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## Distribution 

Aegon Spain distributes life insurance, general insurance, health and pension products. It uses two main distribution channels, Bancassurance, comprising 66% of the total, and its own network of brokers and agents. Aegon Spain’s sales network is focused on individual life and health insurance in urban and rural areas. 

## Overview of business lines 

Aegon Spain primarily serves retail customers, and offers life insurance, general insurance, accident and health, and pension products. The recent partnership with Banco Santander enabled Aegon Spain to begin offering general insurance. The gross premium written contribution in 2013 for each of Aegon Spain’s business lines was 69% for life insurance, 20% for accident and health insurance, and 11% for general insurance. 

## Competition 

The Spanish insurance market is highly competitive. 

For Aegon Spain’s traditional life, unit-linked variable life and pension products, the major competitors are retail bank-owned insurance companies. The life market is dominated by Grupo Caixa, with a 21% market share, and Santander, with a 12% share, followed by Mapfre, with 10%. Aegon Spain’s market share is 1.09%. 

For Aegon Spain’s health and general insurance products, the main competitors are foreign and local companies. Mapfre leads the non-life insurance market with a 19% market share, followed by Axa and Generalli, both with an 8% share. The non-life market is more fragmented than the life market. Aegon Spain’s multi- risk business line is responsible for non-life and has a market share of 0.88%. 

## Regulation and supervision 

Direccion General de Seguros (DGS) is the regulatory authority for the Spanish insurance industry. Insurance companies are required to report to DGS on a quarterly basis. Spanish regulations incorporate all requirements of the relevant European Union directives. The local regulations for solvency margin are based, respectively, on percentages of the reserves 

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for the life insurance business and of the premiums and sum at risk for the health and general insurance business. The local regulations for investments require the appropriate matching of investments and technical provisions, and also establish different levels of restrictions on the type of assets in which the insurance company may invest. 

## Asset liability management 

Aegon Spain’s approach to asset liability management is, respectively, to make projections of asset and liability cash flows, calculate their present values using a market yield curve, and compute the main parameters affecting these cash flows, such as duration and convexity. The goal is to lock in the spread by matching the duration of assets to the duration of liabilities. 

## Reinsurance ceded 

Aegon Spain has a ‘one Aegon’ reinsurance management policy, meaning that both its joint ventures and own business are treated as a whole, with the same economic conditions and reinsurers panel, but with individual profit shares without losses carried forward by each entity belonging to Aegon Spain. The main contract for mortality and morbidity provides proportional reinsurance protection for both its individual risk and group risk policies. With this approach, Aegon Spain seeks to optimize the cost of reinsurance coverage, sharing the profits and not the losses, while achieving prudential diversification of its insurance risk by limiting the maximum possible losses on risks that exceed retention levels. Maximum retention levels vary by product and by nature of the risk being reinsured; generally, however, the retention limit is between EUR 30,000 and EUR 60,000 per life insured. Aegon Spain remains contingently liable for the amount ceded should the reinsurance company fail to meet its obligations. Aegon Spain generally uses only reinsurance companies that have a Standard & Poor credit rating of “A” or higher. Aegon’s Group Reinsurance Use Committee is involved in the pre-approval of reinsurers, and the selection of reinsurers where a reinsurer has a rating of below “A”. In addition, to reduce its exposure to defaults, Aegon Spain has several reinsurers on its panel and regularly monitors the creditworthiness of each. Further protection is taken out through funds that are withheld for investment by the ceding company where appropriate. 

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