137 ANNUAL REPORT 2010 The fair values of AEGON USA’s ABS- non housing instruments  were determined as follows: The unrealized loss in the small business loan ABS portfolio is  a function of decreased liquidity and increased spreads as new  issuance within this sector has come to a halt. Additionally,  delinquencies and losses in the collateral pools within AEGON’s  small business loan securitizations have increased since 2007,  as a result of the overall economic slowdown which has resulted  in decreased sales and profits at small businesses nationwide.  Banks and finance companies have also scaled back their  lending to small businesses.  investment grade, the individual bonds have been modeled to  determine if cash flow models indicate a credit event will impact  future cash flows and resulting impairments have been taken.  AEGON holds EUR 11,244 million (2009: EUR 11,871 million) of  bonds issued by banks. The net unrealized loss on these bonds  amount to EUR 386 million (2009: EUR 799 million). The capital  bases of banks and other financial firms have been strained as  they are forced to retain assets on their balance sheets that  had previously been securitized and to write down certain  mortgage-related and corporate credit-related assets. Financial  companies within AEGON’s financial sector are generally high  in credit quality, and as a whole represent a large portion of  the corporate debt market. The financial sector has seen a large  impact to valuations from the broader market volatility given  it is a focal point of the current concerns. Governments across  the world have attempted to stabilize market liquidity and  investor confidence via extraordinary measures, including  providing substantial support to banks and insurance companies.  AEGON’s small business loan ABS portfolio is concentrated in  senior note classes (99% of par value). In addition to credit  enhancement provided by the excess spread, reserve account,  and over-collateralization, AEGON’s positions are also  supported by subordinated note classes. AEGON’s small  business loan ABS portfolio is also primarily secured by  commercial real estate (99% of par value), with the original  LTV of the underlying loans typically ranging between 60-70%.  ABS-CDOs are primarily secured by pools of corporate bonds  and leveraged bank loans. The unrealized loss is a function of  decreased liquidity and increased credit spreads in the market  for structured finance and monoline guaranteed securities.  Where there have been rating downgrades to below investment  grade, the individual bonds have been modeled using the  current collateral pool and capital structure.  ABS-other includes debt issued by securitization trusts  collateralized by various other assets including student loans,  timeshare loans, franchise loans and other asset categories.  The unrealized losses are a function of decreased liquidity  and increased credit spreads in the market. Over 98% of  the securities in an unrealized loss in this section are rated  investment grade. Where ratings have declined to below  The value of AEGON’s investments in deeply subordinated  securities in the financial services sector may be significantly  impacted if the issuers of such securities exercise the option to  defer payment of optional coupons or dividends, are forced to  accept government support or intervention, or grant majority  equity stakes to their respective governments. These securities  are broadly referred to as capital securities which can be  categorized as Trust Preferred, Hybrid, Tier 1 or Upper Tier 2. The ‘Trust Preferred’ category is comprised of capital securities  issued by U.S.-based financial services entities where the capital  securities typically have an original maturity of 30 years  (callable after 10 years) and generally have common structural  features, including a cumulative coupon in the event of deferral.  EXPOSURE TO CAPITAL SECURITIES IN THE BANKING  SECTOR Other ABS ABS - CDOs Small business loans FINANCIAL Financial – Banking SHARPENING OUR FOCUS 2010 Level II Level III Total ABSs – non housing 3,324 1,391 4,715 2009 Level II Level III Total ABSs – non housing 3,948 1,268 5,216