123 ANNUAL REPORT 2010 SENSITIVITY ANALYSIS OF NET INCOME AND  SHAREHOLDERS’ EQUITY TO TRANSLATION RISK Movement of markets  1 Estimated approximate  effects on net income Estimated approximate  effects on shareholders’  equity 2010 Increase by 15% of non-euro currencies relative to the euro 166 2,620 Decrease by 15% of non-euro currencies relative to the euro (166) (2,620) 2009 Increase by 15% of non-euro currencies relative to the euro 78 2,009 Decrease by 15% of non-euro currencies relative to the euro (78) (2,009) 1  The effect of currency exchange movements is reflected as a one-time shift up or down in the value of the non-euro currencies relative to the euro on  December 31. AEGON bears interest rate risk with many of its products. In  cases where cash flows are highly predictable, investing in assets  that closely match the cashflow profile of the liabilities can offset  this risk. For some AEGON country units, local capital markets  are not well developed, which prevents the complete matching  of assets and liabilities for those businesses. For some products,  cash flows are less predictable as a result of policyholder  actions that can be affected by the level of interest rates. rate guarantees and minimum guaranteed crediting rates  provided on policies. Also, investment earnings may be lower  because the interest earnings on new fixed-income investments  are likely to have declined with the market interest rates.  Mortgages and redeemable bonds in the investment portfolio  are more likely to be repaid as borrowers seek to borrow at  lower interest rates and AEGON may be required to reinvest the  proceeds in securities bearing lower interest rates. Accordingly,  net income declines as a result of a decrease in the spread  between returns on the investment portfolio and the interest  rates either credited to policyholders or assumed in reserves. In periods of rapidly increasing interest rates, policy loans,  surrenders and withdrawals may and usually do increase.  Premiums in flexible premium policies may decrease as  policyholders seek investments with higher perceived returns.  This activity may result in cash payments by AEGON requiring  the sale of invested assets at a time when the prices of those  assets are adversely affected by the increase in market interest  rates; this may result in realized investment losses. These cash  payments to policyholders result in a decrease in total invested  assets and a decrease in net income. Among other things, early  withdrawals may also require accelerated amortization of DPAC,  which in turn reduces net income. AEGON manages interest rate risk closely taking into account  all of the complexity regarding policyholder behavior and  management action. AEGON employs sophisticated interest  rate measurement techniques and actively uses derivatives  and other risk mitigation tools to closely manage its interest  rate risk exposure. AEGON operates an Interest Rate Risk policy  that limits the amount of interest rate risk to which the Group is  exposed. All derivative use is governed by AEGON’s Derivative  Use Policy. During periods of sustained low interest rates, AEGON may not  be able to preserve margins as a result of minimum interest  The table that follows shows interest rates at the end of each  of the last five years.  2010 2009 2008 2007 2006 3-month US LIBOR 0.30% 0.25% 1.42% 4.70% 5.36% 3-month EURIBOR 1.01% 0.70% 2.89% 4.69% 3.73% 10-year US Treasury 3.29% 3.83% 2.22% 4.03% 4.70% 10-year Dutch government 3.15% 3.56% 3.54% 4.32% 3.97% SHARPENING OUR FOCUS INTEREST RATE RISK