Fitch Ratings has affirmed the financial strength ratings of AEGON Group, and boosted its rating outlook on the firm to “Stable” from “Negative”.

The rating agency says that the revision of the outlook is based on Fitch’s review of the AEGON Group’s earnings profile. AEGON Group’s ratings were placed on negative outlook in October 2002, when credit defaults, provisions for variable annuity guarantees, and acceleration of deferred acquisition costs on variable annuities caused a significant decline in net income, the firm reports.

Fitch now says that while net income from 2001-2003 was affected by significant credit impairments and realized losses on shares and real estate, credit impairments have continued to decline and were more than offset by realized gains in 2004, as well as the first three months of 2005.

It has concluded that the fundamental earnings power of the company is very strong, earnings levels are commensurate with the assigned ratings, and operating performance reflects solid management of key drivers, such as persistency, expenses, and asset/liability management and crediting strategies, as well as the achievement of pricing standards and risk tolerances.

Fitch says it views AEGON Group’s very strong consolidated statutory capital position as supportive of production levels and risk profile. Capital growth has been self-funding, with the exception of 2002, when parent company AEGON NV provided capital and surplus note contributions of $1.8 billion.

Other strengths recognized in the ratings include: sound asset quality; the absolute and relative size of U.S. operations, which allow the company to compete effectively in all of its major retail and institutional product segments; significant earnings diversification weighted toward general account life and annuity products; strong pricing and risk management discipline; effective management of an extensive network of well established distribution channels; and the efficiency benefits achieved through successful integration of several large acquisitions.

AEGON Canada Inc., a member of the AEGON Group, is the parent company of Transamerica Life Canada, AEGON Fund Management Inc, AEGON Capital Management, AEGON Dealers Services Canada Inc. and Money Concepts (Canada)
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