135 ANNUAL REPORT 2010 Negative Amortization (option ARMs) Mortgage Exposure Commercial mortgage backed securities SHARPENING OUR FOCUS The total gross unrealized loss on CMBS of AEGON USA is  EUR 305 million, and the total net unrealized loss on CMBS  of AEGON USA is EUR 56 million. Over the past 24 months,  the commercial real estate market experienced a deterioration  in property level fundamentals, which has led to an increase  in CMBS loan-level delinquencies. The introduction of the 20%  and 30% credit enhanced classes within the 2005-2008 vintage  deals provide some offset to these negative fundamentals.  AEGON USA holds EUR 6,700 million (2009: EUR 5,482 million)  of CMBS. The unrealized loss on CMBS is EUR 56 million  (2009: EUR 878 million). The underlying mortgages have  varying risk characteristics and are pooled together and sold  in different rated tranches. The Group’s CMBS include conduit,  large loan, single borrower, commercial real estate collateral  debt obligations (CRE CDOs), government agency, and franchise  loan receivable trusts. As part of AEGON USA’s RMBS Exposure, AEGON USA  holds EUR 821 million of Negative Amortization Floaters  (2009: EUR 722 million), net unrealized losses on this  portfolio amount to EUR 373 million at December 31, 2010  (2009: EUR 640 million). Negative Amortization Floaters  (also known as option ARMs) are loans whereby the payment  made by the borrower is less than the accrued interest due and  the difference is added to the loan balance. When the accrued  balance of the loan reaches the negative amortization limit  (typically 110% to 125% of the original loan amount), the loan  recalibrates to a fully amortizing level and a new minimum  payment amount is determined. The homeowner’s new  minimum payment amount can be significantly higher than  the original minimum payment amount. The timing of when  these loans reach their negative amortization cap will vary,  and is a function of the accrual rate on each loan, the minimum  payment rate on each loan and the negative amortization  limit itself. Typically, these loans are estimated to reach their  negative amortization limit between three and five years  from the date of origination.  AEGON’s exposure to Negative Amortization Floaters  is primarily to super-senior securities. The following table  provides the market values of the Negative Amortization  (Option ARMs) exposure by rating and by vintage. 2010 2009 Rating Amortized  cost % Amortized  cost % AAA  171 14.3% 283 20.8% AA  49 4.1% 44 3.2% A  43 3.6% 62 4.6% BBB 66 5.5% 91 6.7% <BBB 865 72.5% 882 64.7% AT DECEMBER 31 1,194 100.0% 1,362 100.0% 2010 2009 Vintage Amortized  cost % Amortized  cost % Prior 2005 33 2.8% 37 2.7% 2005 381 31.9% 427 31.4% 2006 466 39.0% 538 39.5% 2007 289 24.2% 319 23.4% 2008 25 2.1% 41 3.0% AT DECEMBER 31 1,194 100.0% 1,362 100.0%