DISTRIBUTION CHANNELS TAIWAN CHINA PRODUCTS AND DISTRIBUTION PRODUCTS AND DISTRIBUTION GENERAL HISTORY GENERAL HISTORY AEGON Life Insurance (Taiwan) Inc. is a life insurance company that was formed in 2001 to conduct life insurance business in the Republic of China. AEGON Taiwan’s operations began in 1994 as a branch office of Life Investors Insurance Company of America, an AEGON USA life insurance company. In 1998, AEGON Taiwan took over a block of business, which comprised of 55,000 policies from American Family Life Assurance Company Taiwan. In 1999, the Transamerica Taiwan branch was added as a result of AEGON’s acquisition of Transamerica Corporation and its integration with the existing operation was completed in 2001. At the end of 2001, AEGON Taiwan acquired another block of business, which comprised of 57,000 policies of National Mutual Life Association of Australia, AXA’s Taiwan life operation. After a 12-month preparatory period, AEGON’s business took a huge step forward in mainland China when AEGON- CNOOC Life Insurance Company China, a 50/50 joint venture with China National Offshore Oil Corporation, started its operations in May 2003. The product portfolio consists primarily of traditional life products, such as increasing whole life, female whole life, endowment life, term life, one-year term accident and health rider, and waiver of premium rider products. Variable universal life, introduced in April 2002, is one of the major products in the agency channel. Female whole life is a unique product that offers life protection, female specific illness benefits and a survival benefit. In 2003, new product initiatives included an updated version of the increasing whole life plan, targeted to the needs for both protection and savings, VIP Plus, a package of traditional whole life and variable universal life for retirement needs, and a single premium fixed-term variable product linked to structured notes, which competes with the term deposits of banks. The market potential of China has attracted many major insurers to China. Most major international insurance companies are focusing on selling their products through agency and bancassurance channels. AEGON-CNOOC has leveraged AEGON’s experience in other distribution channels as well. Although the main distribution channel in the local market is the agency channel, AEGON-CNOOC adopted a multi-channel strategy, which includes the agency and bancassurance channels, and direct marketing and telemarketing. The SARS outbreak in China in early 2003 did not delay  the opening of business. AEGON-CNOOC launched 13 basic products and 8 riders to the markets, including whole  life, endowment, dread disease, accidental death and dismemberment, and surgical indemnity. These are all traditional life products sold through various channels. AEGON-CNOOC also launched a SARS product, SARS Guard,  to meet customer demand. In the group business sector, AEGON Taiwan provides protection through yearly renewable life, accidental or medical business to employees of its corporate clients. Distribution through the brokerage and bancassurance channels has resulted in substantial growth in new business volumes. In 2003, brokerage and banks together accounted for approximately 90% of AEGON Taiwan’s total new business premiums. In the bancassurance channel, most of the business consists of increasing whole life business. A single premium structured notes product was launched in the 4th quarter of 2003. In the brokerage channel, most of the business consists of increasing whole life business and is written by independent agents.  The agency channel consists of a network of over 500 full-time professional career agents located in 26 offices throughout Taiwan. Most of the business in the agency channel consists of traditional life business, while the variable universal life business accounts for the remainder. AEGON ASIA AEGON GROUP ANNUAL REPORT 2003 59