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Operating Profile Key Credit Factors Financial Profile Key Credit Factors Insurer Financial Strength

Factor Scores

Industry Profile and Operating Environment

Business ProfileCapitalisation &

Leverage

Debt Service Capabilities & Financial Flexibility

Financial Performance &

Earnings

Investment & Asset Risk

Asset/Liability & Liquidity

ManagementReserve Adequacy

Reinsurance, Risk Mitigation & Catastrophe Risk

Rating

aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

bb+

bb

1www.fitchratings.com | March 2018

Dutch Insurance Peer Review

Dutch Insurance Peer ReviewIssuers Aegon NV NN Group NV VIVAT NV

IFS / OutlookA+ / StableA+ / StableBBB+ / Stable

Bar Colours = Relative Importance

Higher Influence Moderate Influence Lower Influence

Bar Arrows = Rating Factor Outlook

Positive Negative Evolving Stable

This Peer Review report compares and contrasts the key credit factors affecting the ratings of the insurers listed to the right.

Fitch Ratings assigns a score to each of the nine key credit factors (as outlined in the table below) underlying the groups’ Insurer Financial Strength (IFS) ratings. These scores are denoted by lower-case letters and follow the same scale Fitch uses for its IFS ratings (ie ‘aaa’ through ‘c’).

Each score’s relative influence (higher, moderate, lower) on the insurers’ ratings and the outlook (stable, positive, negative) is also shown.

The information in this Peer Review is derived from the most recently published Insurance Ratings Navigator report on each organisation, which is developed based on the application of Fitch’s Insurance Rating Criteria. Links to the insurers’ individual Navigator reports, applicable criteria and other related research, are on the final page of this report.

Aegon

NN

VIVAT

Aegon

NN

VIVAT

Aegon

NN

VIVAT

Aegon

NN

VIVAT

Aegon

NN

VIVAT

Aegon

NN

VIVAT

Aegon

NN

VIVAT

NN

VIVAT

NN

VIVAT

Aegon

NN

VIVAT

(Aegon not scored)



Factor Levels Capitalisation & Leverage

Aegon A+ NN A+ VIVAT BBB+

aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Very Strong Capitalisation & LeverageFitch assesses capitalisation & leverage as ‘very strong’ for Aegon and NN, and ‘strong’ for VIVAT. The credit factor has high influence on the ratings. VIVAT’s capitalisation & leverage score is one notch below peers, due to the higher historical volatility of its capital metrics.

Prism FBM Scores Support Capital AssessmentFitch primarily focuses on its Prism Factor-Based Model (Prism FBM) for its assessment of insurers’ capital adequacy. Our Prism FBM scores support our view that insurers in the peer group are well capitalised. Prism FBM scores were ‘extremely strong’ at end-2016, with the exception of Aegon which scored ‘very strong’. However, we estimate NN’s Prism FBM score to have weakened to ‘Very Strong’ at end-1H17 following the acquisition of Delta Lloyd. Strong coverage ratios under the Solvency II (S2) regulatory regime also confirm our assessment of capitalisation. NN’s S2 ratio of 196% at end-1H17 was the strongest among peers. VIVAT’s end 1H17 S2 ratio was 171%, slightly below the same period last year, mainly due to unfavourable

market movements. Aegon’s S2 ratio improved to 185% at end-1H17, in line with the peer average.

S2 Sensitivities ManageableWe view the sensitivity of insurers’ S2 ratios to market factors, such as the widening of government bond spreads, as manageable. While S2 disclosures and sensitivities in particular inform our analysis, changes to S2 ratios from market movements are unlikely to directly, of themselves, affect ratings; this is because Fitch continues to focus on its own Prism Factor-Based Model as its primary assessment of insurers’ capital adequacy.

New Debt Drives Increasing LeverageWe forecast the financial leverage of both NN and VIVAT to have increased in 2017 to around 30%. VIVAT issued new debt in 2017 to support the capitalisation of its operating subsidiaries, while NN issued debt as part of financing the Delta Lloyd acquisition. Also, Delta Lloyd’s higher financial leverage contributed to the increase in NN’s financial leverage ratio post acquisition.

Higher Influence: Capitalisation & Leverage

15

20

25

30

35

40

2013 2014 2015 2016 2017estimated

(%) Aegon NNª VIVAT

a NN end-17 estimate includes Delta LloydSource: Companies, Fitch

Financial leverage ratios

100

150

200

250

300

Aegon NN VIVAT

(%) 1H16 1H17

Source: Companies, Fitch

S2 ratios



Factor Levels Financial Performance & Earnings


aaa

aa+

aa

aa-

a+

a

a-bbb+

bbb

bbb-

bb+

bb

Earnings a Key Rating WeaknessProfitability is a key rating weakness in the Dutch insurance sector. We consider a significant improvement as unlikely in the medium term. NN scored higher than peers for this credit factor, as it delivered the most balanced long-term financial performance, supported by earnings diversification. Aegon’s score reflects its weak but improving performance. Although VIVAT’s profitability has recovered in recent years, it has a weaker and more volatile track record over the longer term and has more limited revenue diversification relative to peers.

Life Closed Books Run Off Gradually Life insurance remains the main earnings source for all of the rated peers. Dutch life results are pressured by low interest rates and the lack of demand for higher-margin traditional life insurance and unit-linked savings products. We expect tight management of closed books through cash flow matching; interest rate risk hedging and cost controls will support life segment earnings. Pockets of growth in protection products, such as term life, could partly offset revenue declines from the gradual run-off of closed books.

Stabilising Non-life MarginsThe earnings contribution of non-life insurance is more modest compared to life insurance. Fitch expects continued price adjustments to lead to stabilising underwriting results in the P&C segment in 2018. However, both NN and VIVAT are exposed to the challenging MTPL segment, which could face further difficulties. NN’s underwriting margin in the Dutch business remained negative at end-1H17, pressured by increasing bodily injury claims, while VIVAT’s margin recovered strongly from the hailstorm hit in 2016. Aegon’s non-life operations are very small and do not have a material influence on the factor score.

Cost Savings Remain FocusWe estimate large Dutch insurers will cut annual costs by a further EUR650 million in 2017-2020, mainly through staff reductions and operational efficiencies. This includes the expected cost synergies from the integration of Delta Lloyd into NN. However, cost savings are unlikely to translate into significantly improved profitability, due to the gradual run-off of higher margin life policies and strong competition in non-life insurance.

Higher Influence: Financial Performance & Earnings

-4

-2

0

2

4

6

8

10

Aegon NN VIVAT

(%)

Net income return on equity

2015 2016


-14-12-10-8-6-4-202

NN VIVAT

(%)

Non-life underwriting margins

1H16 1H17




Factor Levels Business Profile


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Higher to Moderate Influence: Business Profile

Business Profiles Support RatingsThe business profiles and strong Dutch market positions of each company in the peer group is a key rating strength which supports ratings. Aegon and NN score ‘very strong’, which reflects their strong market positions, and the high level of product and international diversification. VIVAT scores ‘strong’, below peers, due to its smaller size, lack of international diversification and more modest market share.

Diverse Business ActivitiesNN’s acquisition of Delta Lloyd in 2017 positioned it as a contender for Dutch non-life market leader, and further reinforced its position as the life market leader. Aegon also has a strong market position in life insurance in the Netherlands, but its activities are more internationally focused, with

significant operations in the US and UK. NN also has insurance activities in various countries outside the Netherlands, but the proportion of the international business is more modest compared to Aegon. VIVAT is a large insurer in the Netherlands, with top five positions in both Dutch life and non-life insurance, but lacks international diversification.

Banking Adds to DiversificationNN and Aegon also have banking subsidiaries which contribute positively to their earnings and business diversification. Banking subsidiaries provide Dutch insurance groups with a vehicle to participate in the growing ‘bank savings’ market, as well as cross-selling opportunities. In addition, banking subsidiaries have become increasingly important participants in the mortgage origination market.

87%

Gross premium split (end-2016)


Aegon EUR23bn

13%

0

100

200

300

400

500

Aegon NN VIVAT

Asset split by geography(end-2016)

Dutch Non-Dutch

a 'other' segment assets shown as DutchSource: Companies, Fitch

(EURbn)

a

Life Non-Life

NN EUR9bn

17%

83%

VIVAT EUR3bn

27%

73%



Moderate Influence: Debt Service Capabilities & Financial Flexibility

Factor Levels Debt Service Capabilities & Financial Flexibility


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Factor Score ‘Strong’ to ‘Good’Debt service capability and financial flexibility are relative rating weaknesses for Aegon and VIVAT, whereas NN’s score is in line with its rating. VIVAT’s score of ‘good’ reflects its relatively weak long-term fixed charge coverage and more limited standalone financial flexibility compared to peers, although this assessment has improved in recent years.

Interest Expenses to IncreaseOur assessment of this credit factor is driven mainly by the insurers’ fixed charge coverage ratio (FCC), which in turn is driven by insurers’ profitability and financial leverage. A moderate increase in interest expenses is likely for VIVAT and NN due to increasing leverage in 2017; this could somewhat pressure FCC ratios. In 2016, VIVAT’s FCC of 4x was the weakest in the peer group, due to its weaker profitability. This compares to Aegon’s 7x (based on net underlying earnings) and NN’s 13x.

Adequate Financial FlexibilityFitch’s assessment of the financial flexibility of both Aegon and NN benefits from their established track record of accessing capital markets. VIVAT’s track record in this regard is somewhat weaker, being the only company in the peer group that is not listed publicly and that used to be reliant on its parent for financial support. However, VIVAT’s successful issuance of both senior and subordinated notes in 2017 reflects significant improvement in its standalone financial flexibility. Funding conditions for Dutch insurers further improved in 2017 with the normalisation of risk premiums, as measured by the z-spread falling below 200bp on long-term debt.

-10

-5

0

5

10

15

2013 2014 2015 2016 2017(estimated)

(x)

Fixed charge coverage ratios

Aegon NN VIVAT




Moderate Influence: Investment & Asset Risk

Factor Levels Investment & Asset Risk


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Low Investment Risk All insurers in the peer group scored ‘very strong’ for investment and asset risk, reflecting their conservative investment portfolios and low asset risks. Asset risk credit metrics are largely consistent among the three peers; Aegon’s slightly lower score reflects it’s relatively lower quality fixed-income portfolio compared to peers.

Fixed-Income Dominates PortfoliosDutch insurers’ general account investments mainly consist of fixed-income assets and Dutch residential mortgages, while other asset classes remain less relevant. VIVAT is overweight in fixed income investments compared to peers, with a high proportion of ‘AAA’ rated Dutch and German government securities, resulting from past capital constraints, preventing higher investment risk. With capitalisation restored, Fitch expects VIVAT to normalise its portfolio and conservatively re-risk, shifting some of its ‘AAA’ government bond portfolio to other higher yielding debt, mortgages, investment funds and real estate.

Low Risky Asset RatiosRisky assets ratios - defined as investments in non-investment-grade fixed-income securities and unaffiliated common stocks relative to equity - are low. Aegon’s end-2016 risky asset ratio was 55%, somewhat higher than that of VIVAT and NN (37% and 38% respectively), due to its higher exposure to non-investment grade bonds.

Increasing Mortgage ExposureMortgage investments in Dutch insurers’ portfolios have increased significantly in recent years, in an effort to earn higher yields in the low interest rate environment. Aegon and NN originate new mortgages through their own banking subsidiaries, which provide a steady supply of mortgage investments to their insurance business. VIVAT’s mortgage investments were significantly below peers, partly driven by conservative risk taking and the absence of a banking subsidiary, but we expect it to gradually catch up to peers. We believe higher mortgage investments do not translate into significantly higher credit risk; the Dutch residential mortgage market has historically been stable with low credit losses, underpinned by creditor-friendly legislation and a relatively high proportion of mortgages guaranteed by Nationale Hypotheek Garantie.

0%

20%

40%

60%

80%

100%

Aegon NN VIVAT

General account investment split (end-2016)

Fixed Income Loans & Mortgages Cash and equivalentEquities and similar Properties Other


Fixed income rating split(end-2016)


44%50%

6%

Aegon EUR103bn

AAA - AAA - BBBBelow BBB - Not rated

64%

34%

2%

NN EUR78bn

83%

15%

2%

VIVAT EUR28bn



Moderate Influence: Asset/Liability & Liquidity Management

Factor Levels Asset/Liability & Liquidity Management


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Interest Rate Risk HedgedDuration gaps between assets and liabilities generate interest rate risk for all Dutch life insurers. Insurers manage this risk by matching cash flows as closely as possible and hedging residual interest rate risk. VIVAT’s lower score (‘good’) for this credit factor reflects its historically high duration mismatch, which contributed to weak financial performance as interest rates declined. Insurers have seen declines in the individual life insurance business in recent years as a result of market changes, and have mostly stopped selling traditional life products. The gradual run-off of closed book life portfolios will naturally reduce interest rate risk exposure.

Closed Books Adequately ManagedGuarantees in run-off life portfolios - including NN’s Japan and Europe, as well as Aegon’s US legacy variable annuity businesses - are closely managed through hedges, although perfect risk mitigation is not

possible. This results in some earnings volatility from time-to-time, but Fitch views the hedging programmes for capital market-related risks for both Aegon and NN as having been reasonably effective in recent years.

Low Liquidity RiskFitch views Dutch insurers’ liquidity positions as sound. Insurers regularly perform liquidity stress tests to ensure smooth operations in severe stress scenarios, including both market and insurer-specific events. However, an increased use of derivatives for hedging purposes by insurers could create higher liquidity needs, through higher collateral requirements in case of sharp unfavourable market movements.

0

20

40

60

80

100

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038

(%)

Forecasted run-off of life closed books (number of policies)

Source: DNB, Fitch



Factor Levels Reserve Adequacy


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Lower Influence: Reserve Adequacy

Adequate ReservingDutch insurers score ‘strong’ for reserve adequacy. This credit factor has lower influence due to the relative smaller size of non-life operations in the overall business profiles. We do not score this credit factor for Aegon, given it is predominantly a life insurance-focused insurer.

Positive Run-off DevelopmentFitch considers the reserving practices of NN and VIVAT to be prudent; this is confirmed by loss development triangles, which show overall positive run-off results for the past five years. However, increasing bodily injury claims in the motor business could have an adverse effect on reserves, as reflected by NN’s EUR40 million reserve strengthening in 1H17.

Adequate Risk ManagementDutch insurers score ‘strong’ for this credit factor, which has a lower influence on their ratings due to the relative smaller size of non-life operations in the overall business profiles. As for reserve adequacy, we do not score this credit factor for Aegon, given its life focus (instead, these factors are assessed as part of asset/liability management). VIVAT’s risk management processes are fully independent of Anbang’s risk management framework; the strength of the risk management processes are ensured by regular interaction with the regulator, the Dutch Central Bank.

Good Quality Reinsurance ProtectionReinsurance is placed with a diverse panel of reinsurers with a minimum credit rating of ‘A-’. Fitch believes the reinsurance programmes of NN and VIVAT provide adequate protection against large losses, with conservative retention levels compared to equity.

Factor Levels Reinsurance, Risk Mitigation & Catastrophe Risk


aaa

aa+

aa

aa-

a+

a

a-

bbb+

bbb

bbb-

Lower Influence: Reinsurance, Risk Mitigation & Catastrophe Risk

Not

Sco

red

Not

Sco

red



Insurance Ratings NavigatorEuropean Life

European Life

Sector Details: aaa AAA Stable

Sector: aa+ AA+ Stable

Region: aa AA Stable

Country: aa- AA- Stable

Country IDR: AAA a+ A+ Stable

Country IDR Action: a A Stable

Country Action Date: a- A- Stable

Country Ceiling: AAA bbb+ BBB+ Stable

bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable

Ratings History bb BB Stable

Date bb- BB- Stable

A+ Stable b+ B+ Stable

A+ Stable b B Stable

A+ Stable b- B- Stable

AA- Negative ccc CCC Stable

AA- Stable cc CC Stable

AA- Stable c C Stable

AA- Negative d or rd D or RD Stable

Bar Chart Legend:

A+

n Higher Influence

n Moderate Influence +0

n Lower Influence +0+0

Positive

Negative +0

Evolving +0

Stable +0Final: A+

-1Final: n.a. `

Analysts

The Navigator summarizes the main IFS rating(s) of the noted operating company, and/or operating company subsidiaries of the noted holding company.

Date ChangedThe ratings could be downgraded if, over a sustained period, the FLR rises above 30% or if the Prism Factor-Based Model score falls to below the "Very Strong" category.

The ratings could be upgraded if Aegon's net income ROE improves to above 7% for a sustained period with the Prism Factor-Based Model capital score remaining at least "Very Strong".

04-Apr-200713-Dec-201111-Dec-201520-Mar-2009

AA-A+AA

AAAA

Direct Peer Group

A-

AA-

Current IFS Previous IFS

AA-

Deterioration in Capital/Leverage

Weak Earnings The ratings could also be downgraded if net income ROE remains below 3%.

11-Apr-2016

Some Weakness Ineffective

Country Ceiling

Other Criteria ElementsSovereign-Related Constraint

No AAA

Negative

AA-

Insurer Financial Strength (IFS)IFS Recovery Assumption Good

Issuer Default Rating (IDR)

Operational Profile Financial Profile

28-Apr-17

Reinsurance, Risk Mitigation &

Catastrophe Risk

Reserve Adequacy


Management



Earnings

Credit Factor

Not Applicable

Credit Factor

Not Applicable

IFS

Industry Profile & Operating Environment

Action

15-Mar-16 Affirmed

Affirmed

Developed Markets - Europe

Stable

Affirmed

Affirmed

AAA

Non-Insurance Attributes Positive Neutral Negative

Yes No

Corporate Governance & Management

Ownership Positive

Affirmed

Effective

Insurer Financial Strength

FactorLevels

Other Factors & Criteria

Elements(see below)

European Life

Affirmed

04-Aug-17

03-Aug-17

02-Mar-17

Neutral

Debt Service Capabilities &

Financial Flexibility

Unadjusted Insurer Financial StrengthOther Factors & Criteria Elements Drivers

Aegon has a strong franchise and scale in its main markets - the US, the Netherlands and the UK - with top 10 positions in most of its chosen market segments.

The group’s capital strength is supported by a score of "Very Strong" in Fitch's Prism Factor-Based Model at end-2016.

Publish Date:

23-Aug-16 Downgrade

21-Feb-14

22-Oct-14

Vertical Bars = Range of Rating Factor

03-Aug-15

Affirmed

Netherlands

Capital-Light StrategyAegon is shifting its business mix from high-margin spread-based business to lower-margin, capital-light, fee-based business. While we view this strategy positively, it results in a compression of margins for the group.Relevant Criteria & References

Aegon N.V.

Business Profile Capitalization & Leverage

Weak ProfitabilityAegon’s profitability, driven by pressure from pricing competition and low interest rates in the main markets, is a key rating weakness. Fitch views Aegon's net income return on equity (ROE) of 2% in 2016 as moderately weak.

Stable Financial Leverage

Yes

Sensitivities

AA+

Aviva PlcAXA SALegal & General Group Plc

Improving Profitability

Assicurazioni Generali S.p.A.AA

01-Oct-2010NN Group N.V. Prudential plc

15-Jun-2009

AA-WD


Bar Colors = Relative Importance

Allianz SE

Other Credit Factors

Start-up / Runoff Constraint Yes No n.a.

Aegon's Fitch-calculated financial leverage ratio (FLR) was 29% as at end-2016 (end-2015: 27%), a level that Fitch views as commensurate with the 'A' rating category, and in line with similarly rated peers.

Very Strong Capital

Very Strong Business Profile

Insurance Rating Methodology (Apr 2017)

European Life: SCF Report (Nov 2016)

Willem Loots (+44 203 530 1808) Harish Gohil (+44 20 3530 1257)



Insurance Ratings NavigatorEuropean Composite

European Composite









bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable


Date bb- BB- Stable

A+ Stable b+ B+ Stable

A+ Stable b B Stable

A+ Stable b- B- Stable

ccc CCC Stable

cc CC Stable

c C Stable

d or rd D or RD Stable

Bar Chart Legend:

A+

n Higher Influence



Positive

Negative +0

Evolving +0

Stable +0Final: A+

-1Final: A `

NN’s profitability is strong, with a Fitch-calculated net income return on equity (ROE) of 6%, which we expect to remain stable. Fitch expects NN to realise significant synergies out of the Delta Lloyd acquisition.

Increased Leverage

Very Strong Capital



Prudential plc


Start-up / Runoff Constraint Yes No n.a.

Sensitivities

Aviva PlcLegal & General Group PlcVIVAT N.V.

Improved Financial Leverage or ROE

Aegon N.V.AA

19-Oct-2016

AA-WD

NN Group N.V.


Very Strong Business Profile

NN is a market leader in life and the second largest non-life insurer in The Netherlands following the Delta Lloyd acquisition. Operations in Europe and Japan add to the group's diversification.

Strong Profitability

Yes

Conservative Investment Exposure

NN’s investment exposure is conservative and supported by a risky assets/equity ratio of 38% at end-2016. General account assets are predominantly ‘A’ or higher rated fixed-income securities or mortgages.Relevant Criteria & References

23-Oct-17

02-Dec-16

Neutral




NN’s capital position remains a key rating strength despite the group’s key metrics weakening following the acquisition of Delta Lloyd on 7 April 2017. Fitch expects NN's Prism FBM score to fall to 'Very Strong' in 2017.

NN's financial leverage, as calculated by Fitch, increased to above 30% at end-1H17, from 22% at end-2016, as a result of the Delta Lloyd acquisition. However, Fitch expects leverage to improve.

Publish Date:

11-Apr-16 New Rating


Affirmed

Netherlands


FactorLevels

Other Factors & Criteria Elements

(see below)

European Composite

Affirmed

25-Oct-17

AAA


Yes No


Ownership Positive

Effective

IFS

Industry Profile & Operating

Environment

Action

Affirmed


Stable


28-Apr-17


Reserve Adequacy


Management



Earnings


Country Ceiling


No AAA

Negative

AA+



AABBB

Direct Peer Group

A+

AA-


AA-

Higher Financial Leverage or Lower ROE

Weaker Capital The ratings could also be downgraded if capitalisation weakens significantly, as measured by a fall in the Prism FBM score to below ‘Very Strong’.

Date ChangedThe ratings could be downgraded if, for a sustained period, financial leverage increases to above 32% or net income ROE falls to below 5%.

The ratings could be upgraded if, on a sustained basis, financial leverage improves to below 24% or net income ROE rises to above 8%, while NN’s Prism FBM Score remains at least ‘Very Strong’.

01-Oct-201023-Aug-201611-Dec-201515-Jun-2009

BBB+


Analysts

Insurance Rating Methodology (Apr 2017)

European Composite: SCF Report (Life) (Nov 2016)

Willem Loots (+44 203 530 1808) Harish Gohil (+44 20 3530 1257)



Insurance Ratings NavigatorEuropean Composite

European Composite









bbb BBB Stable

bbb- BBB- Stable

bb+ BB+ Stable


Date bb- BB- Stable

BBB+ Stable b+ B+ Stable

BBB+ Negative b B Stable

BBB+ Stable b- B- Stable

BBB Positive ccc CCC Stable

BBB Positive cc CC Stable

BBB Positive c C Stable

BBB RWE d or rd D or RD Stable

Bar Chart Legend:

BBB+

n Higher Influence



Positive

Negative 0

Evolving +0

Stable +0Final: BBB+

-1Final: BBB `

We estimate that VIVAT’s financial leverage ratio had increased to above 30% at end-1H17 from 21% at end-2016 due to a new EUR650 million senior debt issue in May 2017.

Strong Capitalisation

Ownership Neutral To Rating



Aegon N.V.


Start-up / Runoff Constraint Yes No AAA

Sensitivities

Ethias SA

Improved Profitability, Lower Leverage

NN Group N.V. A+

BBB

VIVAT N.V.


Stable Dutch Market Position

VIVAT has a stable presence in the Dutch market, notably in life insurance. At end-2016, it ranked fourth in Dutch life with a 13% market share and fifth in non-life with a 5% market share based on gross premiums (excluding health).

Increased Financial Leverage

Yes

Volatile ProfitabilityProfitability could improve, supported by significant cost savings, and other management actions to improve underwriting performance. We estimate run-rate net income return on equity (ROE) of 4%-5%, but actual results could be volatile.Relevant Criteria & References

08-Jan-18

20-Jun-17

Neutral




We believe that the regulatory and governance framework under which VIVAT operates protects its capitalisation and policyholders through restrictions on the minimum capital position and on capital flows to the shareholder, Anbang.VIVAT scored ‘extremely strong’ in Fitch’s Prism factor-based capital model (Prism FBM) at end-2016 (end-2015: ‘very strong’). We expect VIVAT to maintain a Prism FBM score at or near the ‘extremely strong’ level.

Publish Date:

19-Oct-16 Upgrade

17-Aug-15

13-Nov-15


25-Apr-16

Affirmed

Netherlands


FactorLevels

Other Factors & Criteria Elements

(see below)

European Composite

Affirmed

24-Jan-18

Affirmed

Rating Watch Maintained

AAA


Yes No


Ownership Positive

Affirmed

Effective

IFS

Industry Profile & Operating

Environment

Action

25-May-16 Affirmed

Affirmed


Stable


27-Oct-17


Reserve Adequacy


Management



Earnings


Country Ceiling


No AAA

Negative

AA-



Direct Peer Group

A+


BBB+

Lower Earnings, Capital; Higher LeverageWeaker Regulatory Oversight

An adverse change in our perception of the strength of the ring-fencing provided by the regulatory and governance framework under which VIVAT operates could lead to a downgrade.

Deteriorating Parent Credit Profile

Significant deterioration in Anbang's credit profile as assessed by Fitch could also lead to a downgrade of VIVAT's ratings.

Date ChangedThe ratings could be downgraded if VIVAT’s net income ROE falls below 3%, if the Prism FBM score falls to the low end of the 'strong' category, or if financial leverage increases to more than 35% for a sustained period.

Net income ROE sustained above 6% could lead to an upgrade. The rating could also be upgraded if financial leverage falls below 25% while the Prism FBM score is maintained at 'extremely strong'.

23-Aug-201611-Apr-201627-Jun-2017


Analysts

Insurance Rating Criteria (Nov 2017)

European Composite: SCF Report (Life) (Nov 2016)

Willem Loots (+44 203 530 1808) Andras Sasdi (+44 203 530 1805)



Aegon N.V.

31-Dec-2012 31-Dec-2013 31-Dec-2014 31-Dec-2015 31-Dec-2016

Year End Year End Year End Year End Year End

Capitalisation and Leverage (%)

Total financing and commitments (x) 1.4 1.6 1.4 1.6 1.7

Financial leverage 34 34 29 27 29

Solvency II ratio n.a. n.a. n.a. 220 157

Debt Service Capabilities and Financial Flexibility (x)

Fixed-charge coverage ratio 5 4 6 -1 4

Fixed-charge coverage ratio - based on underlying earnings 5 5 7 7 7

Financial Performance and Earnings (%)

Net income return on equity 6 3 5 -2 2

Net underlying earnings return on equity 6 7 7 6 7

Pre-tax operating return on assets 0.7 0.4 0.5 -0.1 0.2

Investment and Asset Risk (%)

Risky assets to equity 55 63 49 55 55

Unaffiliated shares/equity 7 9 4 6 5

Non-investment grade bonds/equity 40 46 40 43 42

Asset/Liability and Liquidity Management (%)

Liquid assets to policyholder liabilities 109 107 99 97 98

Key Financial Metrics (EURbn)

Total assets 365 352 425 416 426

Shareholders' equity 23 18 24 23 21

Gross written premiums 19 20 20 23 23

Net income 1.6 0.9 1.2 (0.5) (0.6)

Net underlying earnings - reported by Aegon 1.4 1.5 1.4 1.5 1.5



NN Group N.V.





Financial leverage n.a. 26 23 22 22



Fixed-charge coverage ratio n.a. 5 10 13 13


Net income return on equity 4 2 3 8 6

Pre-tax operating return on assets n.a. 0.3 0.5 1.1 1.0

Combined ratio (Netherlands only) n.a. 101 99 97 100




Non-investment grade bonds/equity n.a. n.a. n.a. 7 6


Liquid assets/net technical reserves (excluding unit linked) n.a. n.a. n.a. 102 107

Reserve Adequacy (%)

Loss reserves/equity (non-life) 1.6 3.3 4.5 2.9 2.8

One year reserve development to prior year equity n.a. -0.3 -0.8 -0.5 -0.5

One year reserve development to prior year loss reserves -1.1 -2.5 -3.5 -2.9 -3.2


Total assets 336 145 165 162 169

Shareholders' equity 26 14 20 20 23

Gross written premiums n.a. 9.5 9.3 9.2 9.4

Net income 1.1 0.3 0.6 1.6 1.2



VIVAT N.V.





Financial leverage 48 36 38 21 21



Fixed-charge coverage ratio 0 -5 -6 3 4


Net income return on equity -4 -23 -27 4 4

Pre-tax operating return on assets 0.0 -1.1 -1.3 0.5 0.6

Combined ratio 97 108 111 109 105




Non-investment grade bonds/equity - Fitch estimate 31 16 10 8 12


Liquid assets/net technical reserves (excluding unit linked) 130 131 97 99 91

Reserve Adequacy (%)

Loss reserves/equity (non-life) 1.6 3.3 4.5 2.9 2.8

One year reserve development to prior year equity -1.3 -0.2 -0.7 -0.3 -0.2

One year reserve development to prior year loss reserves -5.2 -0.7 -1.8 -0.5 -0.5


Total assets 56 54 55 60 59

Shareholders' equity 2.9 2.6 2.0 3.4 3.7

Gross written premiums 3.5 3.2 3.1 2.6 2.5

Net income (0.1) (0.6) (0.6) 0.1 0.2



Analysts

Willem Loots+44 20 3530 [email protected]

Andras Sasdi+44 20 3535 [email protected]

Aegon (August 2017)NN Group (October 2017)VIVAT NV (January 2018)

Navigators

Aegon Americas (And North American Subsidiaries of Aegon N.V.) (October 2017) NN Group N.V. (Feb 2018) VIVAT N.V. (Feb 2018)

Related Research

Insurance Rating Criteria (November 2017)

Related Criteria

mailto:[email protected]

mailto:[email protected]

https://www.fitchratings.com/site/re/10000637










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