AEGON AROUND THE WORLD MUTUAL FUNDS ADVICE REINSURANCE CEDED There are approximately 28,000 active registered independent financial advisors in the United Kingdom, many of whom are grouped into networks of advisors, who act as large national distributors. The thirty largest of the 5,300 IFA firms operating in AEGON UK’s key markets employ 80% of the registered independent financial advisors. AEGON UK has strong relationships with independent financial advisors across the market, but is particularly involved with the networks and with large local firms. protection and group private medical coverage. The Employee Protection Menu adds an additional layer of flexibility where the individual employee can choose benefits within a pre- defined menu at the employer’s cost. AEGON Asset Management UK (AAM UK) is a major provider of fund management services both within the AEGON UK group and to institutional customers and individuals. As at December 31, 2003, AAM UK managed approximately GBP 34 billion of funds, providing both mutual and segregated funds for clients.  To support this activity, there are approximately 330 broker-consultants based in the United Kingdom, operating out of over 17 local branch offices. Relationship management is a core element of achieving success in the intermediate channel. Scottish Equitable plc is able to support local independent investment advisors through this branch network in areas such as business development and training. AAM UK is a participant in the corporate bond market,  with more than GBP 14 billion invested. A dedicated sales  force has been established to exploit this capability in the institutional market and AAM UK continued to win new mandates during 2003. AEGON UK reinsures mortality and morbidity risk where it believes it is prudent and economically sound to do so. On individual products, AEGON UK seeks to obtain insurance coverage for 90% of the risk for the life business. For group business, AEGON UK seeks to obtain insurance coverage for 50% of the life business. AEGON UK has a minimum credit rating requirement of AA by Standard & Poor’s for reinsurers to which risk is ceded. Any decision to use a reinsurer with a lower credit rating requires the agreement of AEGON’s reinsurance committee. Investment in distribution businesses by insurance companies has recently become more attractive due to new regulations, which come into force in the United Kingdom during 2004. Following distribution business acquisitions during 2002 and 2003, AEGON now has a significant position in the United Kingdom independent financial advisor market, having taken majority interests in six distribution companies and minority stakes in three others. These firms deliver advice relating to financial needs to a range of customers (both individuals and corporates) using a range of delivery methods (primarily face to face, but also using media and worksite marketing). AEGON UK also uses reinsurance to offer pension contract holders access to a number of external fund management organizations. Under these contracts, which relate to unit- linked business, the unit liability is reinsured to the third party organization. The credit risk relating to the investments is borne by the pension contractholders while AEGON UK retains ultimate credit risk relating to the external fund managers. AEGON UK’s principal means of distribution has been through the independent financial advisor (IFA) channel in the United Kingdom market. These advisors provide their customers access to all available products and must demonstrate that the best advice is given to their client. DISTRIBUTION CHANNELS AEGON GROUP ANNUAL REPORT 2003 56