0 300 600 900 1,200 Single Recurring annualized 01 02 03 30,000 25,000 20,000 15,000 10,000 5,000 0 01 02 03 Fixed annuities GICs & funding agreements Variable annuities Synthetic GICs  Mutual funds, collective trust & other managed assets On balance sheet Off balance sheet STANDARDIZED NEW PREMIUM PRODUCTION  in USD million  TOTAL DEPOSITS/ OFF BALANCE SHEET PRODUCTION  in USD million Accident and health premiums were only slightly higher than in 2002 as it was decided in 2003 to exit certain supplemental insurance products. Telemarketing sales declined as a result of new telemarketing regulations, including the national ‘Do not call’ list. Offsetting this decline were higher sales through sponsored programs along with rate increases on certain health products. The direct business model continues to evolve to reach targeted customers. Investment income of USD 6,354 million was slightly higher than last year. Portfolio growth due to general account sales and low lapses was offset by lower indirect investment income, declining interest rates and lost income on defaulted assets. The indirect investment income from shares and real estate investments decreased by USD 135 million in 2003 compared to 2002. New money flows in the portfolio, combined with reinvestments from bond maturities at lower interest rates, drove the fixed rate asset yield lower. Floating rate asset yields have also declined, but since these are matched with floating rate liabilities, there is no effect on income. Interest rate related gains on bonds sold of USD 1,141 million for the year were deferred and are not reflected in 2003 revenues. Fees and commission revenues of USD 966 million increased 16% compared to last year. A non-recurring gain of USD 90 million was realized on real estate investments through the combination of an insurance settlement (USD 54 million) and the release of a provision (USD 36 million). The remaining increase in fees and commission revenues is primarily attributable to increased investment management fees earned as a result of higher asset balances. Commissions and expenses of USD 3,897 million increased 10% compared to 2002. Commissions declined in 2003 compared to 2002, as a result of lower annuity production and commission restructuring efforts. However, net DPAC amortization increased, due to business growth and lower capitalization. Operating expenses of USD 1,764 million, which exclude DPAC amortization and total commissions, increased USD 90 million, due to less employee pension plan income, USD 27 million, due to a coinsurance option that expired unexercised, USD 35 million, reflecting the accruals for a deferred compensation plan  and USD 24 million, reflecting expenses related to a block of  in force business acquired from Mutual of New York on December 31, 2002. Off balance sheet products include managed assets such as mutual funds, collective investment trusts and synthetic GICs. Off balance sheet production was USD 21.5 billion, a 14% increase compared to 2002. Mutual fund sales of USD 8.3 billion increased 25%, reflecting the expanded marketing relationships with wirehouse networks. Synthetic GIC sales of USD 13.2 billion increased 9% compared to last year. AEGON USA does not manage the assets underlying a synthetic GIC and is not subject to the investment risk, but receives a fee for providing liquidity to benefit plan sponsors in the event that qualified plan benefit requests exceed plan cash flows. Variable annuity deposits of USD 6.4 billion decreased  36% compared to 2002. The decrease is largely due to the discontinuance of the guaranteed minimum income benefit (GMIB) feature. A new product with enhanced death and  living benefit guarantees, which utilizes an active portfolio reallocation strategy, was introduced in late 2003 in an  effort to replace sales lost due to the discontinuance  of the GMIB feature. Deposits into fixed and variable annuity contracts and institutional spread-based products (GICs and funding agreements) were recorded directly to the balance sheet as a deposit liability and not reported in revenues. Fixed annuity deposits of USD 5.2 billion decreased 27% compared to 2002. Fixed annuity sales declined due to lower policyholder crediting rates and the reduction of commission rates. Withdrawals from existing contracts continued to be at their lowest levels in years, reflecting the lower new money interest rates available on new policies. In response to the low interest rate environment, AEGON USA introduced during 2003 new products with a lower guaranteed annual interest rate. GICs and funding agreement production was down 4% compared to 2002, primarily due to disciplined pricing to achieve returns. Life production (standardized new premium) increased 9% to USD 1,076 million, reflecting strong growth in general account sales, partially offset by the negative effect of discontinuing new sales of structured settlement products in July 2003. The Agency Group achieved strong sales of traditional, universal and term life products, through the combined efforts of existing distribution channels and new relationships. PRODUCTION COMMISSIONS AND EXPENSES AEGON GROUP ANNUAL REPORT 2003 25