Business overview  Results of operations – Americas 34 Fixed annuities Sales and distribution Annual Report 2013 Aegon USA underwrites fixed and variable annuities through  its various life insurance companies. Transamerica Capital Inc.  (TCI), the underwriting and wholesaling broker-dealer, distributes  variable annuities and mutual funds through major wirehouse  firms, regional broker-dealers, and a large bank network. TCI  serves these distribution channels through affiliated and external  wholesalers. From late 2009, Aegon USA reduced its sales of fixed annuities  in response to lower market interest rates and lower investment  returns. Similar market conditions continue to restrict sales of  fixed annuities and, as a result, Aegon USA has de-emphasized  their sale. Income from fixed annuities is generated by spread on  investment earnings over the credited rate, policy fees if  Fixed annuities include deferred annuities, fixed index annuities,  and immediate annuities. These product lines have been de- emphasized due to the low interest rate environment. A fixed  annuity exposes Aegon to interest rate risk and behavior and  mortality risk. The insurer’s interest rate risk may be mitigated  through product design, close asset liability management and  hedging, although the effects of policyholder behavior cannot  be fully mitigated. Immediate annuities have lower behavior  risks than deferred annuities, but contain interest rate risk, and  longevity risk if annuity payments are life contingent. Minimum interest rate guarantees exist in all generations of fixed  annuity products, as they are required by state non-forfeiture  regulations. The average minimum interest rate guarantees of  the in-force fixed annuity block is approximately 2.65%. The  average current credited rate of the in-force fixed annuity block  is approximately 3.25%. Equity indexed annuities offer additional  returns that are index-linked to published stock market indices  and proprietary indices, with a minimum cash value equal to  a percentage of the premium increased at a minimum fixed or  variable rate. Equity indexed annuities make up a small fraction  of the in-force business. Certain fixed annuity products also offer  a bailout provision. Under the bailout provision, if the crediting  rate falls below the bailout rate, policyholders may surrender  their contracts without incurring any surrender charges. Aegon USA addresses equity market, interest rate and market  volatility risks through product design, including robust analysis  of the underlying funds allowed within a product, and by using  hedging strategies. Variable annuity products also contain  policyholder behavior risk, mortality risk, and in the case of  income riders, longevity risks, which are handled similarly to  those in fixed annuities. These guaranteed benefits subject the company to interest rate  risk and market risk. Poor market performance may cause the  guaranteed benefits to exceed the policyholder account value. The policyholder may surrender the annuity prior to maturity and  receive the cash value less surrender charges. Fixed annuities  have a specified crediting rate that may be reset periodically at  the company’s discretion after an initial guarantee period. Fixed  annuity contracts in the United States also offer guaranteed  minimum surrender values and payout options. Fixed annuities  have a maturity date at which benefits must be used or the  contract surrendered. Commonly this date corresponds to the  annuitant’s age, up to a maximum of 95 years. Upon maturity  of the annuity, the policyholder’s payout options include a lump  sum payment, income for life, or payment for a specified period  of time.  Certain variable annuity contracts also provide guaranteed  minimum death benefits and guaranteed minimum income  benefits. Under a guaranteed minimum death benefit, upon  the death of the insured the beneficiaries receive the greater  of the account balance or the guaranteed amount upon the  death of the insured. The guaranteed minimum income benefit  feature, which has not been offered on new business since 2003,  provides for minimum payments if the policyholder elects to  convert to an immediate payout annuity. The guaranteed amount  is calculated using the total deposits made by the policyholder,  less any withdrawals, and sometimes includes a roll-up or  step-up feature that increases the value of the guarantee with  interest or with increases in the account value. An immediate annuity is purchased with a single lump sum  premium payment, and the benefit payments generally begin  within a year of purchase. The benefit payment period may  be for a fixed period or as long as the beneficiary is alive, or  a combination of the two. Some immediate annuities and payout  options under deferred annuities may also offer the owner or  beneficiaries the option to surrender the annuity to have access  to the account value if needed for unexpected events. applicable, and surrender charges. Fees and surrender charges  are not a large source of revenue on fixed annuities.  charges as well as various types of rider fees for providing  guarantees and benefits. Generally, surrender charges are  not a large form of revenue as policyholder surrender rates  are typically lower when a surrender charge penalty remains.  Collected surrender charges are typically used to recoup  unamortized deferred acquisition costs.  A guaranteed minimum withdrawal benefit is offered on  some variable annuity products Aegon USA has either issued  or assumed from a ceding company. This benefit guarantees  a policyholder may withdraw a certain percentage of the account  value, starting at a certain age or duration, for either a fixed  period or the life of the policyholder.