations before FIT & div to policyholders....................................... 684,327

Dividends to policyholders: life......................................................................... 5,969

Gains from operations after dividends to policyholders........................................ 678,358

Federal income taxes incurred........................................................................... -101,441

Net gain from operations after FIT and dividends................................................ 779,799

CASH FLOW ANALYSIS ($000)

Funds Provided Funds AppliedGross cash from oper 16,525,728 Benefits paid 13,002,709Long-term bond proceeds 10,795,896 Comm, taxes, expenses 1,897,305Other invest proceeds 2,141,489 Long-term bonds acquired 12,682,216Borrowed money 1,769,852 Other cash applied 4,502,019Other cash provided 41,992Decr cash & short-term 809,292

Total 32,084,250 Total 32,084,250

—— ♦ ——


TRANSAMERICA PREMIER LIFE INSURANCECOMPANY

4333 Edgewood Road N.E.Cedar Rapids, IA 52499

Web: www.transamerica.comTel.: 800-797-2643AMB#: 006742 NAIC#: 66281Ultimate Parent#: 085244 FEIN#: 52-0419790



RECENT DEVELOPMENTSEffective July 31, 2014, the company changed its name from Monumental

Life Insurance Company to Transamerica Premier Life Insurance Company.Effective October 1, 2014, Western Reserve Life Assurance Co. of Ohio

merged with and into Transamerica Premier Life Insurance Company.The company has recently divested itself of its BOLI/COLI and payout

annuity businesses.

RATING RATIONALE


Transamerica Premier 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 various investment products. Thecompany is licensed in 49 states, the District of Columbia, Guam and PuertoRico. Sales of the company’s products are primarily through agents, brokers,financial institutions and direct response methods.


The ratings of the life insurance companies of Aegon USA reflect the strongbusiness profile, adequate risk-adjusted capitalization, strong enterprise riskmanagement, and an underlying trend of statutory and IFRS profitability. Theratings also reflect A.M. Best’s assessment of the financial strength andsupport of the parent, Aegon N.V. (Aegon). Partially offsetting these strengthsis the increasing focus on sales of products that have unfavorable riskcharacteristics from a product creditworthiness standpoint, as well as the



equity market sensitivity of its earnings and significant reliance on captivereinsurance.

Aegon USA’s business profile is viewed as strong by A.M. Best, withcompetitive market positions in the U.S. life and annuity areas. The group’smarket positions are supported by a large and diversified distribution systemthat is made up of both independent and career agents, financial institutions,wirehouses and direct response channels. Subsequently, in late 2016 thecompany exited the Affinity, Direct TV, and Direct Mail channels that werepart of the accident and health (A&H) line of business in the US. Aegon USAenjoys the efficiencies and competitive advantages of meaningful economiesof scale, which have contributed favorably to its historical financialperformance. There should be lower dependency on release of requiredsurplus as the fee-based business grows. Aegon USA’s earnings profile is oneof the more diversified in the industry. Product lines that contribute to overallearnings include traditional life, variable life, variable annuities, mutual funds,pensions and A&H insurance. Additional rating consideration includes A.M.Best’s assessment of the financial strength and support of the parent, Aegon.As a result, Aegon USA receives rating enhancement in consideration ofAegon’s overall creditworthiness and the strategic and financial importance ofthe U.S. operations to Aegon.





Best’sFSR

05/05/17 A+ 12/12/13 A+04/15/16 A+ 04/09/13 A+02/11/15 A+


Year Assets

CapitalSurplusFunds

AssetValuation

Reserve

NetPremiumsWritten

NetInvest

IncomeNet

Income2012 39,658,008 1,130,555 204,031 1,984,545 904,043 273,5422013 41,280,035 1,345,916 261,614 2,124,691 821,819 326,6842014 42,248,242 1,774,705 247,773 6,292,481 825,970 350,7312015 41,649,416 1,507,978 270,586 3,095,725 840,834 213,8242016 41,515,552 1,677,677 225,467 3,298,030 884,585 338,879

(*) Within several financial tables of this report, this company is compared against theMultiple Lines Composite.











The former Investment & Retirement (I&R) division offered a wide rangeof savings and retirement products, including mutual funds, investment adviceas well as fixed and variable annuities. Transamerica Capital Management(TCM) is the underwriting and wholesaling broker/dealer for variable

annuities and mutual funds. TCM builds relationships with 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 (renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York. Transamerica Advisors Life InsuranceCompany of New York was later merged with and into Transamerica FinancialLife Insurance Company, effective 7/1/14) 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 channels. In late 2009, I&R reduced its sales of fixed annuitiesin response to lower market interest rates and lower investment returnsavailable in the environment. Similar market conditions have continued overrecent years and restricted sales of fixed annuities. As a result, I&Rde-emphasized the sale of fixed annuities and executed several large fixedannuity coinsurance transactions in recent years.


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. In 2009, Aegon announced its plan to run-off itsinstitutional spread based business to reduce capital requirements and creditrisk. The institutional line of business also included structured producttransactions, such as credit default swaps, synthetic collateralized debt



obligations, affordable housing tax credit guarantees and hedge fund principalprotection. Going forward, Aegon USA will only continue to offer affordablehousing tax credit guarantees.


Period ————DPW———— ——Prem Assumed——Ending ($000) (% Chg) ($000) (% Chg)2012 2,530,167 3.2 207,470 -2.92013 2,675,486 5.7 157,040 -24.32014 2,895,644 8.2 4,061,709 999.92015 3,175,792 9.7 499,472 -87.72016 3,323,542 4.7 -1,562,352 -99.9

5-Yr CAGR … 6.3 … -99.9

ReinsurancePeriod ———Prem Ceded——— —NPW & Deposits—Ending ($000) (% Chg) ($000) (% Chg)2012 753,092 -5.3 2,022,933 6.12013 707,835 -6.0 2,189,829 8.32014 664,872 -6.1 6,330,921 189.12015 580,402 -12.7 3,143,871 -50.32016 -1,536,840 -99.9 3,328,044 5.9

5-Yr CAGR … -99.9 … 11.8

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.



—Prem Assumed—Product Line ($000) (%) ($000) (%)Industrial life 852 0.0 … …Ordinary life 1,737,154 52.3 8,260 -0.5Group life 50,346 1.5 2,946 -0.2Credit life 3,452 0.1 1,705 -0.1Individual annuities 613,186 18.4 -1,833,898 117.4Group annuities 110,359 3.3 -197,454 12.6Individual A&H 226,109 6.8 378,106 -24.2Credit A&H 2,402 0.1 24 0.0Group A&H 579,683 17.4 77,958 -5.0

Total 3,323,542 100.0 -1,562,352 100.0


Product Line ($000) (%) ($000) (%)Industrial life 846 -0.1 6 0.0Ordinary life 446,309 -29.0 1,299,104 39.4Group life 5,617 -0.4 47,676 1.4Credit life 1,084 -0.1 4,074 0.1Individual annuities -2,161,438 140.6 940,726 28.5Group annuities 89,055 -5.8 -176,150 -5.3Individual A&H 76 0.0 604,140 18.3Credit A&H 1,600 -0.1 825 0.0Group A&H 80,011 -5.2 577,629 17.5

Total -1,536,840 100.0 3,298,030 100.0

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Industrial life 308,913 312,048 317,404 332,598 340,278Ordinary life 7,409,996 6,840,164 6,445,573 6,204,623 5,958,837Group life 520,448 544,119 573,759 598,213 613,408Credit life 2,951 4,173 1,551 1,572 2,493Supplementary contr 149,244 185,877 191,971 174,515 105,323Individual annuities 2,780,287 2,743,628 2,998,977 3,095,639 3,363,035Group annuities 595,166 658,922 702,049 761,542 869,246Deposit type contracts 1,063,250 639,671 673,282 697,414 903,992Individual A&H 962,657 896,587 562,028 634,420 474,385Credit A&H 6,502 8,719 6,826 6,755 7,328Group A&H 74,619 72,480 79,772 76,341 81,521

Total 13,874,032 12,906,389 12,553,191 12,583,633 12,719,845


Year Issued In Force Issued In Force Issued In Force2012 212,828 3,084,049 200 6,750 11,209 226,2582013 191,240 3,003,593 68 6,505 7,438 210,3952014 179,608 2,916,443 59 6,295 13,475 190,8742015 213,294 2,888,190 54 5,976 3,398 177,9122016 203,728 2,855,586 13 5,624 3,643 158,814


Year

Whole LifeEndow. &



2012 115,785,949 57,032,652 1,775,979 6,899,267 697,647 182,191,4942013 119,577,179 54,609,020 1,377,379 6,548,163 669,721 182,781,4632014 129,023,692 53,674,900 1,320,702 5,888,874 635,610 190,543,7772015 144,657,463 51,933,209 1,151,499 5,832,080 606,985 204,181,2352016 157,056,217 56,225,481 843,179 5,192,868 582,256 219,900,002





Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2012 12,330,228 5,125,200 736,844 562,220 … 18,754,491 100.0 …2013 14,631,762 2,865,605 648,069 283,243 … 18,428,679 100.0 0.02014 18,956,933 3,681,393 643,544 214,863 … 23,496,733 100.0 0.02015 25,351,097 2,920,889 663,676 157,987 … 29,093,649 100.0 …2016 24,836,192 1,208,562 302,850 110,915 … 26,458,518 100.0 …





Year Issued In Force (000) (%) (%)2012 212,828 3,084,049 199,804 2.64 1.542013 191,240 3,003,593 197,415 2.50 0.442014 179,608 2,916,443 229,335 2.57 0.592015 213,294 2,888,190 344,535 3.12 1.462016 203,728 2,855,586 367,535 2.95 0.87


YearNPW(000)

Res(000)

Exp toRes(%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 503,232 3,468,357 1.1 7.4 242.1 35.12013 585,703 3,270,154 1.2 7.5 213.3 38.22014 628,532 3,190,948 0.9 5.7 199.0 39.22015 661,488 2,929,506 1.0 5.5 179.8 40.62016 940,726 2,929,531 0.8 3.5 123.8 39.7


YearNPW(000)

Res(000)

Exp toRes (%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 127,747 869,246 1.1 -1.5 193.4 28.42013 128,675 761,542 1.5 0.9 319.6 54.02014 126,632 702,049 1.5 0.6 145.0 26.22015 116,647 658,922 1.3 -0.5 76.5 13.52016 -176,150 595,166 1.1 -1.2 -44.1 13.1


YearTotal Annuity

Res (000)

Min or NoSurrender

Charge (%)


WithMVA (%)

NoSurrender

Allowed (%)2012 4,337,603 72.3 0.2 0.3 27.22013 4,031,696 78.8 0.1 0.2 20.92014 3,892,997 82.5 0.1 0.2 17.22015 3,588,428 82.4 0.0 0.2 17.32016 3,524,696 85.3 0.0 0.1 14.6


2016 2015 2014 2013 2012Sep Acct Assets 22,102,315 21,319,849 22,071,958 21,495,480 19,146,751% Growth 3.7 -3.4 2.7 12.3 6.4S/A Assets/Adm Assets 53.2 51.2 52.2 52.1 48.3

Sep Acct Reserves 21,985,842 21,195,146 21,889,351 21,227,957 18,841,272% Ordinary Life 14.2 14.9 15.4 15.8 15.5% Individual Annuities 75.4 74.8 74.8 74.4 73.6% Group Annuities 10.4 10.3 9.7 9.8 10.9% Group Life 0.0 0.0 0.0 0.0 0.0Deposit Type Liabilities 256 215 191 96 39Other Liabilities 116,216 124,488 182,416 267,427 305,440

S/A Prems & Deposits 810,503 908,008 888,874 852,772 771,537% Ordinary Life 25.1 25.5 26.9 29.2 35.2% Individual Annuities 74.8 74.3 72.9 70.6 64.3% Group Annuities 0.1 0.1 0.2 0.2 0.4% Group Life 0.0 0.0 0.0 0.0 0.0

Sep Acct Fees & Charges 319,532 338,083 350,946 353,854 359,547% Ordinary Life 72.0 71.5 71.2 72.1 73.0% Individual Annuities 27.9 28.4 28.7 27.7 26.8% Group Annuities 0.1 0.1 0.1 0.1 0.2% Group Life 0.0 0.0 0.0 0.0 0.0Fees & Chgs to Assets% 1.5 1.6 1.6 1.7 1.9

Sep Acct Ben & Wdrwls 1,137,055 1,386,011 1,284,825 1,505,935 1,286,646% Ordinary Life 14.3 16.6 15.3 21.2 13.9% Individual Annuities 85.5 83.1 84.4 71.6 84.9% Group Annuities 0.2 0.3 0.3 7.2 1.1% Group Life 0.0 0.0 0.0 0.0 0.0Ben & Wdrwl to Assets% 5.2 6.4 5.9 7.4 6.9




2016 2015 2014 2013 2012California 643,723 568,672 451,279 404,452 373,157Texas 233,732 226,973 205,059 177,724 152,956Florida 203,539 205,141 190,676 181,599 165,585Pennsylvania 143,537 146,557 129,646 121,348 116,707New Jersey 133,850 140,050 139,215 139,964 131,969Illinois 125,098 124,302 129,959 119,568 117,662Virginia 117,101 115,340 112,257 103,774 108,634Kentucky 112,658 117,406 118,992 119,076 119,544Maryland 111,726 113,118 107,567 113,490 101,659North Carolina 107,193 107,307 99,964 93,228 85,768All Other 1,390,604 1,309,728 1,190,073 1,107,866 1,055,883

Total 3,322,761 3,174,594 2,874,688 2,682,089 2,529,524










Pre-tax NetPeriod Net Oper Operating Net TotalEnding Income Gain Income Return2012 403,081 286,009 273,542 239,0222013 369,164 326,932 326,684 427,8292014 531,209 335,069 350,731 267,4752015 205,108 234,856 213,824 201,3322016 364,624 350,270 338,879 322,142

5-Yr Total 1,873,186 1,533,136 1,503,660 1,457,801

———Company——— —Industry Composite—Period Operating Operating Operating OperatingEnding ROR (%) ROE (%) ROR (%) ROE (%)2012 9.9 24.0 5.5 10.72013 9.6 26.4 4.6 8.42014 4.5 21.5 3.9 7.62015 5.7 14.3 6.8 11.72016 7.6 22.0 5.1 8.6

5-Yr Avg 6.8 21.2 5.1 9.4






5-Year Avg 71.3 23.7 0.7 6.8 21.2 4.56 4.80


NET OPERATING GAIN ($000)Product Line 2016 2015 2014 2013 2012Industrial life 2,537 -4,678 -3,299 -7,167 32,081Ordinary life 64,757 100,248 38,047 27,424 91,972Group life 18,326 4,466 2,292 -2,090 -2,904Credit life 2,605 1,798 -2,982 856 587Supplementary contr -15,959 -20,570 -9,166 -13,248 -14,320Individual annuities 176,219 46,140 48,685 217,536 47,722Group annuities 59,011 91,813 59,912 140,163 73,382Individual A&H -109,425 -211,878 174,431 -91,011 19,886Credit A&H 2,996 -227 -1,708 127 2,263Group A&H 36,482 142,483 28,858 54,341 35,339Other 112,720 85,259 … … …

Total 350,270 234,856 335,069 326,932 286,009


Year Written Earned Ratio Ratio Results2012 582,695 584,960 55.9 33.9 60,6782013 558,099 565,128 77.0 37.4 -78,4912014 4,585,713 4,583,207 5.2 3.6 267,7062015 1,128,875 1,124,991 96.5 34.9 -368,6272016 1,178,111 1,180,792 74.3 35.3 -112,269Current Year Experience:Group 573,160 573,445 51.1 44.6 24,854Credit 825 2,387 18.0 -89.8 2,697Non-can. 17,443 17,592 47.6 11.6 7,200Guarant renew 578,875 579,538 99.2 27.2 -152,775Non-renew, S.R. 78 78 … 10.5 70Other accident 7,132 7,150 15.9 10.6 5,258Other 597 603 16.9 12.3 427


Year Income Gains Gains2012 904,043 -12,467 -34,5202013 821,819 -249 101,1462014 825,970 15,663 -83,2562015 840,834 -21,032 -12,4922016 884,585 -11,391 -16,737

5-Year Total 4,277,251 -29,476 -45,859——————Company—————— -Industry Composite-

Pre-taxInvest


Year (%) (%) (%) (%) (%) (%)2012 -2.0 4.6 5.7 6.0 0.2 5.12013 -9.1 4.4 4.1 4.7 -0.5 4.92014 0.5 4.5 4.6 3.9 0.5 4.82015 1.8 4.5 4.3 4.2 3.3 4.82016 5.2 4.9 5.3 5.2 0.3 4.7

5-Yr Avg -0.9 4.6 4.8 4.8 0.8 4.9








Current BCAR: 191



Year Gain Gains Taxes Gains2012 403,081 -12,467 117,072 -34,5202013 369,164 -249 42,232 101,1462014 531,209 15,663 196,140 -83,2562015 205,108 -21,032 -29,748 -12,4922016 364,624 -11,391 14,354 -16,737

5-Yr Total 1,873,186 -29,476 340,050 -45,859—————Source of Surplus Growth—————Change Change % Chg

in Other in inYear AVR Changes C&S C&S2012 -12,668 -351,849 -125,496 -10.02013 -57,583 -154,885 215,361 19.02014 13,841 116,717 398,033 31.92015 -12,997 -455,062 -266,727 -15.02016 45,119 -197,561 169,699 11.3

5-Yr Total -24,289 -1,042,641 390,871 6.0


Year Notes Debt Capital Surplus2012 160,000 … 783,537 187,0182013 160,000 … 919,463 266,4532014 160,000 … 920,182 694,5232015 160,000 … 720,517 627,4612016 160,000 … 720,269 797,408

Year-End Asset Valuation AdjustedYear C&S Reserve C&S2012 1,130,555 204,031 1,334,5862013 1,345,916 261,614 1,607,5302014 1,774,705 247,773 2,022,4782015 1,507,978 270,586 1,778,5642016 1,677,677 225,467 1,903,145


to Surplus to Total in NPW to SurplusYear Liab(%) Relief(%) Capital & Dep(%) Liab(%) Relief(%)2012 7.0 33.1 1.5 6.1 11.8 2.92013 8.8 14.6 1.4 8.3 11.8 2.72014 11.1 2.6 3.1 189.1 12.3 2.62015 9.6 10.8 1.8 -50.3 12.4 2.72016 10.9 9.5 1.7 5.9 11.8 2.3



Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage2012 103,286,687 2.6 2.1 4.7 33.1 456.5 4.3 75.22013 92,104,550 2.0 1.9 3.9 14.6 347.8 4.1 77.62014 84,926,052 1.4 1.3 2.7 2.6 252.2 3.9 76.32015 77,398,265 1.3 1.5 2.8 10.8 295.6 3.8 74.22016 73,410,602 1.1 1.0 2.1 9.5 135.6 5.3 78.8



Liquidity: Aegon USA has adequate cash and liquid assets to protect againstadverse liquidity scenarios. The company manages so that liquidityrequirements could be met in stress scenarios which factor in a combination ofevents over monthly horizon points over an extended period of time. Liquidityimpacts due to rating downgrades are also factored into the company’s stresstesting. The company manages liquidity so that a positive cash balance can bemaintained during the first 6 months of a modeled scenario with illiquid assetsales not allowed during this period. The company also forecasts liquidity tobe positive over a two year period. Aegon USA’s liquidity is also supported by$1.5 billion in available syndicated borrowings for emergency use only incommitted bank lines through the ultimate parent AEGON, N.V. The groupalso has available to them the ability to access the FHLB as well as othernormal operating lines of credit outside of emergency use funding. Liquidity



is considered adequate and supports the level of business complexity in whichthe company operates.



Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital2012 23,196 45.1 107.7 91.7 0.52013 436,424 43.7 104.2 67.8 0.52014 962,648 45.8 105.2 48.9 0.32015 141,940 46.1 103.7 53.0 0.22016 2,614,332 51.2 86.0 38.0 0.1








Net Short- —Real Estate— Exp.Year Yield Bonds Stocks Mortgages Term Gross Net Ratio2012 4.60 5.02 14.00 5.96 0.21 12.94 -1.39 4.552013 4.36 4.85 17.37 5.50 0.14 14.18 -0.94 4.792014 4.45 4.81 17.23 5.36 0.11 14.01 -3.02 4.982015 4.46 4.77 17.35 5.44 0.16 22.94 2.80 7.812016 4.94 5.13 33.24 5.00 0.57 13.95 2.84 7.54



Government 1.9 0.8 1.3 0.5 12.1 19Gov’t Agencies & Muni 0.8 0.7 0.7 0.2 1.4 12Industrial & Misc 8.3 12.3 18.0 17.8 20.8 12Hybrid Securities … … 0.1 1.0 1.1 20

Total 11.0 13.9 20.1 19.4 35.5 14

2016 2015 2014 2013 2012Bonds (000) 13,230,216 14,471,372 14,275,747 13,830,053 13,565,102US Government 14.6 4.7 5.4 5.9 4.3Foreign Government 1.6 1.5 1.5 1.5 1.6State/Special Revenue - US 4.1 3.3 4.2 3.0 2.6Industrial & Misc - US 79.6 90.5 88.9 89.1 91.0Affiliated … … … 0.4 0.4




Stocks (000) 162,518 118,566 132,904 107,156 145,256Unaffiliated Common 68.9 42.6 32.2 42.6 54.5Affiliated Common 24.7 52.0 38.0 48.5 39.7Unaffiliated Preferred 6.4 5.4 29.9 8.9 5.8




Mortgages (000) 1,598,685 1,687,756 1,903,557 1,770,664 1,915,565Commercial 98.9 97.7 97.8 97.0 95.8Residential 0.2 0.2 0.2 0.3 0.3Farm 1.0 2.1 2.0 2.7 3.9Mortgage Quality (%) 2016 2015 2014 2013 201290 Days Delinquent … 0.0 0.0 0.0 0.1In Process of Foreclosure 0.0 0.0 0.0 0.0 0.0Total Delinquencies 0.0 0.0 0.0 0.1 0.1

2016 2015 2014 2013 2012Real Estate (000) 226,687 227,312 38,795 40,926 40,412Property Occupied by Co 10.9 11.3 68.9 66.9 87.1Property Held for Inc 85.8 84.1 0.9 0.9 1.0Property Held for Sale 3.3 4.5 30.2 32.2 11.9



Other Inv Assets (000) 3,284,138 2,854,163 2,882,832 2,988,055 3,862,452Cash 17.3 13.0 12.7 11.1 30.1Short-Term 20.7 17.9 13.3 11.3 9.8Schedule BA Assets 19.8 22.7 29.8 26.8 22.1All Other 42.2 46.4 44.2 50.8 38.0


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 title was changed toMonumental Life Insurance Company. The company redomesticated fromMaryland to Iowa during 2007. During 2014, the present title was adopted.

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 Insurance

Company, Iowa, 2007; Western Reserve Life Assurance Company of Ohio,2014.

MANAGEMENT

Officers: President, Blake S. Bostwick; Executive Vice President, Secretaryand General Counsel, Jason Orlandi; Senior Vice President and Controller,Eric J. Martin; Chairman of the Board, Mark W. Mullin.

Directors: Blake Bostwick, Mark W. Mullin, Jason Orlandi, David Schulz, C.Michiel van Katwijk.

REGULATORYAn examination of the financial condition was made as of July 31, 2014, by

the insurance departments of Iowa, Maryland, Ohio and Vermont. The 2016annual independent audit of the company was conducted byPricewaterhouseCoopers, LLP. The annual statement of actuarial opinion isprovided by Donald Krouse.

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.


Assets LiabilitiesTotal bonds 13,230,216 +Net policy reserves 12,810,782Total preferred stocks 10,449 Policy claims 243,788Total common stocks 152,069 Deposit type contracts 1,063,250Mortgage loans 1,598,685 Interest maint reserve 278,692Real estate 226,687 Comm taxes expenses 100,453Contract loans 926,400 Borrowed money 1,346,634Cash & short-term inv 1,248,373 Asset val reserve 225,467Securities-colltrl assts 425,875 Funds held reinsurance 628,416Other invested assets 648,719 Payable for securities lending 425,875Prems and consids due 187,663 Other liabilities 612,202Accrued invest income 176,993Other assets 581,107 Tot liab w/o sep accts 17,735,560

Separate account bus 22,102,315Tot assets w/o sep accts 19,413,237

Separate account bus 22,102,315 Total liabilities 39,837,875Common stock 10,137Surplus notes 160,000Paid in & contrib surpl 710,132Unassigned surplus 795,303Other surplus 2,105

Assets 41,515,552 Total 41,515,552

+Analysis of reserves; Life $7,871,734; annuities $3,344,133; supplementary contracts withlife contingencies $180,563; accidental death benefits $17,896; disability active lives $29,570;



disability disabled lives $118,507; miscellaneous reserves $204,601; accident & health$1,043,778.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 301,455Ordinary life 1,299,104 Matured endowments 8,223Individual annuities 940,726 Annuity benefits 376,323Credit life 4,074 Surrender benefits 1,001,765Group life 47,676 Acc & health benefits 813,565Group annuities -176,150 Int on policy funds 35,221Acc & health group 577,629 Supplementary contracts 43,284Acc & health credit 825 Incr life reserves 478,071Acc & health other 604,140 Incr a & h reserves 71,648Industrial 6 Change in reserves -55,837Total premiums 3,298,030 Res adj reins assumed 9,234

Supplementary contracts -22,457 Commissions 730,736Net investment income 884,585 Comm exp reins assumed 127,694Amort interest maint res 25,293 Interest expenses 9,600Comm & exp reins ceded 158,779 Insur taxes lic & fees 60,229Res adj on reins ceded -180,319 General ins expenses 315,582Reinsurance income 133,475 Net transf to sep acct -214,499Other income 329,070 Other expenses 152,229Mgt and/or service fee 3,779

Total 4,630,236 Total 4,264,524


Dividends to policyholders: life......................................................................... 1,088

Gains from operations after dividends to policyholders........................................ 364,624

Federal income taxes incurred........................................................................... 14,354

Net gain from operations after FIT and dividends................................................ 350,270


Funds Provided Funds AppliedGross cash from oper 7,184,312 Benefits paid 3,391,059Long-term bond proceeds 2,676,294 Comm, taxes, expenses 1,410,231Borrowed money 1,184,168 Long-term bonds acquired 3,699,101Other cash provided 1,961,093 Other cash applied 4,140,275

Incr cash & short-term 365,200

Total 13,005,866 Total 13,005,866

—— ♦ ——


TRANSAMERICA FINANCIAL LIFE INSURANCECOMPANY

440 Mamaroneck AvenueHarrison, NY 10528

Web: www.transamerica.comTel.: 800-797-2643AMB#: 007267 NAIC#: 70688Ultimate Parent#: 085244 FEIN#: 36-6071399



RECENT DEVELOPMENTSEffective July 1, 2014, Transamerica Advisors Life Insurance Company of

New York was merged with and into Transamerica Financial Life InsuranceCompany. The company has recently divested itself of its BOLI/COLI andpayout annuity businesses.

RATING RATIONALE


Transamerica Financial Life Insurance Company primarily sells fixed andvariable pension and annuity products, group life coverages, life insurance,investment contracts and structured settlements. The company is licensed in50 states and the District of Columbia. Sales of the company’s products areprimarily through brokers.











Best’sFSR

05/05/17 A+ 12/12/13 A+04/15/16 A+ 04/09/13 A+02/11/15 A+


Year Assets

CapitalSurplusFunds

AssetValuation

Reserve

NetPremiumsWritten

NetInvest

IncomeNet

Income2012 27,709,677 913,478 118,837 4,935,636 434,681 216,8192013 30,176,766 1,027,026 136,048 5,239,588 414,751 245,0382014 31,099,280 957,697 112,004 5,434,251 410,350 23,9292015 31,535,277 1,167,385 117,572 5,807,554 401,084 259,8762016 32,318,395 1,092,304 124,698 5,768,804 395,527 224,978

(*) Within several financial tables of this report, this company is compared against the GroupAnnuity Composite.











The former Investment & Retirement (I&R) division offered a wide rangeof savings and retirement products, including mutual funds, investment adviceas well as fixed and variable annuities. Transamerica Capital Management(TCM) is the underwriting and wholesaling broker/dealer for variable

annuities and mutual funds. TCM builds relationships with 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 (renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York. Transamerica Advisors Life InsuranceCompany of New York was later merged with and into Transamerica FinancialLife Insurance Company, effective 7/1/14) 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 channels. In late 2009, I&R reduced its sales of fixed annuitiesin response to lower market interest rates and lower investment returnsavailable in the environment. Similar market conditions have continued overrecent years and restricted sales of fixed annuities. As a result, I&Rde-emphasized the sale of fixed annuities and executed several large fixedannuity coinsurance transactions in recent years.


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. In 2009, Aegon announced its plan to run-off itsinstitutional spread based business to reduce capital requirements and creditrisk. The institutional line of business also included structured producttransactions, such as credit default swaps, synthetic collateralized debt



obligations, affordable housing tax credit guarantees and hedge fund principalprotection. Going forward, Aegon USA will only continue to offer affordablehousing tax credit guarantees.


Period ————DPW———— ——Prem Assumed——Ending ($000) (% Chg) ($000) (% Chg)2012 4,956,005 0.1 633,557 1.92013 5,262,374 6.2 531,963 -16.02014 5,447,514 3.5 550,478 3.52015 5,815,647 6.8 510,557 -7.32016 5,780,318 -0.6 529,333 3.7

5-Yr CAGR … 3.2 … -3.2

ReinsurancePeriod ———Prem Ceded——— —NPW & Deposits—Ending ($000) (% Chg) ($000) (% Chg)2012 653,926 -42.9 4,943,752 11.62013 554,749 -15.2 5,246,790 6.12014 563,742 1.6 5,440,740 3.72015 518,650 -8.0 5,812,959 6.82016 540,847 4.3 5,774,020 -0.7

5-Yr CAGR … -13.9 … 5.4

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



—Prem Assumed—Product Line ($000) (%) ($000) (%)Ordinary life 170,357 2.9 521,047 98.4Group life 14,267 0.2 1,165 0.2Credit life 2,369 0.0 220 0.0Individual annuities 374,202 6.5 5,422 1.0Group annuities 5,089,365 88.0 640 0.1Individual A&H 60,205 1.0 54 0.0Credit A&H 2,401 0.0 2 0.0Group A&H 67,153 1.2 783 0.1

Total 5,780,318 100.0 529,333 100.0


Product Line ($000) (%) ($000) (%)Ordinary life 536,481 99.2 154,923 2.7Group life 455 0.1 14,977 0.3Credit life 193 0.0 2,395 0.0Individual annuities 317 0.1 379,307 6.6Group annuities 16 0.0 5,089,989 88.2Individual A&H … … 60,259 1.0Credit A&H 604 0.1 1,799 0.0Group A&H 2,780 0.5 65,156 1.1

Total 540,847 100.0 5,768,804 100.0

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Ordinary life 1,099,152 1,010,629 949,486 892,667 839,292Group life 60,343 54,740 49,920 45,944 41,373Credit life 2,415 3,467 4,512 6,205 8,178Supplementary contr 30,056 28,687 27,443 27,545 23,727Individual annuities 1,321,006 1,406,091 1,626,929 1,718,014 1,985,729Group annuities 4,472,224 4,388,949 4,450,140 4,570,629 4,729,414Deposit type contracts 55,021 59,701 62,204 65,525 69,414Individual A&H 44,149 58,010 38,307 33,797 29,468Credit A&H 4,973 6,954 7,542 8,369 8,889Group A&H 104,348 87,792 88,710 88,910 87,189

Total 7,193,686 7,105,021 7,305,192 7,457,606 7,822,673


Year Issued In Force Issued In Force Issued In Force2012 10,416 2,629,984 1 111 1,676 22,4592013 12,215 2,264,006 2 112 1,571 22,1732014 13,246 2,002,433 1 118 1,200 21,2432015 14,639 1,743,524 … 115 1,141 20,4182016 14,997 1,671,728 … 115 881 19,294


Year

Whole LifeEndow. &



2012 9,016,581 253,487,089 449,360 1,102,831 … 264,055,8612013 10,574,930 211,187,766 604,641 1,129,913 … 223,497,2502014 10,397,347 200,836,306 636,971 1,126,556 … 212,997,1802015 11,749,242 188,807,365 472,069 1,128,210 … 202,156,8862016 12,831,595 181,532,386 256,721 1,097,618 … 195,718,319





Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2012 876,990 651,561 251,034 114,330 … 1,893,915 100.0 …2013 1,190,088 771,795 386,258 101,517 … 2,449,659 100.0 …2014 1,412,359 1,086,434 437,687 84,912 … 3,021,392 100.0 …2015 1,903,711 897,216 306,173 80,894 … 3,187,994 100.0 …2016 1,752,646 628,065 112,340 60,509 … 2,553,560 100.0 …





Year Issued In Force (000) (%) (%)2012 10,416 2,629,984 15,599 1.40 -0.412013 12,215 2,264,006 15,790 1.54 0.942014 13,246 2,002,433 19,448 2.08 -9.922015 14,639 1,743,524 27,578 1.91 3.522016 14,997 1,671,728 30,398 1.61 4.03


YearNPW(000)

Res(000)

Exp toRes(%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 408,080 2,009,456 1.7 15.7 87.3 17.72013 683,077 1,745,560 1.9 11.7 56.8 22.22014 827,977 1,654,372 2.1 11.3 52.8 26.42015 627,014 1,434,778 2.2 12.9 59.7 26.12016 379,307 1,351,062 2.1 16.6 90.9 25.5


YearNPW(000)

Res(000)

Exp toRes (%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 4,325,210 4,729,414 1.7 2.6 88.9 81.32013 4,340,191 4,570,629 1.8 2.7 92.5 87.92014 4,352,038 4,450,140 2.1 3.0 118.0 115.42015 4,897,030 4,388,949 2.1 2.7 96.9 108.12016 5,089,989 4,472,224 2.0 2.4 106.2 120.9


YearTotal Annuity

Res (000)

Min or NoSurrender

Charge (%)


WithMVA (%)

NoSurrender

Allowed (%)2012 6,738,871 52.7 4.1 4.1 39.12013 6,316,189 58.5 3.6 3.5 34.42014 6,104,512 64.0 3.4 3.3 29.42015 5,823,727 66.0 3.2 3.1 27.72016 5,823,286 69.1 3.0 3.0 24.9


2016 2015 2014 2013 2012Sep Acct Assets 23,281,407 22,369,554 21,835,303 20,880,027 18,154,416% Growth 4.1 2.4 4.6 15.0 10.3S/A Assets/Adm Assets 72.0 70.9 70.2 69.2 65.5

Sep Acct Reserves 22,875,736 22,092,855 21,592,569 20,585,509 17,834,036% Ordinary Life 1.0 1.1 1.2 1.2 1.3% Individual Annuities 17.6 16.9 16.1 13.3 10.8% Group Annuities 81.4 82.0 82.8 85.5 88.0Other Liabilities 378,524 238,985 189,472 246,207 243,629Sep Acct Surplus 1 1 8 8 6

S/A Prems & Deposits 4,693,329 4,948,770 4,687,989 4,482,210 4,163,654% Ordinary Life 0.1 0.1 0.2 0.2 0.2% Individual Annuities 7.8 12.5 17.3 14.8 9.3% Group Annuities 92.0 87.4 82.5 85.0 90.5

Sep Acct Fees & Charges 180,835 178,533 168,948 150,472 136,445% Ordinary Life 5.6 5.9 6.2 6.8 7.5% Individual Annuities 46.1 43.0 35.0 26.8 20.3% Group Annuities 48.4 51.2 58.8 66.4 72.2Fees & Chgs to Assets% 0.8 0.8 0.8 0.8 0.8

Sep Acct Ben & Wdrwls 4,749,414 4,211,412 4,557,533 3,324,936 3,299,713% Ordinary Life 0.3 0.3 0.3 0.6 0.4% Individual Annuities 4.6 5.0 3.6 3.9 3.5% Group Annuities 95.1 94.7 96.1 95.5 96.0Ben & Wdrwl to Assets% 20.8 19.1 21.3 17.0 19.1




2016 2015 2014 2013 2012New York 1,260,229 1,519,270 1,582,707 1,451,187 1,389,598Florida 1,112,864 569,201 832,927 866,983 760,455California 865,456 865,068 515,531 479,252 389,009Georgia 287,398 261,676 225,740 277,527 206,350Missouri 240,668 214,961 248,520 263,710 224,770Iowa 173,458 206,392 155,347 163,441 151,762Tennessee 164,565 118,143 89,335 70,037 65,810Texas 158,310 164,076 194,601 153,403 135,451Illinois 121,786 87,912 58,062 56,810 66,304Massachusetts 110,659 158,777 200,336 79,508 94,966All Other 1,286,696 1,644,909 1,342,365 1,400,281 1,468,597

Total 5,782,090 5,810,385 5,445,470 5,262,140 4,953,071










Pre-tax NetPeriod Net Oper Operating Net TotalEnding Income Gain Income Return2012 320,003 208,887 216,819 169,4022013 330,820 314,063 245,038 200,5742014 130,531 57,503 23,929 65,7732015 345,325 290,360 259,876 262,2892016 302,944 260,556 224,978 204,054

5-Yr Total 1,429,622 1,131,369 970,640 902,092

———Company——— —Industry Composite—Period Operating Operating Operating OperatingEnding ROR (%) ROE (%) ROR (%) ROE (%)2012 3.7 25.1 4.3 14.42013 5.3 32.4 8.6 21.82014 0.9 5.8 -0.3 -0.72015 4.4 27.3 6.2 10.12016 4.0 23.1 6.7 19.2

5-Yr Avg 3.7 22.7 5.0 12.9






5-Year Avg 94.9 4.8 0.8 3.7 22.7 4.61 4.10


NET OPERATING GAIN ($000)Product Line 2016 2015 2014 2013 2012Ordinary life 44,305 35,618 -94,165 8,426 -3,423Group life 131 3,930 2,701 1,360 2,469Credit life 1,020 1,565 1,040 2,382 1,426Supplementary contr -107 67 460 859 1,057Individual annuities 65,035 138,142 81,938 146,251 -29,872Group annuities 81,179 62,932 59,620 144,038 227,450Individual A&H 24,573 -12,108 1,069 1,889 3,545Credit A&H 230 560 23 -204 66Group A&H 1,525 9,283 4,817 9,063 6,168Other 42,665 50,370 … … …

Total 260,556 290,360 57,503 314,063 208,887


Year Written Earned Ratio Ratio Results2012 79,889 80,016 57.4 33.6 7,2442013 83,248 82,539 61.5 34.6 2,9552014 114,061 113,486 59.2 37.2 3,9052015 125,454 125,234 74.4 37.3 -14,7052016 127,930 126,738 57.1 36.2 8,047Current Year Experience:Group 65,320 64,349 60.7 44.2 -3,550Credit 1,799 2,600 61.1 61.6 -97Non-can. 185 184 46.0 6.7 87Guarant renew 60,258 59,234 52.5 27.1 11,790Other accident 365 367 144.8 5.7 -185Other 4 4 51.1 6.7 2


Year Income Gains Gains2012 434,681 7,932 -47,4172013 414,751 -69,024 -44,4642014 410,350 -33,574 41,8442015 401,084 -30,483 2,4132016 395,527 -35,579 -20,924

5-Year Total 2,056,394 -160,729 -68,548——————Company—————— -Industry Composite-

Pre-taxInvest


Year (%) (%) (%) (%) (%) (%)2012 -7.8 4.7 5.2 4.5 -0.4 5.02013 -4.6 4.6 3.9 3.2 0.1 4.82014 -1.1 4.6 4.3 4.7 2.3 4.82015 -2.3 4.5 4.2 4.2 -4.7 4.62016 -1.4 4.5 4.2 4.0 8.8 5.1

5-Yr Avg -3.6 4.6 4.4 4.1 1.1 4.8








Current BCAR: 191



Year Gain Gains Taxes Gains2012 320,003 7,932 111,116 -47,4172013 330,820 -69,024 16,757 -44,4642014 130,531 -33,574 73,027 41,8442015 345,325 -30,483 54,965 2,4132016 302,944 -35,579 42,388 -20,924

5-Yr Total 1,429,622 -160,729 298,253 -68,548—————Source of Surplus Growth—————Change Change % Chg

in Other in inYear AVR Changes C&S C&S2012 -16,254 10,078 163,226 21.82013 -12,133 -74,893 113,549 12.42014 24,045 -159,748 -69,930 -6.82015 -5,569 -47,032 209,689 21.92016 -7,126 -272,008 -75,081 -6.4

5-Yr Total -17,037 -543,603 341,452 7.8


Year Notes Debt Capital Surplus2012 150,000 442 935,820 -172,7842013 150,000 442 935,820 -59,2362014 150,000 460 935,802 -128,5652015 150,000 460 935,802 81,1232016 … 460 935,802 156,043

Year-End Asset Valuation AdjustedYear C&S Reserve C&S2012 913,478 118,837 1,032,3142013 1,027,026 136,048 1,163,0742014 957,697 112,004 1,069,7002015 1,167,385 117,572 1,284,9582016 1,092,304 124,698 1,217,003


to Surplus to Total in NPW to SurplusYear Liab(%) Relief(%) Capital & Dep(%) Liab(%) Relief(%)2012 12.1 6.4 4.8 11.6 10.3 4.42013 14.3 5.9 4.5 6.1 10.3 8.02014 13.1 5.2 5.1 3.7 10.6 3.72015 16.3 6.5 4.5 6.8 11.6 5.62016 15.6 8.7 4.7 -0.7 11.1 5.1



Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage2012 247,627,359 5.6 12.0 17.6 6.4 260.1 5.3 219.02013 205,474,553 4.4 10.0 14.4 5.9 211.5 5.1 235.82014 193,135,173 4.7 10.2 14.9 5.2 232.9 5.3 223.72015 180,500,389 4.6 9.2 13.8 6.5 193.1 6.6 323.92016 172,845,131 5.4 10.7 16.0 8.7 226.4 7.1 323.0



Liquidity: Aegon USA has adequate cash and liquid assets to protect againstadverse liquidity scenarios. The company manages so that liquidityrequirements could be met in stress scenarios which factor in a combination ofevents over monthly horizon points over an extended period of time. Liquidityimpacts due to rating downgrades are also factored into the company’s stresstesting. The company manages liquidity so that a positive cash balance can bemaintained during the first 6 months of a modeled scenario with illiquid assetsales not allowed during this period. The company also forecasts liquidity tobe positive over a two year period. Aegon USA’s liquidity is also supported by$1.5 billion in available syndicated borrowings for emergency use only incommitted bank lines through the ultimate parent AEGON, N.V. The groupalso has available to them the ability to access the FHLB as well as othernormal operating lines of credit outside of emergency use funding. Liquidity



is considered adequate and supports the level of business complexity in whichthe company operates.



Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital2012 -69,892 60.8 94.4 41.1 …2013 -162,003 54.9 95.7 37.5 …2014 -163,267 51.8 92.4 45.7 …2015 19,635 47.6 88.6 42.3 …2016 85,891 43.6 86.8 43.0 0.3








Net Short- —Real Estate— Exp.Year Yield Bonds Stocks Mortgages Term Gross Net Ratio2012 4.73 4.90 14.03 6.75 0.20 … … 3.312013 4.62 4.79 1.16 5.96 0.12 … … 3.122014 4.61 4.77 2.45 5.82 0.12 … … 3.422015 4.54 4.70 2.66 4.43 0.16 … … 4.122016 4.52 4.85 2.04 4.31 0.65 … … 4.19



Government 0.9 0.4 1.4 1.3 5.7 18Gov’t Agencies & Muni 0.0 0.1 0.0 0.0 0.5 18Industrial & Misc 10.0 32.7 24.2 9.1 11.8 8Hybrid Securities 0.0 0.0 0.3 0.1 1.4 22

Total 11.0 33.2 25.9 10.5 19.3 9

2016 2015 2014 2013 2012Bonds (000) 6,401,974 6,851,703 7,325,741 7,720,515 7,511,135US Government 7.7 9.1 9.9 9.6 8.3Foreign Government 1.5 1.6 1.9 2.1 2.3State/Special Revenue - US 0.7 2.4 1.6 1.5 1.9Industrial & Misc - US 90.1 86.8 86.6 86.8 87.5




Stocks (000) 7,577 6,966 7,951 7,878 13,259Unaffiliated Common … 1.8 4.2 24.8 38.6Affiliated Common 39.9 51.3 48.9 53.5 49.6Unaffiliated Preferred 60.1 46.9 46.9 21.7 11.9




Mortgages (000) 1,243,156 950,309 730,305 551,082 544,544Commercial 98.9 98.9 98.5 95.1 92.6Farm 1.1 1.1 1.5 4.9 7.4

2016 2015 2014 2013 2012Real Estate (000) 3,600 … … … …Property Held for Sale 100.0 … … … …



Other Inv Assets (000) 1,163,875 1,142,560 970,751 805,028 1,114,595Cash 26.1 2.7 18.7 2.8 39.7Short-Term 10.1 25.3 8.3 15.5 14.7Schedule BA Assets 19.4 16.8 7.4 12.1 8.6All Other 44.4 55.2 65.6 69.7 37.0


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. During 2014, Transamerica Advisors Life InsuranceCompany of New York was merged with and into Transamerica Financial LifeInsurance Company.

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;Transamerica Advisors Life Insurance Company of New York, New York,2014.

MANAGEMENT


Directors: Blake S. Bostwick, Wendy Cooper, Anne Kronenberg, Mark W.Mullin, Jason Orlandi, David Schulz, C. Michiel van Katwijk, June Yuson.


2014, by the insurance department of New York. The 2016 annual independentaudit of the company was conducted by PricewaterhouseCoopers, LLP. Theannual statement of actuarial opinion is provided by Donald Krouse.

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


Assets LiabilitiesTotal bonds 6,401,964 +Net policy reserves 7,138,665Total preferred stocks 4,552 Policy claims 42,014Total common stocks 3,025 Deposit type contracts 55,021Mortgage loans 1,243,156 Interest maint reserve 62,056Real estate 3,600 Comm taxes expenses 30,018Contract loans 122,026 Unallocated items 339,062Cash & short-term inv 420,915 Asset val reserve 124,698Securities-colltrl assts 307,732 Payable for securities lending 307,732Other invested assets 226,054 Other liabilities -154,581Prems and consids due 13,792Accrued invest income 85,930 Tot liab w/o sep accts 7,944,685Other assets 204,242 Separate account bus 23,281,406

Tot assets w/o sep accts 9,036,988 Total liabilities 31,226,090Separate account bus 23,281,407 Common stock 2,143

Preferred stock 460Paid in & contrib surpl 933,659Contingency reserve 9,456Unassigned surplus 146,534Other surplus 53

Assets 32,318,395 Total 32,318,395

+Analysis of reserves; Life $1,112,235; annuities $5,775,761; supplementary contracts withlife contingencies $30,325; accidental death benefits $874; disability active lives $954;disability disabled lives $2,738; miscellaneous reserves $62,309; accident & health $153,469.



SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 73,456Ordinary life 154,923 Matured endowments 32Individual annuities 379,307 Annuity benefits 121,979Credit life 2,395 Surrender benefits 5,651,094Group life 14,977 Acc & health benefits 58,684Group annuities 5,089,989 Int on policy funds 3,875Acc & health group 65,156 Supplementary contracts 6,190Acc & health credit 1,799 Incr life reserves 92,632Acc & health other 60,259 Incr a & h reserves 713Total premiums 5,768,804 Res adj reins assumed -5,113

Supplementary contracts 6,456 Commissions 131,308Net investment income 395,527 Comm exp reins assumed 33,360Amort interest maint res 12,802 Interest expenses 9,167Net gain from sep acct 0 Insur taxes lic & fees 15,996Comm & exp reins ceded 95,424 General ins expenses 133,762Res adj on reins ceded -5,113 Net transf to sep acct -79,281Other income 225,726 Other expenses 300Mgt and/or service fee 51,470

Total 6,551,097 Total 6,248,153


Federal income taxes incurred........................................................................... 42,388

Net gain from operations after federal income taxes............................................. 260,556


Funds Provided Funds AppliedGross cash from oper 6,484,282 Benefits paid 5,921,651Long-term bond proceeds 1,879,956 Comm, taxes, expenses 315,012Other invest proceeds 257,332 Long-term bonds acquired 1,420,519Other cash provided 82,765 Other invest acquired 549,351

Other cash applied 396,586Incr cash & short-term 101,216

Total 8,704,334 Total 8,704,334

—— ♦ ——


TRANSAMERICA ADVISORS LIFE INSURANCECOMPANY

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

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

Tel.: 800-797-2643AMB#: 009537 NAIC#: 79022Ultimate Parent#: 085244 FEIN#: 91-1325756



RECENT DEVELOPMENTSThe company has recently divested itself of its BOLI/COLI and payout

annuity businesses.

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.











Best’sFSR

05/05/17 A+ 12/12/13 A+04/15/16 A+ 04/09/13 A+02/11/15 A+


Year Assets

CapitalSurplusFunds

AssetValuation

Reserve

NetPremiumsWritten

NetInvest

IncomeNet

Income2012 10,031,805 636,158 12,246 17,940 121,458 178,1892013 10,135,218 733,415 10,710 18,031 116,754 196,6122014 9,692,474 912,090 14,139 9,293 138,627 201,4792015 8,752,551 790,252 17,111 11,142 98,353 -24,1192016 8,309,563 696,043 17,984 9,296 108,240 71,053

(*) Within several financial tables of this report, this company is compared against theIndividual Life Composite.


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 Yorkwere marketed exclusively through Transamerica Advisors Life InsuranceCompany of New York until 2014, when the company was merged with andinto Transamerica Financial Life Insurance Company. The companiesprimarily market variable annuities and distribute their products exclusivelythrough Merrill Lynch’s network of over 15,000 financial advisors.


Aegon USA is one of the leading life insurance organizations in the U.S.with more than twenty million customers and provides a wide range of lifeinsurance, pensions, long-term savings and investment products. Aegon USAwas founded 1989 when Aegon N.V. (Aegon) decided to bring all of itsoperating companies in the U.S. under a single financial services holdingcompany. Business is conducted through five primary insurance subsidiariesand includes Transamerica Life Insurance Company, Transamerica FinancialLife Insurance Company, Transamerica Advisors Life Insurance Company,Transamerica Premier Life Insurance Company, and Transamerica Casualty



Insurance Company. The Aegon USA group of companies is fully integratedand share senior and investment management along with support services.


Beginning in 2016, Aegon USA has restructured into a functionallyorganized business centered around the Transamerica brand. As a result, thecompany has eliminated its previous divisional alignment and created aunified organization that is functionally aligned (i.e. distribution, operations,finance, etc.). As a result of its recently implemented reorganization in theU.S., there has been a delayering of management via the elimination ofredundant processes and a restructuring of its U.S. distribution footprint. Thecurrent product lines sold through Aegon USA’s life companies include, life,accident & health, mutual funds, variable annuities, fixed annuities,retirement plans, and stable value solutions. The product lines are noworganized by distribution channel in order to ensure better alignment withcustomers, and fall into four main categories of brokerage, partner,institutional/worksite, and wholesale. The brokerage distribution channeloffers life insurance & long-term care products through third-party outlets ofbrokerage general agents or independent wholesale organizations. These aretypically non-registered products sold through independent insurance agentsand financial institutions. The Partner network known as the ‘TransamericaFinancial Network’, provides advice and guidance to individuals to meet theirprotection as well as investment needs including a ‘Transamerica AgencyNetwork’ of approximately 1,700 agents, and over 54,000 associates in the(World Financial Group). This channel provides the same life & healthproducts as the brokerage channel, with a focus on the middle and emergingaffluent markets. The Institutional/Worksite channel focuses on the sale ofproducts to consumers through the employer segment, also known as theworksite. The Wholesale channel consists of Independent broker-dealers thatwant a direct relationship with Aegon USA, and broken out into three areassuch as banks, wirehouses, and independent financial partners that arededicated to one product line, but work closely to refer advisers acrossAegon’s USA’s other multiple product lines. On 12/7/2016, Aegon alsoannounced that it was exiting the Affinity, Direct TV, and Direct Mailchannels, which were part of the accident & health line of business in the U.S.,which no longer fit with its strategic objectives. The newly restructuredorganization is now better aimed at meeting customer needs and creating aconsistent positive experience.

The former Life & Protection (L&P) division included the Agency Groupselling individual life and supplemental health products to the middle incomemarket. Also included in the L&P division were the Brokerage Group,Transamerica Employee Benefits, Long Term Care and the Affinity Group.The Brokerage Group marketed life insurance in the retail high net worthmarket through independent general agents and contract producers. The

Affinity Group specialized in marketing life insurance and supplementalhealth insurance products to consumers through direct channels such astelemarketing, direct mail, television advertising and the Internet. This groupalso marketed credit life, mortgage life and other life insurance andsupplemental health products. Transamerica Long Term Care offered productsand services aimed at meeting the long-term care insurance needs of itscustomers. Policies were sold through independent brokerage and at theworksite to individuals and groups. Through Transamerica EmployeeBenefits, L&P offered voluntary payroll deduction life and supplementalhealth insurance to employees at their place of work which are designed tosupplement employees’ existing benefit plans.

The former Investment & Retirement (I&R) division offered a wide rangeof savings and retirement products, including mutual funds, investment adviceas well 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 (renamedTransamerica Advisors Life Insurance Company and Transamerica AdvisorsLife Insurance Company of New York. Transamerica Advisors Life InsuranceCompany of New York was later merged with and into Transamerica FinancialLife Insurance Company, effective 7/1/14) 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 channels. In late 2009, I&R reduced its sales of fixed annuitiesin response to lower market interest rates and lower investment returnsavailable in the environment. Similar market conditions have continued overrecent years and restricted sales of fixed annuities. As a result, I&Rde-emphasized the sale of fixed annuities and executed several large fixedannuity coinsurance transactions in recent years.

Incorporated within the I&R division was the former Employer Solutionsand Pensions (ES&P) division. This business included full-service retirementplan investments and services in addition to guaranteed savings andinvestment products directed at various segments of the pension industry. Thegroup sold a full range of products and services to small and mid-sizecorporate, non-profit and government sponsored plans through brokers,agents, consultants, third-party administrators and accounting firms. Effective12/31/2015, Aegon USA acquired the defined contribution administrationbook of business of Mercer HR Services, LLC. The transaction propelled thecompany to a top ten defined contribution record-keeper based on planparticipants and assets, adding 917,000 and $71 billion, respectively.Transamerica Retirement Solutions (TRS) served mid-sized to largecompanies and small to mid-sized companies across the U.S. TRS offered anumber of specialized services, including innovative plan design, a wide arrayof investment choices, extensive education programs and online investmenteducation. In addition, ES&P provided synthetic guaranteed investment



contracts primarily to various retirement plans. ES&P was also a leadingprovider of single premium group annuities (Terminal Funding), which areused by companies to decrease the liability of the defined benefit plans.BOLI/COLI products were distributed through a select number of nichebrokers (including an affiliate, Clark Consulting, which was sold inSeptember 2015); however, in December 2010, ES&P discontinued new salesin the executive non-qualified benefits market and related BOLI/COLIbusiness.

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. In 2009, Aegon announced its plan to run-off itsinstitutional spread based business to reduce capital requirements and creditrisk. The institutional line of business also included structured producttransactions, such as credit default swaps, synthetic collateralized debtobligations, affordable housing tax credit guarantees and hedge fund principalprotection. Going forward, Aegon USA will only continue to offer affordablehousing tax credit guarantees.


Period ————DPW———— ——Prem Assumed——Ending ($000) (% Chg) ($000) (% Chg)2012 28,818 4.4 … -99.92013 26,609 -7.7 … …2014 14,716 -44.7 … …2015 15,552 5.7 … …2016 13,389 -13.9 … …

5-Yr CAGR … -13.5 … -99.9

ReinsurancePeriod ———Prem Ceded——— —NPW & Deposits—Ending ($000) (% Chg) ($000) (% Chg)2012 10,878 -5.9 36,001 -0.92013 8,578 -21.1 40,384 12.22014 5,423 -36.8 27,868 -31.02015 4,410 -18.7 24,254 -13.02016 4,093 -7.2 17,870 -26.3

5-Yr CAGR … -18.8 … -13.2

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.



—Prem Assumed—Product Line ($000) (%) ($000) (%)Ordinary life 9,753 72.8 … …Individual annuities 3,636 27.2 … …

Total 13,389 100.0 … …Reinsurance

——Prem Ceded—— ——NPW——Product Line ($000) (%) ($000) (%)Ordinary life 1,582 38.7 8,171 87.9Individual annuities 2,511 61.3 1,125 12.1

Total 4,093 100.0 9,296 100.0

BY-LINE RESERVES ($000)Product Line 2016 2015 2014 2013 2012Ordinary life 1,027,343 1,076,937 1,122,445 1,172,504 1,241,663Supplementary contr 115,447 112,628 111,952 113,149 107,536Individual annuities 356,251 402,024 303,802 283,457 610,356Group annuities 13,616 15,137 17,598 19,467 21,677Deposit type contracts 61,513 70,346 77,163 79,742 83,970

Total 1,574,172 1,677,072 1,632,960 1,668,320 2,065,202


Year Issued In Force Issued In Force Issued In Force2012 3 22,640 … … … …2013 2 20,897 … … … …2014 1 19,367 … … … …2015 … 18,011 … … … …2016 … 16,651 … … … …


Year

Whole LifeEndow. &



2012 5,803,549 3,909 … … … 5,807,4582013 5,549,471 3,689 … … … 5,553,1592014 5,287,198 3,097 … … … 5,290,2952015 4,957,615 2,505 … … … 4,960,1202016 4,585,960 1,809 … … … 4,587,769





Indus-trial

TotalInsurance

Issued

Non-Par(%)

Par(%)

2012 456 … … … … 456 100.0 …2013 5,300 … … … … 5,300 100.0 …2014 86 … … … … 86 100.0 …2015 … … … … … … … …2016 … … … … … … … …



Year % % Issued In Force ($/M) Prem Prem In Force2012 3.7 91.8 152,000 256,513 1.70 2.8 … 67.742013 1.3 98.0 2,650,000 265,740 1.76 1.0 … 65.572014 1.8 94.6 86,000 273,160 1.75 0.7 … 66.602015 3.1 107.5 … 275,394 2.02 0.7 … 66.722016 3.6 97.4 … 275,525 2.13 0.5 … 20.96


Year Issued In Force (000) (%) (%)2012 3 22,640 280 0.12 2.522013 2 20,897 99 0.12 4.762014 1 19,367 69 0.11 19.052015 … 18,011 67 0.11 2.112016 … 16,651 50 0.03 1.37


YearNPW(000)

Res(000)

Exp toRes(%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 15,151 717,891 1.7 296.4 999.9 89.42013 13,284 396,607 3.6 348.9 999.9 176.02014 2,327 415,754 2.5 999.9 999.9 182.02015 2,739 514,652 2.3 999.9 999.9 124.22016 1,125 471,699 2.2 999.9 999.9 106.7


YearNPW(000)

Res(000)

Exp toRes (%)

Comm &Exp toNPW(%)


Benefits &Wdrwls to

Res (%)2012 … 21,677 0.8 … … 85.82013 … 19,467 0.8 … … 85.42014 … 17,598 0.6 … … 72.72015 … 15,137 0.8 … … 48.92016 … 13,616 0.0 … … 63.3


YearTotal Annuity

Res (000)

Min or NoSurrender

Charge (%)


WithMVA (%)

NoSurrender

Allowed (%)2012 739,568 86.3 … 1.4 12.42013 416,074 91.6 … 1.1 7.32014 433,351 90.8 … 1.0 8.22015 529,789 88.2 … 0.9 10.92016 485,315 88.7 … 0.8 10.5


2016 2015 2014 2013 2012Sep Acct Assets 5,702,361 5,992,871 6,832,781 7,417,777 7,062,393% Growth -4.8 -12.3 -7.9 5.0 -0.9S/A Assets/Adm Assets 68.6 68.5 70.5 73.2 70.4

Sep Acct Reserves 5,670,183 5,957,127 6,787,034 7,356,212 6,985,497% Ordinary Life 23.0 22.9 22.1 21.0 20.7% Individual Annuities 76.3 76.3 77.1 78.1 78.2% Group Annuities 0.7 0.8 0.8 0.9 1.2Deposit Type Liabilities … … 4 14 15Other Liabilities 32,178 35,744 45,743 61,551 76,881

S/A Prems & Deposits 12,603 14,830 14,033 25,865 27,872% Ordinary Life 72.0 62.9 61.3 35.0 32.5% Individual Annuities 28.0 37.1 38.7 65.0 67.5

Sep Acct Fees & Charges 137,676 151,272 160,465 162,514 165,390% Ordinary Life 39.3 38.2 36.0 35.4 35.9% Individual Annuities 60.7 61.8 64.0 64.6 64.1Fees & Chgs to Assets% 2.4 2.4 2.3 2.2 2.3

Sep Acct Ben & Wdrwls 566,580 686,822 822,951 775,681 730,461% Ordinary Life 17.9 13.7 13.9 15.3 17.7% Individual Annuities 80.6 85.2 84.6 82.5 79.8% Group Annuities 1.5 1.1 1.6 2.1 2.5Ben & Wdrwl to Assets% 9.7 10.7 11.5 10.7 10.3




2016 2015 2014 2013 2012Florida 3,240 2,698 3,603 6,500 6,455Pennsylvania 962 926 697 850 767North Carolina 926 761 387 573 663Illinois 917 1,025 1,708 2,418 2,525California 845 1,049 1,000 1,527 2,552Ohio 793 697 873 641 446Texas 777 555 -20 3,199 3,929Michigan 708 167 136 1,090 240New Jersey 574 688 1,579 839 1,281Arizona 469 481 -1 739 601All Other 3,148 6,529 4,770 8,217 9,359

Total 13,360 15,575 14,731 26,592 28,817










Pre-tax NetPeriod Net Oper Operating Net TotalEnding Income Gain Income Return2012 216,138 215,566 178,189 171,6292013 434,278 438,122 196,612 184,9682014 124,978 309,501 201,479 208,0822015 -4,659 21,192 -24,119 -11,4212016 134,396 142,822 71,053 57,495

5-Yr Total 905,131 1,127,204 623,215 610,752

———Company——— —Industry Composite—Period Operating Operating Operating OperatingEnding ROR (%) ROE (%) ROR (%) ROE (%)2012 62.9 40.1 5.6 7.02013 127.5 64.0 7.9 8.92014 87.0 37.6 12.6 12.82015 7.1 2.5 5.5 8.52016 48.5 19.2 13.2 12.0

5-Yr Avg 68.9 31.0 8.5 9.9





Year & Dep & Dep Assets Tot Rev Equity Yield Return2012 999.9 138.2 2.1 62.9 40.1 4.38 2.752013 999.9 126.4 4.3 127.5 64.0 4.32 -5.362014 999.9 161.2 3.1 87.0 37.6 5.21 1.542015 999.9 178.8 0.2 7.1 2.5 3.66 2.682016 999.9 209.8 1.7 48.5 19.2 4.25 0.63

5-Year Avg 999.9 154.8 2.4 68.9 31.0 4.36 0.45


NET OPERATING GAIN ($000)Product Line 2016 2015 2014 2013 2012Ordinary life 14,112 22,696 213,853 55,807 31,245Supplementary contr -7,957 -623 30,730 7,484 2,802Individual annuities 90,229 -43,094 60,039 372,605 177,063Group annuities 1,587 1,411 4,879 2,227 4,455Other 44,851 40,802 … … …

Total 142,822 21,192 309,501 438,122 215,566


Year Income Gains Gains2012 121,458 -37,377 -6,5602013 116,754 -241,510 -11,6452014 138,627 -108,023 6,6032015 98,353 -45,311 12,6982016 108,240 -71,768 -13,559

5-Year Total 583,432 -503,989 -12,463——————Company—————— -Industry Composite-

Pre-taxInvest


Year (%) (%) (%) (%) (%) (%)2012 0.4 4.4 3.1 2.8 -6.5 5.02013 -3.9 4.3 -4.5 -5.4 3.9 5.22014 18.7 5.2 1.1 1.5 15.0 5.82015 -29.1 3.7 1.9 2.7 -11.0 5.02016 10.1 4.3 1.5 0.6 1.7 4.9

5-Yr Avg -2.1 4.4 0.6 0.5 0.2 5.2




Capitalization: Aegon USA’s overall risk-based capitalization is adequate tosupport its current insurance and investment risks. A.M. Best believes thatAegon USA has good statutory earnings capacity to support its capitalposition going forward. A.M. Best also notes that over recent years, AegonUSA has come to rely heavily on captive reinsurance to fund its reservesassociated with term life insurance and universal life with secondaryguarantees. Financing provided to these captives include, but are not limitedto, surplus notes, letters of credit and parental guarantees. As part of ourassessment of a rating unit’s balance sheet strength, A.M. Best considers notonly the capital adequacy ratios, but also the quality of capital supporting suchratios. A.M. Best believes that the quality of capital for an operating companythat has ceded XXX and/or AXXX reserves to a domestic or offshore captiveas not as strong as for an operating company with similar risk-adjusted capitalratios that self-funds its XXX and AXXX reserves. Finally, Aegon USA hasreceived capital contributions in the past from its ultimate parent, Aegon N.V.Given that Aegon USA is such an integral part of Aegon N.V., A.M. Bestbelieves that they would likely provide additional capital if needed in thefuture. A.M. Best views the capital profile to be a material supporting factorto the rating of the group.

Current BCAR: 191



Year Gain Gains Taxes Gains2012 216,138 -37,377 572 -6,5602013 434,278 -241,510 -3,844 -11,6452014 124,978 -108,023 -184,523 6,6032015 -4,659 -45,311 -25,851 12,6982016 134,396 -71,768 -8,426 -13,559

5-Yr Total 905,131 -503,989 -222,072 -12,463—————Source of Surplus Growth—————Change Change % Chg

in Other in inYear AVR Changes C&S C&S2012 -223 26,706 198,112 45.22013 1,537 -89,247 97,257 15.32014 -3,430 -25,977 178,675 24.42015 -2,972 -107,444 -121,838 -13.42016 -874 -150,830 -94,209 -11.9

5-Yr Total -5,961 -346,794 257,996 9.7




Year Notes Debt Capital Surplus2012 … … 417,198 218,9602013 … … 417,198 316,2172014 … … 417,198 494,8922015 … … 317,198 473,0552016 … … 242,198 453,845

Year-End Asset Valuation AdjustedYear C&S Reserve C&S2012 636,158 12,246 648,4042013 733,415 10,710 744,1252014 912,090 14,139 926,2292015 790,252 17,111 807,3632016 696,043 17,984 714,027


to Surplus to Total in NPW to SurplusYear Liab(%) Relief(%) Capital & Dep(%) Liab(%) Relief(%)2012 27.9 0.0 0.1 -0.9 17.7 4.52013 37.7 0.0 0.1 12.2 17.8 3.32014 47.9 0.0 0.0 -31.0 17.5 2.12015 41.4 0.0 0.0 -13.0 17.3 3.82016 37.7 0.0 0.0 -26.3 17.8 5.6



Year Reins Ceded Rec/C&S Rec/C&S Rec/C&S Relief Leverage Rec/C&S Leverage2012 1,100,998 … 0.4 0.4 0.0 0.5 2.9 86.12013 399,736 … 0.0 0.0 0.0 0.1 2.8 99.92014 196,752 … 0.0 0.0 0.0 0.2 2.9 106.82015 188,584 … 0.0 0.0 0.0 0.3 3.0 112.32016 177,988 … 0.0 0.0 0.0 0.3 3.0 108.8



Liquidity: Aegon USA has adequate cash and liquid assets to protect againstadverse liquidity scenarios. The company manages so that liquidityrequirements could be met in stress scenarios which factor in a combination ofevents over monthly horizon points over an extended period of time. Liquidityimpacts due to rating downgrades are also factored into the company’s stresstesting. The company manages liquidity so that a positive cash balance can bemaintained during the first 6 months of a modeled scenario with illiquid assetsales not allowed during this period. The company also forecasts liquidity tobe positive over a two year period. Aegon USA’s liquidity is also supported by$1.5 billion in available syndicated borrowings for emergency use only incommitted bank lines through the ultimate parent AEGON, N.V. The groupalso has available to them the ability to access the FHLB as well as othernormal operating lines of credit outside of emergency use funding. Liquidityis considered adequate and supports the level of business complexity in whichthe company operates.



Year Flow ($000) Liquidity Liquidity to Capital Mtg to Capital2012 43,036 55.7 78.7 7.5 …2013 80,397 59.6 84.6 4.0 …2014 272,464 56.7 86.8 5.8 …2015 135,754 58.4 83.1 9.0 …2016 43,123 52.6 77.8 6.6 …


& RE Invest Quick CurrentYear to Capital to Capital Liquidity Liquidity2012 6.5 … 48.1 82.52013 5.0 … 46.3 81.72014 6.3 … 45.4 80.92015 10.7 3.1 44.9 81.02016 15.5 … 45.7 81.9



As of year-end 2016, bonds represented 70.9% of Aegon USA’s investmentportfolio and 93.5% are of investment grade quality. Common stock accountsfor about 3.2% of the portfolio, of which a large portion is affiliated. Direct



commercial mortgage loans comprise approximately 10% of invested assetsand are backed principally by office, retail, industrial and apartmentproperties. The commercial loan portfolio is performing well, with the vastmajority of loans in good standing. Aegon USA’s exposure to alternativeassets consists of investments in higher risk and less liquid assets, such ashedge funds, private equity, mezzanine debt and real estate. A.M. Best notesthat the alternative asset exposure is less than 5% of the investment portfolio.



Net Short- —Real Estate— Exp.Year Yield Bonds Stocks Mortgages Term Gross Net Ratio2012 4.38 4.87 2.66 6.40 0.18 … … 2.542013 4.32 4.77 6.16 6.53 0.21 … … 3.902014 5.21 4.57 7.57 5.01 0.17 … … 1.812015 3.66 4.45 7.32 5.42 0.18 … … 3.562016 4.25 4.65 7.05 4.77 1.14 … … 4.46



Government 4.9 0.8 0.1 0.2 18.5 19Gov’t Agencies & Muni 0.1 0.3 0.1 0.0 3.6 23Industrial & Misc 4.4 37.3 10.6 5.7 11.8 8Hybrid Securities … … … … 1.7 25

Total 9.4 38.4 10.8 5.8 35.5 12

2016 2015 2014 2013 2012Bonds (000) 1,374,341 1,505,652 1,623,727 1,560,730 1,670,188US Government 21.2 23.4 21.8 18.7 19.5Foreign Government 0.4 0.4 0.6 0.6 0.5State/Special Revenue - US 4.2 1.0 0.7 0.9 3.3Industrial & Misc - US 74.2 75.2 76.9 79.8 76.7


Bond Quality (%) 2016 2015 2014 2013 2012Class 1 73.0 74.6 72.0 71.9 75.5Class 2 23.7 20.9 24.8 26.3 21.8Class 3 2.5 3.2 1.9 1.3 1.6Class 4 0.5 1.1 0.9 0.4 0.8Class 5 … 0.2 0.4 0.1 0.3Class 6 0.3 0.1 … … 0.1


Stocks (000) 7,411 7,411 7,561 7,637 10,466Unaffiliated Common … … … 1.0 1.1Unaffiliated Preferred 100.0 100.0 100.0 99.0 98.9


Mortgages (000) 110,655 86,057 58,551 37,170 42,294Commercial 100.0 100.0 100.0 100.0 100.0



Other Inv Assets (000) 1,015,263 1,068,543 1,045,460 1,048,831 1,096,313Cash 0.9 -0.2 -0.4 -0.6 6.6Short-Term 5.9 10.6 2.5 7.6 4.2Schedule BA Assets 7.0 5.9 6.2 0.5 0.6All Other 86.1 83.6 91.8 92.5 88.6




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


Directors: Blake S. Bostwick, Mark W. Mullin, Jason Orlandi, David Schulz,Katherine A. Schulze, C. Michiel van Katwijk.


2014, by the insurance department of Arkansas. The 2016 annual independentaudit of the company was conducted by PricewaterhouseCoopers, LLP. Theannual statement of actuarial opinion is provided by Donald Krouse.

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 LiabilitiesTotal bonds 1,374,341 +Net policy reserves 1,512,658Total preferred stocks 7,411 Policy claims 35,138Mortgage loans 110,655 Deposit type contracts 61,513Contract loans 632,834 Interest maint reserve 4,060Cash & short-term inv 69,777 Comm taxes expenses 13,832Securities-colltrl assts 199,041 Borrowed money 46,637Other invested assets 70,884 Asset val reserve 17,984Prems and consids due 36 Payable for securities lending 199,041Accrued invest income 34,526 Other liabilities 20,295Other assets 107,697

Tot liab w/o sep accts 1,911,159Tot assets w/o sep accts 2,607,202 Separate account bus 5,702,361

Separate account bus 5,702,361Total liabilities 7,613,520

Common stock 2,500Paid in & contrib surpl 239,698Unassigned surplus 453,845

Assets 8,309,563 Total 8,309,563

+Analysis of reserves; Life $1,023,325; annuities $356,835; supplementary contracts withlife contingencies $128,481; disability active lives $4; disability disabled lives $20;miscellaneous reserves $3,994.

SUMMARY OF OPERATIONS ($000)Premiums: Death benefits 190,326Ordinary life 8,171 Annuity benefits 123,553Individual annuities 1,125 Surrender benefits 422,081Total premiums 9,296 Int on policy funds 4,310

Supplementary contracts 19,737 Supplementary contracts 22,850Net investment income 108,240 Incr life reserves -94,068Amort interest maint res 2,103 Commissions 26,419Comm & exp reins ceded 1 Insur taxes lic & fees 214Other income 155,357 General ins expenses 10,846

Net transf to sep acct -546,198Other expenses 4

Total 294,734 Total 160,338


Federal income taxes incurred........................................................................... -8,426

Net gain from operations after federal income taxes............................................. 142,822




Funds Provided Funds AppliedGross cash from oper 302,279 Benefits paid 755,491Transf from sep account 548,390 Comm, taxes, expenses 36,289Long-term bond proceeds 524,132 Long-term bonds acquired 394,122Other cash provided 91,708 Other invest acquired 145,435Decr cash & short-term 42,074 Other cash applied 177,246

Total 1,508,583 Total 1,508,583


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The A.M. Best Company is the oldest, most experienced rating agency inthe world and has been reporting on the financial condition of insurancecompanies since 1899.

A Best's Financial Strength Rating (FSR) is an independent opinion ofan insurer's financial strength and ability to meet its ongoing insurancepolicy and contract obligations. An FSR is not assigned to specificinsurance policies or contracts and does not address any other risk,including, but not limited to, an insurer's claims-payment policies orprocedures; the ability of the insurer to dispute or deny claims payment ongrounds of misrepresentation or fraud; or any specific liabilitycontractually borne by the policy or contract holder. An FSR is not arecommendation to purchase, hold or terminate any insurance policy,

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