Notes to the consolidated financial statements of Aegon N.V.  Note 3 172 Fair value information about assets and liabilities not measured at fair value Impairment of financial assets Debt securities The following table presents the carrying values and estimated fair values of assets and liabilities, excluding assets and liabilities which  are carried at fair value on a recurring basis. Certain financial instruments that are not carried at fair value are carried at amounts that approximate fair value, due to their short- term nature and generally negligible credit risk. These instruments include cash and cash equivalents, short-term receivables and  accrued interest receivable, short-term liabilities, and accrued liabilities. These instruments are not included in the table above. There are a number of significant risks and uncertainties inherent in the process of monitoring investments and determining if  impairment exists. These risks and uncertainties include the risk that the Group’s assessment of an issuer’s ability to meet all of its  contractual obligations will change based on changes in the credit characteristics of that issuer and the risk that the economic outlook  will be worse than expected or have more of an impact on the issuer than anticipated. Any of these situations could result in a charge  against the income statement to the extent of the impairment charge recorded.  Aegon regularly monitors industry sectors and individual debt securities for evidence of impairment. This evidence may include one  or more of the following: 1) deteriorating market to book ratio, 2) increasing industry risk factors, 3) deteriorating financial condition  of the issuer, 4) covenant violations, 5) high probability of bankruptcy of the issuer or 6) recognized credit rating agency downgrades.  Additionally, for ABS, cash flow trends and underlying levels of collateral are monitored.  Residential mortgage-backed securities (RMBS) are monitored and reviewed on a monthly basis. Detailed cash flow models using the  current collateral pool and capital structure on the portfolio are performed quarterly. Model output is generated under a base and  several stress-case scenarios. Aegon’s RMBS asset specialists utilize industry modeling software to perform a loan-by-loan, bottom-up  approach to modeling. Key assumptions used in the models are projected defaults, loss severities, and prepayments. Each of these key  assumptions varies greatly based on the significantly diverse characteristics of the current collateral pool for each security. Loan-to- value, loan size, and borrower credit history are some of the key characteristics used to determine the level of assumption that is utilized.  Defaults were estimated by identifying the loans that are in various delinquency buckets and defaulting a certain percentage of them  over the near-term and long-term. Assumed defaults on delinquent loans are dependent on the specific security’s collateral attributes  and historical performance. Loss severity assumptions were determined by obtaining historical rates from broader market data and by  adjusting those rates for vintage, specific pool performance, collateral type, mortgage insurance and estimated loan modifications.  Prepayments were estimated by examining historical averages of prepayment activity on the underlying collateral. Once the entire pool  is modeled, the results are analyzed by internal asset specialists to determine whether or not a particular tranche or holding is at risk  for not collecting all contractual cash flows taking into account the seniority and other terms of the tranches held. Aegon will impair its  particular tranche to fair value where it would not be able to receive all contractual cash flows. Annual Report 2013 Carrying  amount  December 31,  2013 Estimated fair value hierarchy Total  estimated  fair value  December 31,  2013 Level I Level II Level III Assets Mortgage loans - held at amortized cost 29,245 - 2 32,867 32,869 Private loans - held at amortized cost 1,783 - 96 1,792 1,888 Other loans - held at amortized cost 2,381 - 2,034 348 2,381 Liabilities Trust pass-through securities - held at amortized cost 135 - 122 - 122 Subordinated borrowings - held at amortized cost 44 - 73 - 73 Borrowings – held at amortized cost 11,003 2,067 1,527 7,697 11,291 Investment contracts - held at amortized cost 14,079 - 4,299 10,088 14,387