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## NOTE 9 DERIVATIVES 

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1 Refer to note 47 for a summary of all financial assets and financial liabilities at fair value through profit or loss. 

Of these derivatives EUR 141 million net asset is current 

(2009: EUR 77 million net liability). 

See note 3 for details on measurement of derivatives. 

## USE OF DERIVATIVES 

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AEGON utilizes derivative instruments as a part of its asset liability risk management practices. The derivatives held for risk management purposes are classified as economic hedges to the extent that they do not qualify for hedge accounting, or that AEGON has elected not to apply hedge accounting. The economic hedges of certain exposures relate to an existing asset or liability or the future reinvestment risk. In all cases, these are in accordance with internal risk guidelines and are closely monitored for continuing compliance. 

Embedded derivatives that are not closely related to the host contracts have been bifurcated and recorded at fair value in the balance sheet. These bifurcated embedded derivatives are embedded in various institutional products, modified coinsurance and unit linked insurance contracts in the form of guarantees for minimum benefits. As a result of movements in financial markets and of anticipated maturities of unit linked insurance contracts in 2010 the market value of the guarantees embedded in the written insurance contracts decreased 

significantly. Please refer to note 45 for more disclosures about these guarantees. 

Certain derivatives are used to add risk by selling protection in the form of single name credit default swaps and tranches of synthetic collateralized debt and commodity obligations. Another strategy used is to synthetically replicate corporate credit exposures with credit derivatives. This involves the purchase of high quality low risk assets and the sale of credit derivatives. The program is designed to purchase asset positions that are already subject to review by management, but may not be available under the same terms and conditions in the cash bond market. AEGON holds financial derivatives for trading purposes. 

Furthermore, synthetic Guaranteed Investment Contracts (GICs), liquidity agreements and principal protection agreements have been sold by AEGON to earn a fee. 

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