Other loans - carried at amortized cost 2,164 - - - - - 1,886 1,886 1,195 1,473
Other financial assets - carried at fair value 2,586 - - - - - - - - 2,586
Private loans - carried at amortized cost 3,166 67 - - - - - 67 - 3,099
Other loans - carried at amortized cost 2,441 - - - - - 2,197 2,197 1,326 1,570
Several bonds in Aegon’s USA's portfolio are guaranteed by monoline insurers. This is shown in the table above in the column 'Letters of credit / guarantees'. Further information on the monoline insurers is provided below under 'Monoline insurers'.
At December 31, 2017 there was no violations of the Credit Name Limit Policy at Group level. At December 31, 2016 there were two violations of the Credit Name Limit Policy at Group level. These violations have been resolved in 2017 by reducing the exposure of one and by approving an exemption for the other.
At December 31, 2017 Aegon’s largest corporate credit exposures are to Wilton Re Holdings Ltd, American United Mutual Insurance,
Aegon group level long-term counterparty exposure limits are as follows: Group limits per credit rating Amounts in EUR million 2017 2016
Past due and / or impaired assets - 20 - - 416 1,207 1,624 1 Includes investments of Holding and other activities.
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp. bonds, Bank loans 1,066 2,437 - - - 2,437 29 - 3,532 7 1 Includes investments of Holding and other activities.
Credit risk concentrations – Credit rating 2016 2) Government bonds Corporate bonds RMBSs CMBSs
(2016: EUR 29,479 million). The LTV amounted to approximately 76% (2016: 83%). A significant part of the portfolio 51% (2016: 57%) is government guaranteed. Of the portfolio, 0.2% (2016: 0.4%) is in delinquency (defined as 60 days in arrears). Impairments in 2017 amounted to EUR 8 million (2016: EUR 5 million release). During the last ten years defaults of the portfolio have been 5 basis points on average.
Any existing commitments such as future purchases of interests in investment funds are disclosed in note 48 Commitments and contingencies.
Except for commitments as noted in note 48 Commitments and contingencies, Aegon did not provide, nor is required to provide financial or other support to unconsolidated structured entities. Nor does Aegon have intentions to provide financial or other support to unconsolidated structured entities in which Aegon has an interest or previously had an interest.
Monoline insurers EUR 264 million (2016: EUR 413 million) of the bonds in Aegon USA's and Asia's portfolios are insured by Monoline insurers.
portfolios, are as follows as of December 31, 2017, and December 31, 2016
Fair value of instruments with unrealized losses Debt securities, money market instruments and other
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp. bonds, Bank loans 87 (2) 958 (11)
EUR 464 million (December 31, 2016: EUR 1,217 million) of gross unrealized losses in the AFS debt securities, money markets and other portfolio of Aegon Americas, Aegon the Netherlands and Aegon UK. Two issuers each represent more than 4% of the total unrealized loss position. The unrealized loss relates to securities issued by the government of the United States of America and
Italy reformed its electoral law and announced to hold elections in March 2018. The UK triggered Article 50 in March which set the
Brexit negotiation process in motion. Prime minister May called early elections soon afterward, in which she wasn’t able to achieve her desired majority. At the end of the year, the EU and the UK managed to agree on a deal covering citizen’s rights, the Irish border and the financial settlement. This allowed the negotiations to proceed to the next stage, which will mainly cover a transition period and a trade agreement.
The total gross unrealized loss on available-for-sale RMBS of Aegon Americas, Aegon the Netherlands and Aegon UK amounted to EUR 30 million (December 31, 2016: 83 million), of which EUR 29 million (December 31, 2016: EUR 78 million) relates to positions of Aegon USA, and the total net unrealized gain on available-for-sale RMBS was EUR 284 million (December 31, 2016: EUR 210 million), including a EUR 268 million (December 31, 2016: EUR 199 million) net unrealized gain relating to positions of Aegon
USA. The housing market in the United States continues to be robust, evidenced by rising home prices and strong sales volume although the pace of improvement is slowing compared to initial post-financial crisis years. The housing market is still benefiting from improving employment, historically low inventory, rising household formation rates, income growth, and modest credit easing. This is manifesting itself in lower borrower delinquencies, increased recoveries upon liquidation, and shorter timelines to sell properties.
The fair values of Aegon USA's available-for-sale (AFS) RMBS instruments were determined as follows: Level II Level III Total 2017 Level II Level III Total 2016
Commercial mortgage-backed securities As of December, 31, 2017, Aegon Americas, Aegon the Netherlands and Aegon UK hold EUR 3,549 million (December 31, 2016: EUR 5,579 million) of AFS commercial mortgage-backed securities (CMBS), of which EUR 3,375 million (December 31, 2016: EUR 5,340 million) is held by Aegon USA, EUR 146 million (December 31, 2016: EUR 195 million) by Aegon UK and EUR 28 million
(December 31, 2016: EUR 44 million) by Aegon the Netherlands. CMBS are securitizations of underlying pools of mortgages on commercial real estate. The underlying mortgages have varying risk characteristics and are pooled together and sold in different rated tranches. The company's CMBS include conduit, large loan, single borrower, commercial real estate collateralized debt obligations
The total gross unrealized loss on available-for-sale CMBS of Aegon Americas amounted to EUR 22 million as of December 31, 2017 (December 31, 2016: EUR 67 million). The total net unrealized gain on the available-for-sale CMBS as of December 31, 2017, is EUR 81 million (December 31, 2016: EUR 87 million), of which EUR 36 million (December 31, 2016: EUR 34 million) relates to positions of Aegon USA, followed by Aegon UK at EUR 44 million. CMBS fundamentals remain supportive with commercial property prices above their prior peak. Commercial real estate valuation increases have slowed. The delinquency rate has started to fall as loan resolutions outpace new defaults and positive net supply increases the total outstanding balance. Liquidity remains reasonable for the
Asset-backed securities Aegon Americas, Aegon the Netherlands and Aegon UK hold EUR 4,314 million (December 31, 2016: EUR 6,188 million) of AFS ABS
Additionally, Aegon Americas has investments in ABS of EUR 10 million (December 31, 2016: EUR 13 million), which are classified as fair value through profit or loss. ABS are securitizations of underlying pools of credit card receivables, auto financing loans, small business loans, bank loans, and other receivables. The underlying assets of the asset backed securities have been pooled together and sold in tranches with varying credit ratings.
The total gross unrealized loss on available-for-sale ABS of Aegon Americas, Aegon the Netherlands and Aegon UK amounted to EUR 15 million as of December 31, 2017 (December 31, 2016: EUR 54 million). Aegon USA has EUR 12 million (December 31, 2016: EUR 44 million) of this gross unrealized loss and Aegon the Netherlands EUR 2 million (December 31, 2016: EUR 10 million).
In the United States, increasing investor demand has been met with new issuance in the asset-backed sector. The combination of these factors has led to varied performance by sector with most sectors exhibiting tighter credit spreads over the course of the year. During 2017, the European ABS spreads tightened considerably on the backdrop of a benign macro environment. The majority of European
ABS sectors is now trading at their tightest levels since the financial crisis. The more basic sectors are slowly approaching their all-time lows helped by very low issuance volumes and the support of the European Central Bank asset backed securities purchase program. Due to the ample liquidity provided through the different programs of the Central Banks issuance levels for European ABS
will remain subdued and in combination with further improving fundamentals this leads to continued downward pressure on spreads going forward.
The breakdown by quality of the available-for-sale (AFS) ABS portfolio of Aegon USA, Aegon the Netherlands and Aegon
The fair values of Aegon USA, Aegon the Netherlands and Aegon UK available-for-sale (AFS) ABS instruments were determined as follows: Annual Report 2017
Bank regulators continue to implement a wide array of reforms designed to strengthen capital levels, reduce balance sheet risk and improve liquidity in an ongoing effort to reduce systemic risk and harmonize global bank regulation. Both regulators and central governments are adopting new bank guidelines designed to improve ‘resolvability’ in an attempt to ensure that banks can ‘fail’ in an orderly manner without the use of taxpayer money. While most banks already meet new capital and liquidity requirements, well ahead of regulatory deadlines, they are now in the process of issuing loss absorbing securities and altering their legal, financial and operating structures. Bank balance sheet repair and risk reduction is expected to continue. Globally, risk concentrations on bank balance sheets continue to exist but confidence in the sector has increased materially since the financial crisis.
The unrealized loss improved during 2017 due to tightening credit spreads and declining long term interest rates, which was offset slightly by rising short term interest rates.
Impairments: Other (none individually greater than EUR 25 million) (16) (52)
Past due and impaired assets The tables that follow provide information on past due and individually impaired financial assets for the whole Aegon Group. An asset is past due when a counterparty has failed to make a payment when contractually due. Assets are impaired when an impairment loss has been charged to the income statement relating to this asset. After the impairment loss is reversed in subsequent periods, the asset is no longer considered to be impaired. When the terms and conditions of financial assets have been renegotiated, the terms and conditions of the new agreement apply in determining whether the financial assets are past due.
These factors typically require significant management judgment. The impairment review process has resulted in EUR 2 million of impairment charges for the twelve months ended December 31, 2017 (twelve months ended December 31, 2016: EUR 1 million) for
As of December 31, 2017, there are EUR 62 million of gross unrealized gains and EUR 13 million of gross unrealized losses in the equity portfolio of Aegon (December 31, 2016: EUR 202 million of gross unrealized gains and EUR 13 million of gross unrealized losses). There is one security held by Aegon, issued by Cobank, which had an unrealized loss above EUR 5 million. The table below represents the unrealized gains and losses on share positions held by Aegon Americas, Aegon the Netherlands and Aegon UK.
Holding and other activities Total 2016 1 Common shares in Holding and other activities includes the elimination of treasury shares in the general account for an amount of EUR nil million.
The sensitivity analysis of net income and shareholders' equity to changes in equity prices is presented in the table below.
The sensitivity of shareholders' equity and net income to changes in equity markets reflects changes in the market value of Aegon’s portfolio, changes in DPAC amortization, contributions to pension plans for Aegon’s employees and the strengthening of the guaranteed minimum benefits, when applicable. Aegon generally has positive income benefits from equity market increases and negative impacts from equity market declines as it earns fees on policyholder account balances and provides minimum guarantees for account values. Aegon uses options and other equity derivatives to provide protection against the negative impact of equity market declines. The increase in Aegon’s sensitivity compared with the prior year is due to a different payoff profile resulting from a change in the hedging strategy.
The maturity analysis below shows the remaining contractual maturities of each category of financial liabilities (including coupon interest). When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to be paid. Financial liabilities that can be required to be paid on demand without any delay are reported in the category 'On demand.' If there is a notice period, it has been assumed that notice is given immediately and the repayment has been presented at the earliest date after the end of the notice period. When the amount payable is not fixed, the amount reported
Investment contracts for account of policyholders 1) 35,239 2,885 - - 466 38,591 1 Excluding investment contracts with discretionary participating features.
Aegon’s liquidity management is based on expected claims and benefit payments rather than on the contractual maturities. The projected cash benefit payments in the table below are based on management's best estimates of the expected gross benefits and expenses, partially offset by the expected gross premiums, fees and charges relating to the existing business in force. Estimated cash benefit payments are based on mortality, morbidity and lapse assumptions based on Aegon’s historical experience, modified for recently observed trends. Actual payment obligations may differ if experience varies from these assumptions. The cash benefit payments are presented on an undiscounted basis and are before deduction of tax and before reinsurance.
Financial liabilities relating to insurance and investment contracts 1) On demand < 1 yr amount 1 < 5 yrs amount 5 < 10 yrs amount > 10 yrs amount
Insurance contracts for account of policyholders - 8,122 33,916 35,391 123,911 201,339
The following table details the Group's liquidity analysis for its derivative financial instruments, based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.
Net settled 1 Derivatives includes all financial derivatives regardless whether they have a positive or a negative value. It does not include bifurcated embedded derivatives.
Portugal) are separate operating segments which under IFRS 8 cannot be aggregated, therefore further details will be provided for these operating segments in this segment note.
and other assumption changes and model updates led to a charge of EUR 54 million (USD 61 million). In the Netherlands, assumption changes and model updates led to a gain of EUR 101 million, which mainly relates to the guarantee provision.
During 2016 Aegon implemented actuarial assumption and model updates resulting in a net EUR 118 million charge (2015: EUR 131 million charge) to income before tax.
Fair value items Fair value items include the over- or underperformance of investments and guarantees held at fair value for which the expected longterm return is included in underlying earnings before tax.
Certain assets held by Aegon are carried at fair value and managed on a total return basis, with no offsetting changes in the valuation of related liabilities. These include assets such as investments in hedge funds, private equities, real estate (limited partnerships), convertible bonds and structured products. Underlying earnings before tax exclude any over- or underperformance compared to management’s long-term expected return on assets. Based on current holdings and asset returns, the long-term expected return on an annual basis is 8-10%, depending on asset class, including cash income and market value changes. The expected earnings from these asset classes are net of deferred policy acquisition costs (DPAC) where applicable.
In addition, certain products offered by Aegon Americas contain guarantees and are reported on a fair value basis and the total return annuities and guarantees on variable annuities. The earnings on these products are impacted by movements in equity markets and riskfree interest rates. Short-term developments in the financial markets may therefore cause volatility in earnings. Included in underlying earnings before tax is a long-term expected return on these products and excluded is any over- or underperformance compared to management’s expected return.
Realized gains or losses on investments Includes realized gains and losses on available-for-sale investments, mortgage loans and other loan portfolios.
Impairment charges/reversals Impairment charges include impairments on available-for-sale debt securities, shares including the effect of deferred policyholder acquisition costs, mortgage loans and other loan portfolios at amortized cost, joint ventures and associates. Impairment reversals include reversals on available-for-sale debt securities.
States. Aegon has other blocks of business for which sales have been discontinued and of which the earnings are included in underlying earnings before tax.
Jo in t ve nt ur es a nd as so ci at es e lim in at io ns
The Group uses underlying earnings before tax in its segment reporting as an important indicator of its financial performance. The reconciliation of this measure to the income before tax is shown below. Aegon believes that underlying earnings before tax, together with the other information included in this report, provides a meaningful measure for the investing public to evaluate Aegon’s business relative to the businesses of its peers.
Change in valuation of liabilities for investment contracts 12 (19) (18) -
�� Net fair value change of derivatives is reported as part of the respective line in Note 10 and includes: 1) the overor underperformance of derivatives of EUR 9 million gain (2016: EUR 8 million gain, 2015: EUR 4 million gain) for which the expected long-term return is included in underlying earnings before tax; 2) Net fair value change on economic hedges where no hedge accounting is applied of EUR 278 million loss (2016: EUR 121 million loss, 2015: EUR 139 million loss); 3) Ineffective portion of hedge transactions to which hedge accounting is applied of EUR 7 million loss (2016: EUR 31 million gain, 2015: EUR 14 million loss).
�� Net foreign currency gains and (losses) are reported as part of the respective line in Note 10. �� Change in valuation of liabilities for insurance contracts is reported as part of the respective line in Note 12. �� Change in valuation of liabilities for investment contracts is reported as part of the respective line in Note 12. �� Policyholder claims and benefits - Other are reported as part of the "Other" line in note 12 and is related to policyholder tax. �� Commissions and expenses include: 1) Restructuring charges of EUR 116 million (2016: EUR 54 million charge, 2015: EUR 59 million charge) which are reported as part of Employee and Administration expenses lines in Note 14; 2) Amortization of deferred expenses of EUR 285 million gain (2016: gain of EUR 137 million, 2015: gain of EUR 126 million) which is reported as part of the respective line in Note 14. This is offset against realized gains and losses and impairments on financial investments; 3) Amortization of VOBA and future servicing rights of EUR 94 million gain (2016: charge of EUR 8 million; 2015: gain of EUR 63 million) which is reported as part of the respective line in Note 14. Commissions and expenses include a DPAC/VOBA fair value adjustment of EUR 135 million (2016: EUR 105 million; 2015: EUR 41 million).
�� Impairment (charges) reversals include: 1) Impairment charges and reversals on financial assets, excluding receivables of EUR 42 million charge (2016: EUR 59 million charge, 2015: EUR 24 million gain) as shown in Note 15; 2) Impairment charges and reversals on non-financial assets and receivables of EUR 1 million gain (2016: EUR 38 million charge; 2015: EUR 1,274 million charge) reported as part of the respective line in Note 15.
�� There are no interest charges and related fees that are classified for segment reporting purposes as non-underlying earnings.
VOBA and future servicing rights 336 27 134 55 - 217 33 - - - 586
Impairment charges / (reversals) on financial assets, excluding receivables (68) 20 - 2 21 44 - - - - (24)
Insurance contracts for account of policyholders 72,501 25,587 22,862 1,109 108 49,666 - - - - 122,168
Investment contracts for account of policyholders 30,463 3,255 40,482 234 - 43,971 - - - - 74,434
Financial assets at fair value through profit or loss 110,906 29,374 66,183 1,436 88 97,080 21 4 62 (7) 208,066
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives 232 (42) (35)
Gains and (losses) on investments in real estate 193 70 145
Net fair value change on for account of policyholder financial assets at fair value through profit or loss 20,524 15,121 (110)
Net fair value change on borrowings and other financial liabilities 10 21 9
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives comprise: 2017 2016 2015
Ineffective portion of hedge transactions to which hedge accounting is applied (7) 31 (14)
The ineffective portion of hedge transactions to which hedge accounting is applied comprises: 2017 2016 2015
Fair value change on hedged items in a fair value hedge (127) 231 (66)
Change in valuation of liabilities for investment contracts (2,644) (104) (6,678)
Profit appropriated to policyholders 21 45 29 14 Commissions and expenses
Included in administration expenses is an amount of EUR 105 million of depreciation that relates to equipment, software and real estate held for own use (2016: EUR 89 million; 2015: EUR 84 million). Minimum lease payments recognized as expense amounted to EUR 18 million (2016: EUR 17 million; 2015: EUR 19 million).
Long-term incentive plans Senior managers within Aegon, not classified as ‘Identified Staff’, have been granted the conditional right to receive Aegon shares if certain performance indicators are met and depending on continued employment of the individual employee to whom the rights have been granted. The shares were conditionally granted at the beginning of the year at the volume weighted average price (VWAP)
on the Euronext stock exchange in Amsterdam during the period between December 15 preceding a plan year and January 15 of a plan year. The performance indicators apply over a performance period of one year and consist of financial and non-financial targets set by the Supervisory Board or the local remuneration committees. Following the performance year, shares are allocated based on actual performance. A vesting period of two years applies after which the shares are transferred to the individual employees. In specific circumstances Aegon’s Supervisory Board will reclaim variable compensation that has already been paid out or vested.
Average share price used for grant in EUR 3) 4.727 3.126 4.917 6.739 6.106 5.128 5.246
1 Performance year for both Long-term incentive plans and Variable compensation Identified Staff 2 Number of shares conditionally granted based on the at target number of grants made that could increase or decrease subject to the actual performance attained 3 This value is the volume weighted average price (VWAP) of Aegon on the Euronext Amsterdam stock exchange for the period December 15 to January 15
Impairment charges and reversals on non-financial assets and receivables - 36 1,275
Impairment charges on financial assets, excluding receivables, from: 2017 2016 2015
Tax effect of (profit) / losses from joint ventures and associates (7) (7) (8)
Changes in tax rate/base in 2017 highly benefited by the decrease of the US corporate income tax rate from 35% to 21% as from
Changes in tax rate/base in 2016 was heavily impacted by the release of profits from other comprehensive income (OCI) to income statement in the UK. These profits were taxed in the past against high historic tax rates and were released from OCI to the income statement against a lower statutory tax rate in 2016. The difference caused a negative impact in changes in tax rate/base.
In the UK, the corporate income tax rate decreased to 19% as per April 1, 2017. The beneficial impact of this change was reflected in the 2015 change in tax rate/base. The tax rate will continue to decrease from 19% to 17% with effect from April 1, 2020. The minor impact of this tax rate change was included in the 2016 change in tax rate/base. In Hungary, the corporate income tax rate decreased from 19% to 9% as from January 1, 2017. The minor impact of this tax rate change was included in the 2016 change in tax rate/base.
Total income tax related to components of other comprehensive income 785 311 706
Income tax related to equity instruments and other Income tax related to equity instruments 33 44 44 46
US corporate income tax rate from 35% to 21% as from January 1, 2018.
Net income / (loss) attributable to owners for basic earnings per share calculation 2,230 453 (663)
Weighted average number of common shares B outstanding (in million) 575 575 584
20 Dividend per common share Final dividend 2017 It will be proposed to the Annual General Meeting of Shareholders on May 18, 2018, absent unforeseen circumstances, to pay a final dividend for the year 2017 of EUR 0.14 per common share. After taking into account the interim dividend 2017 of EUR 0.13 per common share, this will result in a total 2017 dividend of EUR 0.27 per common share. With respect to the common shares B, each of which has financial rights attached to it of 1/40th of a common share, the proposed final dividend will be EUR 0.0035.
Interim dividend 2017 The interim dividend 2017 was paid in cash or stock at the election of the shareholder. Approximately 57% of holders of common shares elected to receive the cash dividend. The remaining 43% have opted for stock dividend. The cash dividend amounted to EUR 0.13 per common share, the stock dividend amounted to one new Aegon common share for every 36 common shares held. The stock dividend and cash dividend are approximately equal in value. The interim dividend was payable as of September 15, 2017. The interim dividend 2017 for common shares B amounted to 1/40th of the dividend paid on common shares.
To neutralize the dilutive effect of the 2016 final and 2017 interim dividend paid in shares, Aegon executed a program to repurchase 51,864,626 common shares. Between October 2, 2017, and December 15, 2017, these common shares were repurchased at an average price of EUR 5.0950 per share. These shares will be held as treasury shares and will be used to cover future stock dividends.
To neutralize the dilutive effect of the 2016 interim dividend paid in shares, Aegon executed a program to repurchase 30,765,224 common shares. Between October 3, 2016, and November 11, 2016, these common shares were repurchased at an average price of EUR 3.8406 per share. These shares will be held as treasury shares and will be used to cover future stock dividends.
Final dividend 2015 The Annual General Meeting of Shareholders on May 20, 2016, approved a final dividend over 2015 of EUR 0.13 per common share payable in either cash or stock, related to the second half of 2015. Approximately 57% of holders of common shares elected to receive the cash dividend. The remaining 43% have opted for stock dividend. The final dividend was payable as of June 24, 2016. The stock dividend amounted to one new Aegon common share for every 30 common shares held. The stock dividend and cash dividend are approximately equal in value. Dividend paid on common shares B amounted to 1/40th of the dividend paid on common shares.
To neutralize the dilutive effect of the 2015 final dividend paid in shares, Aegon executed a program to repurchase 29,258,662 common shares. Between July 4, 2016, and August 12, 2016, these common shares were repurchased at an average price of EUR 3.5054 per share. These shares will be held as treasury shares and will be used to cover future stock dividends.
to EUR 0.12 per common share, the stock dividend amounted to one new Aegon common share for every 45 common shares held.
Aegon repurchased common shares to neutralize the dilutive effect of the 2015 interim dividend paid in shares. Aegon executed a program to repurchase 20,136,673 common shares. Between September 16, 2015, and October 13, 2015, these common shares were repurchased at an average price of EUR 5.2777 per share. These shares are held as treasury shares and will be used to cover future stock dividends.
EUR 7 billion (2016: EUR 8 billion) of cash collateral is received related to securities lending, repurchase agreements and margins on derivatives transactions. A corresponding liability to repay the cash is recognized in other liabilities (note 44 Other liabilities). Refer to note 49 Transfer of financial assets for details on collateral received and paid. Investment of cash collateral received is restricted through limitations on credit worthiness, duration, approved investment categories and borrower limits. EUR 7 million (2016: EUR 16 million) of the cash collateral received is included in cash and cash equivalents and the remainder is included in other asset classes as that collateral is typically reinvested. Aegon earns a share of the spread between the collateral earnings and the rebate paid to the borrower of the securities. Due to the sale of the UK annuity portfolio in 2016 the short term collateral has decreased significantly since then. Income from securities lending programs was approximately EUR 11 million (2016: EUR 13 million; 2015: EUR 8 million).
Cash classified as Assets held for sale 22 260 - -
Bank overdrafts classified as Liabilities held for sale (1) - -
Cash and cash equivalents include cash and demand balances held at the Dutch Central Bank. The Dutch Central Bank requires
Net cash and cash equivalents at December 31, 2017, are negatively impacted by effects of changes in exchange rates of EUR 196 million (2016: EUR 23 million negative; 2015: EUR 200 million positive).
Total net cash flows from operating activities decreased by EUR 2,766 million to a EUR 553 million inflow (2016: 3,319 EUR million inflow). The decrease is mainly driven by an outflow from results from financial transactions, changes in accruals and money market investments. These cash outflows are partly offset by the net purchase of investments for account of policyholders and by net changes in cash collateral.
Net cash flows from investing activities decreased by EUR 118 million to a EUR 1,196 million outflow (2016: EUR 1,078 million outflow). The total consideration paid for acquisitions, including cash in acquired entities, was EUR 52 million. The total consideration received for disposals, excluding transferred assets and reinsurance assets from reinsurance transactions, was EUR 299 million. Total consideration received in cash and cash equivalents amounted to EUR 306 million, as an earn-out of EUR 7 million was part of the total consideration. Transferred cash and cash equivalents amounts to an outflow of EUR 1,361 million as a result of reinsurance transactions and disposals of entities over which control is lost. The decrease is mainly driven by the aquisition of Cofunds Ltd., the divestment of the payout annuity business and Bank Owned Life Insurance / Corporate Owned Life Insurance business (BOLI/COLI) and the sale of Unirobe Meeùs Groep (UMG) (refer to note 51 Business combinations).
Net cash flows from investing activities decreased by EUR 1,693 million to a EUR 1,078 million outflow (2015: EUR 615 million inflow). The total consideration received for disposals, excluding transferred assets and reinsurance assets from reinsurance transactions, was EUR 69 million. Total consideration received in cash and cash equivalents amounted to EUR 56 million as an earn-out of EUR 13 million was part of the total consideration. Transferred cash and cash equivalents amounts to an outflow of EUR 1,130 million as a result of reinsurance transactions and disposal of entities over which control is lost. The decrease is mainly driven by net cash outflows related to the sale of Aegon’s UK annuity portfolio and the commercial non-life insurance business in Aegon Nederland (refer to note 51 Business combinations).
Net cash flows from financing activities increased by EUR 2,320 million to a EUR 465 million outflow (2015: EUR 2,785 million outflow). The increase is a result of proceeds and repayments of borrowings (refer to note 39 Borrowings). This was partly offset by the share buyback program, executed in 2016, to neutralize the dilutive effect of the cancellation of the preferred shares in 2013.
In 2017, following court approval on the Part VII transfer22, the sale of the UK annuity portfolio to Rothesay Life and Legal & General has been completed. As a consequence the related assets and liabilities are no longer classified as assets and liabilities held for sale at year-end 2017. Also refer to note 51 Business combinations.
The table below presents the major types of assets and liabilities of Aegon Ireland plc. included in assets and liabilities classified as held for sale on the consolidated statement of financial position.
Amounts in EUR million 2017 Assets Cash and cash equivalents 260
The fair value hierarchy consists of three levels. Reference is made to note 3 Critical accounting estimates and judgment in applying accounting policies for more details on the fair value hierarchy.
Assets carried at fair value Fair value through profit or loss
Financial assets at fair value through profit or loss (FVTPL) 7,119 5,142
The decrease of EUR 19.8 billion in financial assets, for general account, excluding derivatives compared to December 31, 2016 is mainly driven by the disposal of debt securities related to the divestments of the pay-out annuity and BOLI/COLI businesses and the block of life reinsurance in the Americas. In addition, the balance is affected by foreign exchange rates translation adjustments. Refer to note 51 Business combinations for the disposals of BOLI/COLI businesses and the block of life reinsurance in the Americas.
Of the investments in real estate EUR 633 million (2016: EUR 743 million) is held by Aegon Americas and EUR 1,494 million (2016: EUR 1,238 million) is held by Aegon the Netherlands.
Refer to note 48 Commitments and contingencies for a description of non-cancellable lease rights.
Rental income of EUR 71 million (2016: EUR 69 million; 2015: EUR 61 million) is reported as part of investment income in the income statement. Direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period amounted to EUR 21 million (2016: EUR 79 million; 2015: EUR 97 million). In 2017, EUR 1 million of direct operating expenses is related to investment properties that did not generate rental income during the period (2016: EUR 1 million; 2015: 1 million).
Total investments for account of policyholders at fair value through profit or loss, excluding derivatives 193,409 202,924
Rental income of EUR 50 million (2016: EUR 60 million; 2015: EUR 72 million) is reported as part of investment income in the income statement. Direct operating expenses relating to investments in real estate for account of policyholder amounted to EUR 4 million in 2017 (2016: EUR 5 million, 2015: EUR 7 million). There are no restrictions on the realizability of investment property or the remittance of income and proceeds of disposal.
Derivatives for account of policyholders Derivatives not designated in a hedge 349 402 76 107 1 Refer to note 47 Fair value for a summary of all financial assets and financial liabilities at fair value through profit or loss.
The fair value of derivatives on both the asset and liability side of the consolidated statement of financial position decreased during 2017 mainly due to changes in interest rates and other market movements during the year, as well as purchases, disposals and maturities. The divestment of the payout annuity business and Bank Owned Life Insurance / Corporate Owned Life Insurance (BOLI/
COLI) business in the Americas contributed to the decrease of derivative assets with EUR 259 million compared to December 31, 2016.
The derivatives are measured at fair value through profit or loss in accordance with IAS 39. The value of the longevity derivatives are calculated using an internal model as there is no active market for this type of derivatives. For more details refer to the paragraph on underwriting risk included in note 36 Insurance contracts and the paragraph on derivatives included in note 47 Fair value.
Aegon has entered into free-standing credit derivative transactions. The positions outstanding at the end of the year were: Notional Fair value Notional Fair value
For the years ended December 31, 2017, 2016, and 2015, Aegon recognized gains and (losses) related to the ineffectiveness portion of designated fair value hedges of EUR (6) million, EUR 26 million and EUR (17) million respectively. No portion of derivatives was excluded when assessing hedge effectiveness.
For the year ended December 31, 2017, Aegon the Netherlands recognized EUR 142 million negative fair value changes on mortgage loans using fair value hedge accounting under the EU carve out version of IAS 39 in the income statement (2016: EUR 195 million positive). This amount was offset by a positive amount of EUR 133 million fair value changes recognized on the derivatives used as hedging instrument (2016: EUR 176 million negative). During 2016 Aegon the Netherlands changed their risk management policy and decided to take on more interest rate risk, in order to economically offset the interest rate risk on the insurance liabilities. This has resulted in a de-designation for some of the fair value hedge accounting portfolios. The cumulative base adjustment of EUR 67 million per year-end 2017 (2016: EUR 70 million) is amortized over the weighted average duration (7 to 13 years) of the mortgage portfolios to which hedge-accounting was applied at the date of de-designation.
Fair value adjustments for these interest rate swaps are deferred and recorded in equity until the occurrence of the forecasted transaction at which time the interest rate swaps will be terminated. The accumulated gain or loss in equity will be amortized into investment income as the acquired asset affects income. Aegon hedges its exposure to the variability of future cash flows from interest rate movements for terms up to 26 years. The cash flows from these hedging instruments are expected to affect the profit and loss for approximately the next 35 years. For the year ended December 31, 2017, the contracts for which cash flow hedge accounting was terminated resulted in deferred gains of EUR 598 million (2016: EUR 407 million) that are recognized directly in equity to be reclassified into net income during the period when the cash flows occur of the underlying hedged items. During the year ended
For the year ended December 31, 2017, Aegon recognized EUR 0 million of hedge ineffectiveness on cash flow hedges (2016: EUR 5 million gain; 2015: EUR 4 million gain). In 2017, EUR 113 million loss was reclassified from equity into investment income
Summarized financial information of joint ventures The summarized financial information presented in the following table presents the joint ventures on a 100% basis. Aegon considers its investment in AMVEST Vastgoed B.V. (AMVEST) a material joint venture and is therefore presented separately.
Summarized statement of financial position Cash and cash equivalents 109 135 342 373
Non-current financial liabilities excluding trade payables and other provisions 643 476 220 292
The difference in the carrying value of investments in joint ventures of EUR 1,712 million (2016: EUR 1,614 million) and the total of the carrying value of joint ventures presented above of EUR 1,693 million (2016: EUR 1,598 million) relates to joint ventures with a negative carrying value of EUR 18 million (2016: EUR 16 million) which have been reclassified to Provisions.
Post-tax profit or loss 126 106 35 28 27 Investments in associates
Of the reinsurance assets EUR 13 million is current (2016: EUR 15 million).
Gross premium and deposits – existing and new business 11,326 6 11,332
Gross premium and deposits – existing and new business 99 111
Reinsurance assets increased by EUR 8.0 billion compared to December 31, 2016 mainly due to the divestment of the payout annuity,
BOLI/COLI businesses and a block of life reinsurance business in the US. For more details on the divestment of these businesses refer to note 51 Business combinations.
Individual savings and retirement products 1,911 - - - - - - 1,911 30 Other assets and receivables
Future servicing rights increased by EUR 36 million following the acquisition of the Nordea second-pillar pension fund in August 2017.
The line disposals reflects the divestment of the payout annuity and BOLI/COLI business in the Americas and Unirobe Meeùs Groep in the Netherlands impacting goodwill by EUR 27 million, VOBA by EUR 11 million and software by EUR 3 million.
Goodwill The goodwill balance has been allocated across the cash-generating units which are expected to benefit from the synergies inherent in the goodwill. Goodwill is tested for impairment both annually and when there are specific indicators of a potential impairment. The recoverable amount is the higher of the value in use and fair value less costs of disposal for a cash-generating unit. The operating assumptions used in all the calculations are best estimate assumptions and based on historical data where available.
A reasonably possible change in any key assumption is not expected to cause the carrying value of the cash-generating units to exceed its recoverable amount.
VOBA The movement in VOBA over 2017 can be summarized and compared to 2016 as follows: Amortization / depreciation through income statement (63) (178)
A geographical summary of the lines of business to which the VOBA is allocated is as follows: VOBA Americas The Netherlands United Kingdom Europe Asia Total
Individual savings and retirement products 144 - - - - 144
Individual savings and retirement products 181 - - - - 181 32 Shareholders’ equity Issued share capital and reserves attributable to shareholders of Aegon N.V.
In June 2017, Aegon issued to Vereniging Aegon 13,042,612 common shares B with a par value of EUR 0.12 to compensate for the dilution of Vereniging Aegon’s shareholding caused by the distribution of the final dividend 2016 in shares.
In September 2017, Aegon distributed to its shareholders 24,948,255 common shares as interim dividend 2017 in the form of stock.
This stock dividend distribution was paid from treasury shares (note 32.3 Treasury shares) and with the issuance of 21,099,402 common shares with a par value of EUR 0.12
Furthermore, in December 2017, Aegon repurchased 13,042,592 common shares B from Vereniging Aegon to keep the voting rights of Vereniging Aegon on the agreed level.
Furthermore, in June 2016, Aegon repurchased 17,324,960 common shares B from Vereniging Aegon to keep the voting rights of Vereniging Aegon on the agreed level.
In September 2015, Aegon distributed to its shareholders 20,136,673 common shares as interim dividend 2015 in the form of stock.
Meeting of Shareholders. Moreover, repayment on common shares B needs approval of the related shareholders. Refer to 'Other information' for further information on dividend rights.
(2016: 17,324,960) own common shares B with a par value of EUR 0.12 each.
Transactions in 2017: Sale: 1 transaction, average price EUR 0.11 (1,979) -
Net (gains) / losses transferred to income statement (1,330) - (738) (2,069)
The cash flow hedging reserve includes (un)realized gains and losses on the effective portions of hedging instruments, net of tax. The amounts are recognized in the income statement at the moment of realization of the hedged position to offset the gain or loss from the hedged cash flow. No amounts have been released from equity to be included in the initial measurement of non-financial assets or liabilities.
USD 500 million floating CMS rate 2) Quarterly, July 15 2018 402 402 402
EUR 950 million floating DSL rate 3) Quarterly, July 15 2018 950 950 950 1 The coupon of the USD 250 million junior perpetual capital securities is reset each quarter based on the then prevailing three-month LIBOR yield plus a spread of 87.5 basis points, with a minimum of 4%.
The securities have been issued at par. The securities have subordination provisions, rank junior to all other liabilities and senior to shareholders' equity only. The conditions of the securities contain certain provisions for optional and required coupon payment deferral and mandatory coupon payment events. Although the securities have no stated maturity, Aegon has the right to call the securities for redemption at par for the first time on the coupon date in the years as specified, or on any coupon payment date thereafter.
redemption amount. For further information on the non-cumulative subordinated notes and their subordination refer to note 33 Other equity instruments.
USD 225 million 1) 7.65% Semi-annually, December 1 1996 2026 n.a. 91 109
Sources of underwriting risk include policyholder behavior (such as lapses, surrender of policies or partial withdrawals), policy claims
Sensitivity analysis of net income and shareholders’ equity to various underwriting risks is shown in the table that follows. Aegon’s best estimate assumptions already include expected future developments and the sensitivities represent an increase or decrease of lapse
Transfer (to) / from insurance contracts for account of policyholders 135 1
Gross premium and deposits – existing and new business 1,625 1,700
Transfer (to) / from investment contracts for account of policyholders - (808)
Included in Transfers to disposal groups for 2017 is the sale of Aegon Ireland plc. business which is classified as held for sale per year-end 2017. As a result, the Insurance contracts for account of policyholders are no longer included in the 2017 ending balance.
Included in Other is the reclassification of the pension contract relating to the personnel of Unirobe Meeùs Groep (UMG) from defined benefit plans to insurance contracts for account of policy holders following the sale of UMG in November 2017.
38 Guarantees in insurance contracts For financial reporting purposes Aegon distinguishes between the following types of minimum guarantees: a. Financial guarantees: these guarantees are treated as bifurcated embedded derivatives, valued at fair value and presented as derivatives (note 2.9 and note 47 Fair value); b. Total return annuities: these guarantees are not bifurcated from their host contracts because they are presented and valued at fair value together with the underlying insurance contracts (note 2.19); c. Life contingent guarantees in the United States: these guarantees are not bifurcated from their host contracts, presented and valued in accordance with insurance accounting together with the underlying insurance contracts (note 2.19); and d. Minimum investment return guarantees in the Netherlands: these guarantees are not bifurcated from their host contracts, valued at fair value and presented together with the underlying insurance contracts (note 2.19 and note 47 Fair value).
annuities sold through its joint venture in Japan. Variable annuities allow a customer to provide for the future on a tax-deferred basis and to participate in equity or bond market performance. Variable annuities allow a customer to select payout options designed to help meet the customer’s need for income upon maturity, including lump sum payment or income for life or for a period of time. This benefit guarantees that a policyholder can withdraw a certain percentage of the account value, starting at a certain age or duration, for either a fixed period or during the life of the policyholder.
if the premium has been paid for a consecutive period of at least ten years and is invested in a mixed fund and/or fixed-income funds.
The GMWB rider Aegon assumed from the ceding company is accounted for as a derivative and is carried in Aegon’s statement of financial position at fair value. At December 31, 2017, the contract had a value of EUR 34 million (2016: EUR 50 million). Aegon entered into a derivative program to mitigate the overall exposure to equity market and interest rate risks associated with the reinsurance contract. This program involves selling equity futures contracts and equity total return swap contracts (S&P 500, Midcap,
The fixed annuities product balance as of December 31, 2017, amounted to EUR 270 million (2016: EUR 328 million).
Average attained age of contract holders 69 70 69 69 1 Guaranteed minimum death benefit in the United States.
Net amount at risk 5) 4,440 5,017 1 Guaranteed minimum investment return in the Netherlands.
For equity volatility, Aegon uses a term structure assumption with market-based implied volatility inputs for the first five years and a long-term forward rate assumption of 25% thereafter. The volume of observable option trading from which volatilities are derived generally declines as the contracts’ term increases, therefore, the volatility curve grades from implied volatilities for five years to the ultimate rate. The resulting volatility assumption in year 20 for the S&P 500 index (expressed as a spot rate) was 23.1% at December 31, 2017, and 24.0% at December 31, 2016. Correlations of market returns across underlying indices are based on historical market returns and their inter-relationships over a number of years preceding the valuation date. Assumptions regarding policyholder behavior, such as lapses, included in the models are derived in the same way as the assumptions used to measure insurance liabilities.
including asset and liability management and derivative hedging strategies to hedge certain aspects of the market risks embedded in these guarantees.
Guarantee reserves decreased by EUR 1.121 million in 2017 (2016: increase of EUR 863 million).
Capital funding On July 18, 2017 Aegon redeemed unsecured notes with a coupon of 3%, issued in 2012. The principal amount of EUR 500 million was repaid with accrued interest. On August 30, 2017 Aegon issued senior unsecured notes of EUR 500 million, due August 30, 2018. The notes were issued under Aegon’s USD 6 billion debt issuance program at a price of 100.157%, and will carry a coupon of 0.00%.
A detailed composition of capital funding is included in the following table: (sorted at maturity) Coupon rate Coupon date Issue /
EUR 500 million Unsecured Notes 3% July 18 2012 / 17 - 500
EUR 500 million Unsecured Notes 0% August 30 2017 / 18 500 -
EUR 75 million Medium-Term Notes 1) 4.625% December 9 2004 / 19 82 84
USD 500 million Senior Notes 1), 2) 5.75% Semi-annually 2005 / 20 455 526
EUR 500 million Senior Unsecured Notes 1.00% December 8 2016 / 23 495 495
These loans are considered senior debt in calculating financial leverage in note 46 Capital management and solvency.
EUR 1,365 million "SAECURE 12" RMBS Note 1), 2) Floating Quarterly 2012 / 17 - 1,030
EUR 1,123 million "SAECURE 13" RMBS Note 1), 3) Floating Quarterly 2013 / 18 750 862
EUR 1,367 million "SAECURE 14" RMBS Note 1), 4) Floating Quarterly 2014 / 19 994 1,126
EUR 500 million Conditional Pass-Through Covered Bond 1), 9) 0.375% Annual 2017 / 24 497 -
USD 550 million Floating Rate Guaranteed Note 10), 12) Floating Quarterly 2007 / 37 - 450
FHLB Secured borrowings 1) Floating Quarterly 2016 / 46 4,160 2,839 1 Issued by a subsidiary of Aegon N.V.
2 The Notes were called for redemption on the first optional redemption date (30 October 2017). 3 The first optional redemption date is 28 February 2018; the legal maturity date is 30 November 2093. Notes are fully collateralized by mortgage loans which are part of Aegon’s general account investments.
The provision for unearned commission decreased to EUR 0 million (2016: EUR 25 million) due to the sale of Unirobe Meeùs Groep.
Other reflects the reclassification of the pension contract relating to the personnel of Unirobe Meeùs Groep (UMG) from defined benefit plans to insurance contracts for account of policyholders following the sale of UMG in November 2017.
The fair value of Aegon’s own transferable financial instruments included in plan assets and the fair value of other assets used by Aegon included in plan assets was nil in both 2017 and 2016.
Net interest on the net defined benefit liability (asset) 99 10 109 123 11 134
Movements during the year of the present value of the defined benefit obligations 2017 2016
Remeasurements of the defined benefit obligations: - Actuarial gains and losses arising from changes in demographic assumptions 30 (211)
USA in 2017 or 2016. However, with the Aegon N.V. Management Board approval of a proposal from Transamerica Corporation,
Transamerica Corporation made a pension plan contribution of EUR 89 million in September 2017 (EUR 226 million in September 2016) that was over and above the minimum required funding levels as set forth by the Internal Revenue Code.
Aegon USA provides health care benefits to retired employees through continuation of coverage in self funded plans, which are classified as unfunded per IAS 19 financial guidance. The postretirement health care benefits under the Plans are administered by Transamerica Corporation, which has delegated the claims administration to third-party administrators. Aegon USA maintains two plans which provide continuation of coverage for retiree medical benefits. For each plan, Aegon USA has the fiduciary responsibility to administer the plan in accordance with its terms, and decides questions related to eligibility and determines plan provisions and benefit amounts.
100 basis points decrease in discount rate 498 546 100 basis points increase in salary increase rate 38 42 100 basis points decrease in salary increase rate (33) (37)
Furthermore, the specific statutory requirements governing the administration of group pension schemes have been laid down in the
Investment strategies are established based on asset and liability studies. The overall goal is to maximize total investment returns to provide sufficient funding for the present and anticipated future benefit obligations within the constraints of a prudent level of portfolio risk. These studies use for example return objectives and various investment instruments. Investment restrictions are updated regularly and they result in asset allocation mix and hedges.
As a consequence of the sale of UMG to Aon Groep Nederland during 2017, the defined benefit obligation (DBO) and the assets backing the DBO related to UMG have been derecognized. This resulted in a decrease of the ‘DBO’ and ‘insurance contracts for general account’ of EUR 478 million. On the other hand, the pension contract between UMG and Aegon Levensverzekering N.V. is no longer 1 Aegon Nederland deducts employee contributions from the total pension expenses.
Plan amendments The minimum tax-qualified retirement age for occupational retirement plans in the Netherlands is triggered by an increase in average life expectancy as determined by the Central Bureau of Statistics. Effective January 1, 2018, the tax-qualified retirement age in combination with the maximum annual benefit accrual of 1.875% becomes 68. As a result Aegon has changed the retirement age of its pension plan from 67 to 68 years as from January 1, 2018.
Indexation 3) 44.10% of Curve 2017 45.20% of Curve 2016 1 Dutch Actuarial Society 2017 prospective mortality table with minor methodology adjustments. 2 Dutch Actuarial Society 2013 prospective mortality table with minor methodology adjustments.
Financial actuarial assumptions 100 basis points increase in discount rate (447) (545)
The pension scheme Trustees are required to carry out triennial valuations on the scheme’s funding position, with the latest valuation being as at March 31, 2016. As part of this triennial valuation process, a schedule of contributions is agreed between the Trustees and Aegon UK in accordance with UK pensions legislation and guidance issued by the Pensions Regulator in the UK. The schedule of contributions includes deficit reduction contributions to clear any scheme deficit. Under IAS 19, the defined benefit plan has a deficit of EUR 137 million at December 31, 2017 (2016: EUR 298 million deficit).
The weighted average duration of the defined benefit obligation is 23.1 years (2016: 23.0 years).
Transfer to/from other headings - (300) 351 (79) - - 27 -
The decrease of the United States corporate income tax rate from 35% to 21% as from January 1, 2018 with an impact of total
In 2016, there were considerable movements in the net deferred tax schedule. The major components consisted of: �� The increase of deferred tax liability primarily related to an increase of unrealised profits in respect of financial assets mainly driven by tightening credit spread �� The movement in Insurance contracts and Intangible assets mainly related to the reclassification through these categories �� The increase in Other mainly related to the deferral tax credits in 2016
EUR 505 million; tax EUR 90 million) the realization of the deferred tax asset is dependent on the projection of future taxable profits from existing business in excess of the profits arising from the reversal of existing taxable temporary differences.
Not recognized deferred tax assets 1 The gross value of state tax loss carry forward is not summarized in the disclosure, due to the fact that the United States files in different state jurisdictions with various applicable tax rates and apportionment rules
Deferred corporate income tax assets in respect of deductible temporary differences are recognized to the extent that the realization of the related tax benefit through future taxable profits is probable. For the following amounts relating to Defined benefit plans and
Deferred corporate income tax asset dependent on future taxable profits 261 362 46 64 1 The amendment of IAS 12, relating to deferred tax assets on unrealized losses, changed the qualification by Aegon of ‘holding bonds and similar investments until the earlier of market recovery or maturity’ from a tax planning opportunity into a source of income with no impact on the figures presented.
Aegon did not recognize deferred corporate income tax assets in respect of deductible temporary differences relating to Financial assets and Other items for the amount of gross EUR 43 million; tax EUR 8 million (2016: gross EUR 70 million; tax EUR 13 million).
Deferred corporate income tax liabilities have not been recognized for withholding tax and other taxes that would be payable on the unremitted earnings of certain subsidiaries. The unremitted earnings totaled gross EUR 1,771 million; tax EUR 441 million (2016: gross
46 Capital management and solvency After receiving a confirmation from the Dutch Central Bank (DNB) Aegon started to apply a revised method in calculating the Solvency
II contribution of the Aegon US Insurance entities under Deduction & Aggregation (D&A), affecting Aegon’s tiering of capital in 2017.
It includes lowering the conversion factor from 250% to 150% Risk-Based Capital Company Action Level and reducing own funds by a 100% RBC Company Action Level requirement to reflect transferability restrictions. The methodology is subject to annual review.
Strategic importance Aegon’s approach towards capital management plays a vital role in supporting the execution of its strategy. Next to ensuring adequate capitalization to cover Aegon’s obligations towards its policyholders, capital management priorities also include the shift of capital to products that offer higher growth and return prospects, the shift from capital intensive spread business to capital light fee business and Aegon’s aim to provide for a sustainable dividend to shareholders, which can grow over time if the
Management of capital Disciplined risk and capital management support Aegon’s decisions in deploying the capital that is generated in the
Company's businesses and that is provided for by investors. Aegon balances the funding of new business growth with the funding required to ensure that its obligations towards policyholders and debtholders are always adequately met, and providing for a sustainable dividend to shareholders.
Aegon’s ERM framework ensures that the Aegon Group and its operating companies are adequately capitalized and that obligations towards policyholders are always adequately met. Firmly embedded in this larger framework, Aegon’s capital management framework builds on a set of key pillars: the use of internal target capital management zones, an internal target range for the use of gross financial leverage and, supported by robust risk and capital monitoring processes that timely trigger and escalate interventions if needed to ensure that capital is always being managed towards these internal target ranges, and is prevented from falling below the regulatory minimum capital requirements.
During 2017, the Aegon Group and all of its regulated entities that are subject to capital requirements on a solo-level continued to comply with the 100% Solvency II ratio.
Total available own funds 15,628 15,957 18,119 1 The tiering information is based on the revised method which was confirmed by the DNB in 2017. 2 The 2016 comparative numbers are the final numbers as disclosed in Aegon’s 2016 Solvency and Financial Condition Report.
As at December 31, 2017, Tier 1 capital accounted for 89% of own funds (2016: 87%; number based on revised method), including
As at December 31, 2017, Tier 2 capital accounted for 8% of own funds (2016: 8%; number based on revised method), including
EUR 441 million of non-cumulative subordinated notes (2016: EUR 503 million) and EUR 772 million of fixed floating subordinated notes (2016: EUR 788 million) which are both classified as grandfathered Tier 2 capital. Changes in Tier 2 capital compared to previous year is mainly related to foreign currency movements.
(6,019) million (2016: EUR (5,828) million) compared to the IFRS-EU Statement of Financial Position.
The availability adjustments are changes to the availability of own funds of Aegon Group in accordance with Solvency II requirements.
Group, to a temporary restriction in relation to the sale of Aegon Ireland (the difference between the sale price and Aegon Ireland’s own funds are considered not available at Group level until completion of the sale, expected in the first half of 2018) and Aegon Bank which is under a different regulatory regime but under the same Supervisory Authority and therefore excluded for Solvency II purposes.
Aegon defines total financial leverage as debt or debt-like funding issued for general corporate purposes and for capitalizing
Aegon’s business units. Total financial leverage includes hybrid instruments, in addition to both subordinated and senior debt.
As at December 31, 2017, Aegon’s total capitalization amounted to EUR 24.4 billion (EUR 24.8 billion on December 31, 2016), its gross financial leverage ratio was 28.6% (29.8% on December 31, 2016) and its fixed charge coverage was 8.0x (7.2x on
The following table shows the composition of the total capitalization and the calculation of the gross financial leverage ratio: Total shareholders’ equity - based on IFRS as adopted by the EU 32 20,573 20,913
equity as determined by law. The capitalization level and shareholders' equity of the subsidiaries can be impacted by various factors
Liabilities carried at fair value Investment contracts for account of policyholders 2) - 36,950 219 37,169
Total liabilities at fair value 34 42,738 2,064 44,835 1 The investments for account of policyholders included in the table above only include investments carried at fair value through profit or loss. 2 The investment contracts for account of policyholders included in the table above represents only those investment contracts carried at fair value. 3 Total borrowings on the statement of financial position contain borrowings carried at amortized cost that are not included in the above schedule.
Total liabilities at fair value 64 49,584 2,643 52,290 1 The investments for account of policyholders included in the table above only include investments carried at fair value through profit or loss. 2 The investment contracts for account of policyholders included in the table above represents only those investment contracts carried at fair value. 3 Total borrowings on the statement of financial position contain borrowings carried at amortized cost that are not included in the above schedule.
The table below shows transfers between Level I and Level II for financial assets and financial liabilities recorded at fair value on a recurring basis.
(l os se s) f or t he p er io d re co rd ed in t he P
fo r in st ru m en ts h el d at
Other investments at fair value 754 (112) (109) 194 (48) (9) (87) - 1 - - 583 -
Other investments at fair value 1,257 23 - 378 (350) - (162) - 341 (233) - 1,255 20
Total assets at fair value 9,275 199 (150) 2,826 (1,558) (935) (638) (16) 578 (452) - 9,130 131
) f or th e pe rio d re co rd ed in th e
Other investments at fair value 928 (177) 20 240 (133) (141) 18 - - (1) - 754 -
Investments for account of policyholders 1,745 22 - 469 (395) - (35) - 8 (88) - 1,726 23
Prior to transfer, the fair value for the Level II securities was determined using observable market transactions or corroborated broker quotes respectively for the same or similar instruments. The amount of assets and liabilities transferred to Level III was
III to other levels of the fair value hierarchy. The change in level was mainly the result of a return of activity in the market for these securities and that for these securities the fair value could be determined using observable market transactions or corroborated broker quotes for the same or similar instruments.
Other investments at fair value Investment funds Net asset value 3) n.a. 1,246 n.a. 1,252 n.a. Other Other n.a. 9 n.a. 5 n.a.
Real estate Investments in real estate Direct capitalization technique Capitalization rate 496
Revalued amounts Real estate held for own use Direct capitalization technique Capitalization rate 157
Longevity swap Discounted cash flow Mortality 10 n.a. - n.a. Other Other n.a. 3 n.a. 384 n.a.
Financial liabilities carried at fair value Embedded derivatives in insurance contracts 1,831 125 (120) 2,083 205 (194)
Private loans - held at amortized cost 3,642 - 64 4,117 4,181
Other loans - held at amortized cost 2,164 6 1,991 166 2,164
Liabilities Subordinated borrowings - held at amortized cost 764 791 162 - 953
Shares When available, Aegon uses quoted market prices in active markets to determine the fair value of its investments in shares. Fair values for unquoted shares are estimated using observations of the price/earnings or price/cash flow ratios of quoted companies considered comparable to the companies being valued. Valuations are adjusted to account for company-specific issues and the lack of liquidity inherent in an unquoted investment. Adjustments for lack of liquidity are generally based on available market evidence. In addition, a variety of other factors are reviewed by management, including, but not limited to, current operating performance, changes in market outlook and the third-party financing environment. Also for unquoted shares the net asset value may be considered the best approximation to the fair value. Net asset value is the value of an entity's assets minus the value of its liabilities and may be the same as the book value or the equity value of the entity.
Available-for-sale shares include shares in a Federal Home Loan Bank (FHLB) for an amount of EUR 204 million (2016: EUR 237 million), which are reported as part of the line-item Net asset value. A FHLB has implicit financial support from the United
Tax credit investments The fair value of tax credit investments is determined by using a discounted cash flow valuation technique. This valuation technique takes into consideration projections of future capital contributions and distributions, as well as future tax credits and the tax benefits of future operating losses. The present value of these cash flows is calculated by applying a discount rate. In general, the discount rate is determined based on the cash outflows for the investments and the cash inflows from the tax credits and/or tax benefits (and the timing of these cash flows). These inputs are unobservable in the market place. The discount rate used in valuation of tax credit investments has increased to 5.8% (December 31, 2016: 5.6%).
Derivatives Where quoted market prices are not available, other valuation techniques, such as option pricing or stochastic modeling, are applied.
Aegon normally mitigates counterparty credit risk in derivative contracts by entering into collateral agreements where practical and in ISDA master netting agreements for each of the Group’s legal entities to facilitate Aegon’s right to offset credit risk exposure.
Embedded derivatives in insurance contracts including guarantees Bifurcated guarantees for minimum benefits in insurance and investment contracts are carried at fair value. These guarantees include
Since the price of these guarantees is not quoted in any market, the fair values of these guarantees are based on discounted cash flows calculated as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable to the guarantees. Given the complexity and long-term nature of these guarantees which are unlike instruments available in financial markets, their fair values are determined by using stochastic models under a variety of market return scenarios. A variety of factors are considered, including own credit spread, expected market rates of return, equity and interest rate volatility, correlations of market returns, discount rates and actuarial assumptions. The most significant unobservable factor is own credit spread. The weighted average own credit spread used in the valuations of embedded derivatives in insurance contracts decreased to 0.2% (2016: 0.4%).
Trust pass-through securities and subordinated borrowings Trust pass-through securities and subordinated borrowings are either carried at fair value (if they are designated as financial liabilities at fair value through profit or loss) or amortized cost (with fair value being disclosed in the notes to the consolidated financial statements). For the determination of the fair value of these instruments, the level hierarchy as described by IFRS-EU is used. The preferred method of obtaining the fair value of the fair value option bonds is the quoted price (Level I). In case markets are less liquid or the quoted prices are not available, an internal model is used, based on parameters which are market observable (Level II). Aegon uses a discounted cash flow method including yield curves such as deposit rates, floating rates and 3-month swap rates. In addition,
Derivatives with positive values not designated as hedges 5,394 - 6,918 -
Total financial assets at fair value through profit or loss 5,472 200,451 6,984 208,001
Investments for general account The Group manages certain portfolios on a total return basis which have been designated at fair value through profit or loss. This includes portfolios of investments in limited partnerships and limited liability companies (primarily hedge funds) for which the performance is assessed internally on a total return basis. In addition, some investments that include an embedded derivative that would otherwise have required bifurcation, such as convertible instruments, preferred shares and credit linked notes, have been designated at fair value through profit or loss.
Investments for account of policyholders Investments held for account of policyholders comprise assets that are linked to various insurance and investment contracts for which the financial risks are borne by the customer. Under the Group’s accounting policies these insurance and investment liabilities are measured at the fair value of the linked assets with changes in the fair value recognized in the income statement. To avoid an accounting mismatch the linked assets have been designated as at fair value through profit or loss.
In addition, the investment for account of policyholders include with profit assets, where an insurer manages these assets together with related liabilities on a fair value basis in accordance with a documented policy of asset and liability management. In accordance with the Group’s accounting policies, these assets have been designated as at fair value through profit or loss.
48 Commitments and contingencies Investments contracted In the normal course of business, the Group has committed itself through purchase and sale transactions of investments, mostly to be executed in the course of 2018. The amounts represent the future outflow and inflow, respectively, of cash related to these investment transactions that are not reflected in the consolidated statement of financial position.
Commitments increased in 2017 as a result of Aegon’s strategy to generate higher yield on its investments. Aegon has committed itself, through certain subsidiaries, to invest in real estate, private loans, mortgages loans and receivables and investment funds.
Future lease payments Not later than 1 year 1-5 years Later than 5 years Not later than 1 year 1-5 years Later than 5 years
Share of contingent liabilities incurred in relation to interests in joint ventures 39 40
Aegon International B.V., a wholly-owned subsidiary of Aegon N.V., has entered into a contingent capital letter for an amount of JPY
6.5 billion (EUR 49 million) to support its joint venture Aegon Sony Life Insurance Company meeting local statutory requirements.
Other letter of credit arrangements for subsidiaries amounted to EUR 55 million (2016: EUR 104 million); as of that date no amounts had been drawn, or were due under these facilities; �� Due and punctual payment of payables due under letter of credit agreements or guarantees provided for subsidiaries of Transamerica Corporation at December 31, 2017 amounted to EUR 3,079 million (2016: EUR 3,563 million). As of that date no amounts had been drawn, or were due under letter of credit facilities. The guarantees partly related to debt amounted to EUR 1,322 million (2016: EUR 1,505 million) and is included in the Operational funding table in note 39 Borrowings of the consolidated financial statements of the Group in the line 'USD 1.54 billion Variable Funding Surplus Note'; �� Due and punctual payment of payables by the consolidated group companies Transamerica Corporation, Aegon Funding Company
Insurance companies and their affiliated regulated entities are routinely subject to litigation, investigation and governmental review involving issues such as, but not limited to, product fees and costs, including transparency and adequacy of disclosure of initial costs, ongoing costs, and costs due on policy surrender as well as changes to costs over time; employment or distribution relationships; operational and internal controls and processes; environmental matters; competition and antitrust matters; data privacy; information security; intellectual property; and anti-money laundering, anti-bribery and economic sanctions compliance.
Aegon cannot predict the effect of litigation, investigations or other actions on its businesses or the insurance industry. In some jurisdictions, plaintiffs may seek recovery of very large or indeterminate amounts under claims of bad faith, resulting in punitive or treble damages. Damages alleged may not be quantifiable or supportable, or may have no relationship to economic losses or final awards. Separate from financial loss, litigation, regulatory action, legislative changes or changes in public opinion may require Aegon to change its business practices, which could have a material adverse impact on Aegon’s businesses, results of operations, cash flows and financial position.
Aegon believes that the investigation will conclude in 2018, and has taken a provision of EUR 85 million in anticipation of a possible settlement with the SEC. This amount is partly recorded in the Americas (EUR 45 million) and partly in Aegon Asset Management
Company (“TLIC”), have also been named in class actions as well as individual litigation relating to monthly deduction rates increases on universal life products. Plaintiffs generally allege that the rates were increased to recoup past losses rather than to cover the future costs of providing insurance coverage. The class action against TLIC is pending in US federal district court for the Central District of California. In the first phase of one of the individual cases against TLIC to reach trial the jury found that the increase was improper.
That case remains ongoing. At this time it is impracticable for Aegon to quantify a range or maximum liability or the timing of the financial impact, if any, of these matters, as the potential financial impacts are dependent both on the outcomes of court proceedings and future developments in financial markets and mortality. If decided adversely to Aegon, these claims could have a material adverse effect on Aegon’s business, results of operations, and financial position.
That dispute was resolved in Delaware court for USD 235 thousand plus interest in 2010. The plaintiff took the Delaware judgment relating to the 1976 dispute to a Nigerian court and alleged that it was entitled to approximately the same damages for 1977 through 1984 despite the absence of any contract relating to those years. The Nigerian trial court issued a judgment in favor of the plaintiff of the alleged actual damages as well as pre-judgment interest of approximately USD 120 million. On appeal this decision was reversed on procedural grounds and remanded back to the trial court for further consideration. Aegon has no material assets located in Nigeria.
In Poland, owners of unit-linked policies continue to file claims in civil court against Aegon over fees payable upon purchase or surrender of the product. Plaintiffs claim that these fees are not contractually supported. Aegon faces a significant number of these cases. For reasons of commercial necessity as well as at the instigation of the regulatory authorities, Aegon decided to modify the fee structure. As of 2017, a provision of EUR 20 million remains, which represents management's best estimate of the exposure. The final amount may vary based on regulatory developments and the outcome of litigation.
In the Netherlands, unit linked products ('beleggingsverzekeringen') have been controversial and the target of litigation since at least 2005. Allegations include excessive cost, unfair terms, inadequate disclosure, and failure to perform as illustrated. Consumer groups have formed to address these issues and initiate mass claims against insurers. Regulators as well as the Dutch Parliament have been involved ever since, with the principal goal of achieving an equitable resolution. Developments in similar cases against other Dutch insurers currently before regulators and courts may also affect Aegon. In September 2014, consumer interest group Vereniging
Woekerpolis.nl filed a claim against Aegon in court. The claim related to a range of unit-linked products that Aegon sold in the past, including Aegon products involved in earlier litigation. The claim challenges a variety of elements of these products, on multiple legal grounds, including allegations made previously. This claim is being vigorously defended. In June 2017, the court issued a verdict which upheld the principle that disclosures must be evaluated according to the standards at the time when the relevant products were placed inforce. Most of the claims of Vereniging Woekerpolis.nl were dismissed under this standard, although the court found that
Aegon did not adequately disclose certain charges on a limited set of policies. This court decision has been appealed by both parties.
Securities leasing products ('aandelenlease producten') have also been the subject of litigation in the Netherlands. Although sales of securities leasing products ended more than a decade ago, litigation relating to these products has resurfaced. In 2016, the
Dutch Supreme Court ruled on a case involving a securities leasing product sold by one of Aegon’s competitors. It decided that the financial institution was liable if a broker ('remisier') that advised on the sale of the institution's products was not properly licensed.
Sprintplan. Allegations include, among other things, a lack of a proper license of the brokers involved. Aegon defends itself vigorously against these claims. In October 2017, the district court of The Hague found in favor of Aegon that the Sprintplan liability had been conclusively determined in earlier proceedings and there were no grounds to hold further collective proceedings. The plaintiff appealed.
The case is now pending at the court of appeal of The Hague. At this time, Aegon is unable to estimate the range or potential maximum liability. There can be no assurances that this matter will not ultimately result in a material adverse effect on Aegon’s business, results of operations and financial position.
The following tables present the fair value of the assets received in relation to securities lending and reverse repurchase activities: Securities lending 2017 2016
Non-cash collateral that can be sold or repledged in the absence of default 4,166 3,288
In addition, Aegon can receive collateral related to derivative transactions that it enters into. The credit support agreement will normally dictate the threshold over which collateral needs to be pledged by Aegon or its counterparty. Transactions requiring Aegon or its counterparty to post collateral are typically the result of over-the-counter derivative trades, comprised mostly of interest rate swaps, currency swaps and credit swaps. Refer to the credit risk section in note 4 Financial risks for details on collateral received for derivative transactions.
As part of Aegon’s mortgage loan funding program in the Netherlands, EUR 6.5 billion (2016: EUR 6.8 billion) has been pledged as security for notes issued (note 39 Borrowings). In addition, in order to trade derivatives on the various exchanges, Aegon posts margin as collateral. The amount of collateral pledged for derivative transactions was EUR 2,234 million (2016: EUR 2,688 million).
As shown in the second column there are no financial assets and liabilities offset in 2017 and 2016.
(EUR 56 million). The value of the transferred customer investments under management as per January 1, 2017 amounted to approximately GBP 82 billion (EUR 96 billion) and is not recognized on Aegon’s statement of financial position.
On December 7, 2015, Aegon announced that it has increased its investment in Aegon Religare Life Insurance Company ARLI from 26 percent to 49 percent. The company has been renamed as Aegon Life Insurance Company Ltd.
On June 28, 2017, Aegon completed its transaction to divest its two largest run-off businesses in the Americas, the payout annuity business and Bank Owned Life Insurance/ Corporate Owned Life Insurance business (BOLI/COLI). Under the terms of the agreement, Aegon’s Transamerica life subsidiaries has reinsured USD 14 billion of liabilities. The transaction resulted in a book gain of USD 250 million (EUR 231 million), reported in the line other income in the condensed consolidated income statement. The book gain consisted of a loss on the reinsurance transaction which is more than offset by the reclassification of gains from Other
On January 18, 2016 Aegon Nederland N.V. sold its commercial non-life insurance business, which includes the proxy and coinsurance run-off portfolios. This business has an annual premium volume of approximately EUR 90 million. The total insurance liabilities from this business are EUR 334 million while the consideration paid in cash was EUR 302 million. The transaction was subsequently approved by the Dutch Central Bank (De Nederlandsche Bank) and the Dutch Authority for Consumers and Markets (Autoriteit
Part VII transfer1, which were completed in 2017. The loss on the reinsurance transaction is GBP 1.9 billion (EUR 2.4 billion) being the difference of the reinsurance premium paid and the reinsurance asset received related to the insurance liabilities. Upon disposal an amount of GBP 1.4 billion (EUR 1.8 billion) related to a positive revaluation reserve has been reclassified from Other Comprehensive
On December 16, 2016, Aegon completed the sale of 100% of its shares of Aegon Life Ukraine to TAS Group, and exited the Ukrainian market. This transaction has no material impact on the consolidated numbers of Aegon.
Mondiale for EUR 350 million was announced on November 24, 2014. Proceeds from the sale were added to Aegon’s excess cash buffer, and increased the group's Insurance Group Directive (IGD) solvency ratio by over 4 percentage points at the time of the sale.
(72) million (EUR (51) million) release of the net foreign investment hedging reserve and CAD 668 million (EUR 476 million) for the release of the available for sale reserve. The net cash proceeds were CAD 543 million (EUR 387 million) consisting of CAD 600 million
Seven Investment Management (7IM) for GBP 19 million (EUR 26 million). This transaction has led to a net gain of GBP 7 million
52 Group companies Subsidiaries The principal subsidiaries of the parent company Aegon N.V. are listed by geographical segment. All are wholly owned, directly or indirectly, unless stated otherwise, and are involved in insurance or reinsurance business, asset management or services related to these activities. The voting power in these subsidiaries held by Aegon is equal to the shareholdings.
Americas �� Transamerica Advisors Life Insurance Company, Little Rock, Arkansas (United States); �� Transamerica Casualty Insurance Company, Columbus, Ohio (United States); �� Transamerica Corporation, Wilmington, Delaware (United States); �� Transamerica Financial Life Insurance Company, Albany, New York (United States); �� Transamerica Life Insurance Company, Cedar Rapids, Iowa (United States); �� Transamerica Premier Life Insurance Company, Cedar Rapids, Iowa (United States).
Europe The Netherlands �� Aegon Bank N.V., The Hague; �� Aegon Hypotheken B.V., The Hague; �� Aegon Levensverzekering N.V., The Hague; �� Aegon Schadeverzekering N.V., The Hague; �� Aegon Spaarkas N.V., The Hague; �� Optas Pensioenen N.V., Rotterdam; �� TKP Pensioen B.V., Groningen; �� Unirobe Meeùs Groep B.V., The Hague (until November 1, 2017); �� Aegon PPI B.V., The Hague; �� CAPPITAL Premiepensioeninstelling B.V., Groningen.
Central & Eastern Europe �� Aegon Magyarország Általános Biztosító Zártkörűen Működő Részvénytársaság, Budapest (Aegon Hungary Composite
Spain & Portugal �� Aegon España S.A.U. de Seguros y Reaseguros, Madrid (Spain); �� Aegon Administracion y Servicios A.I.E., Madrid (Spain); �� Aegon Activos A.V., S.A., Madrid (Spain); �� Aegon Mediacion, S.L.U, Madrid (Spain).
Asia �� Transamerica Life (Bermuda) Ltd., Hamilton (Bermuda); �� Aegon Insights Limited, Hong Kong (Hong Kong).
Joint ventures The principal joint ventures are listed by geographical segment. The voting power in these joint ventures is equal to the shareholdings except for Akaan where Aegon has 50% of the voting power.
Asia �� Aegon Sony Life Insurance Co., Tokyo (Japan), (50%); �� Aegon THTF Life Insurance Co., Ltd., Shanghai (China), (50%); �� SA Reinsurance Ltd, Hamilton (Bermuda), (50%).
Asset Management �� Aegon Industrial Fund Management Co., Ltd, Shanghai (China), (49%).
53 Related party transactions In the normal course of business, Aegon enters into various transactions with related parties. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties of Aegon include, amongst others, its associates, joint ventures, key management personnel and the defined benefit and contribution plans. Transactions between related parties have taken place on an arm’s length basis. Transactions between Aegon and its subsidiaries that are deemed related parties have been eliminated in the consolidation and are not disclosed in the notes.
Board, the CEOs of Aegon USA, Aegon Continental Europe, Aegon UK, Aegon Asset Management, Chief Risk Officer, Chief Technology
IFRS-EU expenses related to variable compensation amounted to EUR 6.3 million (2016: EUR 6.0 million; 2015: EUR 5.0 million)
Management Board over 2017 were EUR 18.3 million (2016: EUR 18.7 million; 2015: EUR 16.8 million). The amount is reflective of time spent on the Management Board.
Remuneration of members of the Executive Board The information below reflects the compensation and various related expenses for members of the Executive Board. Mr. Rider was appointed to the Executive Board for a term of four years by the shareholders on May 19, 2017 as CFO. Amounts and numbers are disclosed for the period Mr. Rider has been part of the Executive Board. Under the current remuneration structure, rewards are paid out over a number of years, or in the case of shares, vest over a number of years. This remuneration structure has made it more relevant to present rewards earned during a certain performance year instead of what was received in a certain year.
Total conditional variable compensation awards 1,646 1,791 1,707 1 Mr. Rider was appointed as CFO and member of Aegon’s Executive Board per May 19, 2017. Conditional variable compensation is disclosed for the period that
Variable compensation is split 50/50 in a cash payment and an allocation of shares. Of the variable compensation related to performance year 2017, 40% is payable in 2018. Accordingly, Mr. Wynaendts and Mr. Rider will receive a cash payment of EUR 229 and EUR 100 respectively. The number of shares to be made available in 2018 relating to performance year 2017 is 43,732 and 19,017 for Mr. Wynaendts and Mr. Rider respectively. The vested shares, less the number of shares to cover for the payment of any applicable taxes, social security premiums and possible other deductions by the government due for which the
Company holds a withholding obligation in connection with the vesting of the shares, are subject to a three year retention (holding)
The remaining part of variable compensation for the performance year 2016 (60%), for Mr. Wynaendts EUR 313 and 61,083 shares and for Mr. Button EUR 224 and 44,424 shares, is to be paid out in equal portions in 2018, 2019 and 2020, subject to ex-post assessments, which may result in downward adjustments and may be subject to additional conditions being met. Any payout will be split 50/50 in a cash payment and an allocation of shares vesting. The vested shares, less the number of shares to cover for the payment of any applicable taxes, social security premiums and possible other deductions by the government due for which the
Variable compensation is split 50/50 in a cash payment and an allocation of shares. Of the variable compensation related to performance year 2015, 40% is payable in 2016. Accordingly, Mr. Wynaendts and Mr. Button will receive a cash payment of EUR 185 and EUR 157 respectively. The number of shares to be made available in 2016 relating to performance year 2015 is 30,219 and 23,621 for Mr. Wynaendts and Mr. Button respectively. The vested shares, less the number of shares to cover for the payment of any applicable taxes, social security premiums and possible other deductions by the government due for which the
For active members of the Executive Board 50% of the shares vested in 2012 and 50% vested in 2016. 9 The shares that were allocated, vested with the acceptance of the Annual Accounts at the AGM in the year of vesting. The vesting price (in EUR) was: 7.2428 on 21 May 2015, 4.5020 on 20 May 2016, and 4.4230 on May 2017.
Other benefits include non-monetary benefits (e.g. company car), social security contributions by the employer, and tax expenses borne by the Group.
(2016: EUR 416, 2017: EUR 432). 2 Mr. Rider was appointed as CFO and member of Aegon’s Executive Board per May 19, 2017. Pension contributions are disclosed for the period that Mr. Rider has been part of the Executive Board. 3 Mr. Button stepped down as CFO and member of Aegon’s Executive Board on December 1, 2016. Pension contributions are disclosed for the period that
Mr. Button has been part of the Executive Board and are reflective of his time with Aegon until December 1, 2016. Expenses recognized under IFRS-EU accounting treatment in the income statement for MR. Button for 2016 amount to EUR 375 (2015: EUR 215).
EUR 1,342. The total remuneration for the members of the Executive Board over 2017 was EUR 6.0 million (2016: EUR 7.3 million; 2015: EUR 6.0 million). Total expenses recognized under IFRS-EU accounting treatment in the income statement for Mr. Wynaendts related to 2017 was EUR 4,258 (2016: EUR 4,086; 2015: EUR 4,167) and for Mr. Rider EUR 1,088 (2016: nil; 2015: nil). Total
IFRS-EU expenses for the members of the Executive Board over 2017 was EUR 5.3 million (2016: EUR 8.0 million; 2015: 7.1 million).
Interests in Aegon N.V. held by active members of the Executive Board Shares held in Aegon at December 31, 2017 by Mr. Wynaendts amount to 448,601 (2016: 401,948). Mr. Rider was appointed as CFO
William L. Connelly (as of May 19, 2017) 60,125 - -
Mark A. Ellman (as of May 19, 2017) 70,125 - -
54 Events after the reporting period On January 11, 2018, Aegon announced that its subsidiary in the Americas, Transamerica, has entered into an agreement with Tata
2 Summary of significant accounting policies The financial statements have been prepared in accordance with accounting principles in the Netherlands as embodied in Part 9 of
Book 2 of the Netherlands Civil Code. In accordance with 2:362.8 of the Dutch Civil Code, the Company’s financial statements are prepared based on the accounting principles of recognition, measurement and determination of profit, as applied in the consolidated financial statements. These principles also include the classification and presentation of financial instruments, being equity instruments or financial liabilities.
Results from financial transactions comprise: Net fair value change of derivatives 56 (68)
The other changes in 2017 in Loans to group companies mainly relate to currency exchange rate fluctuations.
Meeting of Shareholders. Moreover, repayment on common shares B needs approval of the related shareholders. Refer to Other information for further information on dividend rights.
R em ea su re m en t of d ef in ed b en ef it pl an s of g ro up co m pa ni es
Foreign currency translation differences and movement in foreign investment hedging reserves - - - 102 (1,717) - - - - (1,615)
Remeasurement of defined benefit plans of group companies - - - 49 - - - - - 49
The balance of the revaluation account, which includes revaluation reserves for real estate and investments that do not have a frequent market listing, consisted of EUR 5,380 million (2016: EUR 6,113 million) of items with positive revaluation and of EUR 363 million
The revaluation account and legal reserves, foreign currency translation reserve and other, can not be freely distributed. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts.
Transactions in 2017: Sale: transaction, average price EUR 0.11 (1,979) -
Junior perpetual capital securities Coupon rate Coupon date, as of Year of next call 2017 2016
Perpetual cumulative subordinated bonds Coupon rate Coupon date Year of next call 2017 2016 1 The coupon of the EUR 136 million bonds was originally set at 7.25% until October 14, 2008. Subsequently, the coupon has been reset at 5.185% until
The repayment periods of borrowings vary from within one year up to a maximum of 22 years. The interest rates vary from 0.000%
At December 31, 2017, the letter of credit arrangements utilized by captives to provide collateral to affiliates amounted to EUR 3,025 million (2016: EUR 3,720 million); as of that date no amounts had been drawn, or were due under these facilities.
19 Number of employees There were no employees employed by Aegon N.V. in 2017 (2016:nil).
The total remuneration of the independent auditor has increased compared to last year. This increase is related to a contract renewal and to additional audit work that was provided, related to a model conversion in the US and to the conversion to IFRS 9 in the
If the proposed dividend is approved by shareholders, Aegon shares will be quoted ex-dividend on May 22, 2018, for the shares listed on the New York Stock Exchange and on May 22, 2018, for shares listed on Euronext. The record date for the dividend will be May 23, 2018. Shareholders can elect to receive a dividend in cash or in shares during the dividend election period, which will run from May 29, 2018 up to and including June 15, 2018. The dividend will be payable as of June 22, 2018.
Our opinion In our opinion: �� Aegon N.V.’s consolidated financial statements give a true and fair view of the financial position of the Group as at December 31, 2017 and of its result and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU) and with Part 9 of Book 2 of the Dutch Civil Code; �� Aegon N.V.’s stand-alone financial statements give a true and fair view of the financial position of the Company as at December 31, 2017 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The stand-alone financial statements comprise: �� the company statement of financial position as at December 31, 2017; �� the company income statement for the year then ended; �� the notes, comprising a summary of the accounting policies and other explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRS-EU and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil
‘Verordening gedrags- en beroepsregels accountants’ (VGBA – Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct).
Therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
As in all of our audits, we addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that may represent a risk of material misstatement due to fraud. Furthermore, to the extent relevant for our audit, we addressed information technology general controls (‘ITGCs’), that are the policies and procedures used by the Group to ensure information technology (‘IT’) operates as intended and provides reliable data for financial reporting purposes.
We ensured that the audit teams both at group and at component levels included the appropriate skills and competences which are needed for the audit of a complex financial conglomerate, such as Aegon N.V. This included industry expertise in life and non-life insurance, banking and asset management, as well as specialists including actuaries, IT auditors, treasury, tax, corporate governance, remuneration and valuation specialists.
The outline of our audit approach was as follows: Materiality � Overall materiality: EUR 90 million.
Audit scope � We conducted audit work on six, mainly regional, units, of which three were considered to be individually financially significant.
� In order to take responsibility for the entire Group, the Group engagement team performed oversight procedures on the work of component teams for all in scope units including the Americas, the Netherlands, the United Kingdom, Central and Eastern Europe, Spain and Asset Management.
� Audit coverage: 98% of consolidated revenue, 97% of consolidated total assets and 99% of consolidated profit before tax.
� Valuation of deferred policy acquisition costs (DPAC) and value of business acquired (VOBA). � Fair value of ‘hard to value’ financial instruments. � Uncertainties in policyholder claims and litigation. � US tax reform
How we determined it We used our professional judgment to determine overall materiality. Consistent with prior years, we used 5% of a three year average of income before tax including normalizing 2016 and 2015 income before tax.
We evaluated the income before tax amounts for 2017 and prior years noting significant fluctuations from year to year. As a result, we used the average of 2017, 2016 and 2015 income before tax for purposes of determining our group materiality, consistent with prior years. Using an average helps to maintain an appropriate and consistent materiality level giving more consideration to the users’ view of the scale of the financial position and operations rather than volatile circumstances. Also, to normalize the 2016 and 2015 income before tax given the infrequent nature of the events, we excluded the realized loss from the sale of the UK annuities business (2016) and Canadian operations (2015), which were in scope of our audits in prior years. The 2017 income before tax amount has significantly increased compared to the normalized 2016 and 2015 income before tax, as a result of which our overall materiality was increased to EUR 90 million.
Component materiality To each component in our audit scope, we allocate consistently, based on our judgment, materiality that is less than our overall group materiality. The range of materiality allocated across components was between EUR 20 million and EUR 85 million.
(2016: EUR 4 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The scope of our group audit Our engagement consists of review procedures on the Q1 2017, Q2 2017 and Q3 2017 condensed consolidated interim financial statements and the 2017 year-end audit as discussed herein.
Aegon N.V. is the parent company of a group of entities. The Group is structured predominately along geographical lines referred to as
In our view, due to their significance and/or risk characteristics, the individually financially significant units of the Americas, the
Netherlands and the United Kingdom required a full-scope audit of their financial information. Specific audit procedures on certain account balances and classes of transactions were also performed in relation to, amongst others, Central and Eastern Europe, Spain and Asset Management to ensure we obtained appropriate coverage across all account balances.
None of the remaining components represented more than 1% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.
By performing the procedures above at the units, combined with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial statements.
Key audit matters Key audit matters are those matters that, in our professional judgment, are of most significance in the audit of the financial statements. We have communicated the key audit matters to the Audit Committee and Supervisory Board. The key audit matters are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. In this section, we describe the key audit matters and included a summary of the audit procedures we performed on those matters.
With regards to the comparison of key audit matters between 2017 and 2016, the US Tax Reform is a new key audit matter in 2017 as a result of the significance of its impact. We determined that Sale of the UK annuities business in two parts was no longer a key audit matter in 2017 due to it being a one-off transaction in 2016.
Given the nature of the insurance industry the following key audit matters are consistent with the prior year. �� Valuation of insurance contracts and insurance contracts for account of policyholders including the design and application of complex valuation models and the economic and actuarial assumptions that support the calculation. �� Deferred policy acquisition costs (DPAC) and value of business acquired (VOBA). �� Fair value of ‘hard to value’ financial instruments.
Valuation of insurance contracts and insurance contracts for account of policyholders including the design and application of complex valuation models and the economic and actuarial assumptions that support the calculation Refer to Note 2.19 ‘Summary of significant accounting policiesinsurance contracts’ Note 5 ‘Segment Information’ and Note 36
of the Group’s total liabilities. This is an area that involves significant judgment over uncertain future outcomes, including primarily the timing and ultimate full settlement of long term policyholder liabilities, and therefore we considered it a key matter for our audit.
To assess the adequacy of the life insurance contracts, at each reporting date, Aegon performs liability adequacy testing. This test is done to check that the liabilities are adequate as compared to the expected future contractual obligations. Consistent with the insurance industry, Aegon uses valuation models to support the calculations of the insurance contract liabilities.
The complexity of the models may give rise to errors as a result of inadequate/incomplete data or the design or application of the models. Models considered more complex and/or requiring significant judgment in the setting of assumptions are the guarantees associated with universal life and annuities along with long term care in the Americas and the corporate pension guarantees in the Netherlands.
Economic assumptions such as investment returns and interest rates and actuarial assumptions such as mortality, morbidity and customer behaviour are key inputs used to estimate these longterm liabilities. Significant judgment is applied in setting these assumptions. Given the magnitude of the insurance contract positions and the sensitivities as explained in Note 36, a change in assumptions (especially mortality and morbidity) could have a significant effect on net income and shareholders’ equity.
During 2017, Aegon continued a multi-year review of their actuarial models with continued focus on those considered medium and high risk. Model updates in combination with the
Company’s actuarial and economic assumptions update resulted in a EUR 276 million charge for the year as explained in Note 5
‘Segment Information’. Most significant item in 2017 was the conversion of the largest block of universal life business to a new model in Aegon Americas, resulting in a EUR 303 million charge.
We used our own actuarial specialists to assist us in performing our audit procedures. In particular, our audit focused on the models considered to be more complex and/or requiring significant judgment in the setting of assumptions. We assessed the design and tested the operating effectiveness of internal controls over the actuarial process including management’s determination and approval process for setting of economic and actuarial assumptions as well as controls over Aegon’s actuarial analyses including estimated versus actual results and experience studies.
We assessed the Group’s validation of certain models considered medium and higher risk by the Group as a result of complexity and/or magnitude. We performed audit procedures over models and model updates to determine the models and systems were calculating the insurance contracts liabilities accurately and completely, with a particular focus on the conversion of the largest block of universal life business to a new model in Aegon Americas.
For the models used by the Group, we considered the appropriateness of data used as well as actuarial judgments, which may vary depending on the product and/or the specifications of the product, and also the compliance of the models with the applicable accounting standards.
We tested the validity of management’s liability adequacy testing by assessing the input to the test and validating calculations performed. Our work on the liability adequacy tests included assessing the reasonableness of the projected cash flows and challenging the assumptions adopted in the context of both
Aegon’s and industry experience and specific product features, as well as reconciliations to supporting evidence.
For the assumption setting process, we assessed the experience analyses performed by the Group. Our assessments also included challenging, as necessary, specified economic and actuarial assumptions considering management’s rationale for the actuarial judgments applied along with comparison to applicable industry experiences.
We also assessed the adequacy of the disclosures regarding these liabilities in the consolidated financial statements to determine they were in accordance with IFRS-EU.
Valuation of DPAC and VOBA Refer to Note 2.6 ‘Summary of significant accounting policiesintangible assets’, Note 2.13 ‘Summary of significant accounting policies-deferred expenses’ and Notes 31 ‘Intangible assets’ and 29 ‘Deferred expenses’.
of total DPAC and VOBA, involves the greatest judgment in terms of measurement and recoverability. The amortization of the DPAC
Our work in this area included assessing the reasonableness of the assumptions by comparing it against own experience and applicable industry experiences.
Fair value of ‘hard to value’ financial instruments Refer to Note 2.7 ‘Summary of significant accounting policiesinvestments ’ and Note 47 ‘Fair value’.
The Group’s investment portfolio including net derivative assets totalling EUR 136.0 billion represents 34.3% of the Group’s total assets. The majority of the portfolio consists of more traditional investments with a straightforward valuation.
The risk was not uniform for all investment types and industries and was considered greatest for derivatives, direct and indirect investments in real estate, mortgage loans, asset backed securities, hedge funds, private equity funds and other alternative investments, and unlisted equity and debt securities.
We assessed the design and tested the operating effectiveness of internal controls over the investments’ valuation and impairment process including management’s determination and approval of assumptions and methodologies used in modelbased calculations, controls over data integrity and change management for internally operated valuation models and management’s review of valuations provided by external experts or data vendors. We performed substantive audit procedures to supplement procedures over internal controls testing.
Depending on the actual legal position and expectations from management, claims, including litigation related, are either provided for as a liability or reflected as contingent liabilities in the notes to the financial statements based on the criteria as outlined in IAS 37.
We gained an understanding of the policyholders’ claims and litigations through discussions with management including general legal counsel.
Group. We tested that the Group has properly reflected the claims and litigations in either the provisions or the contingent liabilities by assessing these against the criteria in IAS 37.
We used our tax specialists to assist us in performing our audit procedures. We have read the internal position papers prepared by the Group and assessed the papers on accuracy and completeness when comparing to the US Tax Reform provisions.
We evaluated the design and tested the operating effectiveness of internal controls over deferred and current income tax provisions including management’s calculation of the impacts.
We tested the deferred and current income tax balance, inclusive of the impact of the US Tax Reform and including reconciling inputs to supporting evidence received. We assessed that the classification of the impact of the US Tax reform in either the income statement and OCI was appropriate by verifying that the deferred tax effects followed the accounting for the associated transaction. We also assessed the adequacy of the disclosures regarding the impact of the US Tax Reform in the consolidated financial statements to determine they were in accordance with IFRS-EU.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720.
Report on other legal and regulatory requirements Our appointment We were initially appointed as auditors of Aegon N.V. by the Supervisory Board for the years 2014 to 2016 following the passing of a resolution by the shareholders at the annual meeting held on May 15, 2013. We were reappointed as auditors of Aegon N.V. by the
European Regulation on specific requirements regarding statutory audit of public interest entities.
Services rendered In addition to the audit, we have provided the Company and its Dutch subsidiaries services required by laws and regulations as well as other audit services, being attestation services (including agreed upon procedures for third parties), assurance engagements other than audits and reviews of published quarterly historical information, assurance reports on controls at a service organization for customers of the Company, comfort letter related procedures and audits of regulatory information for the Company’s regulator the
Dutch Civil Code; and for the preparation of the directors’ report in accordance with Part 9 of Book 2 of the Dutch Civil Code; and for �� such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Executive Board is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Executive Board should prepare the financial statements using the going-concern basis of accounting unless the Executive Board either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. The Executive Board should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.
Appendix to our auditor’s report on the financial statements 2017 of Aegon N.V. In addition to what is included in our auditor’s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements We have exercised professional judgment and have maintained professional scepticism throughout the audit in accordance with Dutch
Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among other things of the following: �� Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
�� Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. �� Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect we also issue an additional report to the Audit Committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
The relevant provisions read as follows: 1. 1. The General Meeting of Shareholders will adopt the Annual Accounts; 2. If the adopted profit and loss account shows a profit, the Supervisory Board may decide, upon the proposal of the Executive Board, to set aside part of the profit to augment and/or form reserves; 3. The profits remaining after application of 2 above shall be put at the disposal of the General Meeting of Shareholders.
Major shareholders General As of December 31, 2017, Aegon’s total authorized share capital consisted of 6,000,000,000 common shares with a par value of EUR 0.12 per share and 3,000,000,000 common shares B with a par value of EUR 0.12 per share. At the same date, there were 2,095.648,244 common shares and 585,022,160 common shares B issued. Of the issued common shares, 64,488,094 common shares and 15,345,680 common shares B were held by Aegon as treasury shares and 1,162,556 treasury shares were held by its subsidiaries.
All of Aegon’s common shares and common shares B are fully paid and not subject to calls for additional payments of any kind. All of Aegon’s common shares are registered shares. Holders of shares of New York registry hold their common shares in the registered form issued by Aegon’s New York transfer agent on Aegon’s behalf. Shares of New York registry and shares of Netherlands registry are exchangeable on a one-to-one basis and are entitled to the same rights, except that cash dividends are paid in US dollars on shares of New York registry.
As of December 31, 2017, 278 million common shares were held in the form of New York Registry shares. As of December 31, 2017, there were approximately 16,966 record holders of Aegon’s New York Registry shares resident in the United States.
The purpose of the Association is a balanced representation of the direct and indirect interests of Aegon N.V. and of companies with which Aegon N.V. forms a group, of insured parties, employees, shareholders and other related parties of these companies. Influences that threaten the continuity, independence or identity of Aegon N.V., in conflict with the aforementioned interests will be resisted as much as possible.
General Meeting of Shareholders of Aegon N.V. In September 2002, Aegon N.V. effected a capital restructuring whereby Vereniging
On May 9, 2003, Aegon’s shareholders approved certain changes to Aegon’s corporate governance structure. Preferred shares with a nominal value of EUR 0.12 were converted into 211,680,000 new class A preferred shares with a nominal value of EUR 0.25, and class B preferred shares were created with a nominal value of EUR 0.25 each. No class B preferred shares were issued at that time. The voting rights pertaining to the preferred shares were adjusted accordingly to 25/12 vote per preferred share. However, in May 2003,
Aegon N.V. and Vereniging Aegon entered into a Preferred Shares Voting Agreement, pursuant to which Vereniging Aegon agreed to exercise one vote only per preferred share, except in the event of a 'Special Cause', as defined below.
Vereniging Aegon. Following this 2013 amendment, Vereniging Aegon’s call option relates to common shares B. Vereniging Aegon may exercise its call option to keep or restore its total stake at 32.6%, irrespective of the circumstances which cause the total shareholding to be or become lower than 32.6%.
to mitigate dilution caused by Aegon’s issuance of shares on January 1, 2015, in connection with the Long Term Incentive Plans for senior management.
On May 19, 2016, Aegon N.V. repurchased 13,450,835 common shares from Vereniging Aegon for the amount of EUR 58,000,000, being the Value Weight Average Price of the common shares of the five trading days preceding this transaction, as part of the
EUR 400 million Share Buy Back program, initiated by Aegon N.V. in January 2016 to neutralize the dilutive effect of the cancellation of Aegon N.V.’s preferred shares in 2013.
On December 19, 2017, Aegon N.V. repurchased 13,042,592 Common Shares B from Vereniging Aegon for the amount of EUR 1,725,169.73 based on 1/40th of the Value Weight Average Price of the common shares of the five trading days preceding this transaction. The repurchase of common shares B was executed to align the aggregate shareholding of Vereniging Aegon in Aegon N.V.
Accordingly, at December 31, 2017, the voting power of Vereniging Aegon under normal circumstances amounted to approximately 14.34%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon N.V.).
Other major shareholders In this section below where reference is made to any filings with the Dutch Autoriteit Financiële Markten or the SEC the terms 'capital issued' and 'votes' are used as defined in the Wet op het Financieel Toezicht.
To Aegon’s knowledge based on the filings made with the Dutch Autoriteit Financiële Markten, the US based investment management firm Dodge & Cox International Stock Fund holds a capital and voting interest in Aegon of over 5%.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at September 22, 2016, Dodge & Cox International Stock
December 31, 2017. On February 20, 2018, Dodge & Cox's filing with the SEC shows that Dodge & Cox holds 256,029,115 common shares, representing 9.8% of the issued and outstanding capital as at December 31, 2017 and has voting rights for 250,384,686 shares, representing 9.6% of the votes as at December 31, 2017.
Based on its filing with the Dutch Autoriteit Financiële Markten as at May 26, 2017, BlackRock, Inc. stated to hold 59,827,512 shares, representing 2.3 % of the issued and outstanding capital as at December 31, 2017 and 79,077,402 voting rights, representing 3.0% of the votes as at December 31, 2017. On February 20, 2018, BlackRock, Inc.’s filing with the SEC shows that BlackRock holds 119,424,291 common shares, representing 4.6% of the issued and outstanding capital as at December 31, 2017, and has voting rights for 107,367,731 shares, representing 4.1% of the votes as at December 31, 2017.
Other financial information Schedules to the financial statements Index to schedules Schedule I Summary of Investments other than Investments in Related Parties as at December 31, 2017 Schedule II Condensed Financial Information of Registrant (Parent Company Only) Schedule II Statement of Financial Position as of December 31, 2017 and 2016 Schedule II Income Statement (Loss) for the years ended December 31, 2017, 2016 and 2015 Schedule II Condensed Cash Flow Statement for the years ended December 31, 2017, 2016 and 2015 Schedule II Dividends from and Capital Contributions to Business Units for the years ended December 31, 2017, 2016 and 2015 Schedule III Supplementary Insurance Information for the years ended December 31, 2017, 2016 and 2015 Schedule IV Reinsurance for the years ended December 31, 2017, 2016 and 2015 Schedule V Valuation and Qualifying Accounts for the years ended December 31, 2017, 2016 and 2015
Other investments at fair value through profit or loss 1,898 1,914 1,914
Real estate: Investments in real estate 2,147 2,147 1 Cost is defined as original cost for available-for-sale shares and amortized cost for available-for-sale and held-to-maturity bonds
Net increase / (decrease) in cash and cash equivalents 188 570 (346)
Dividends from and capital contributions to business units Aegon received EUR 1.8 billion of dividends from its business units during 2017, mainly from Americas, United Kingdom, Asset
Eastern Europe and Spain & Portugal. Aegon spent EUR 0.2 billion on capital contributions.
Amounts in million EUR Gross amount Ceded to other companies Assumed from other companies Net amount % of amount assumed to net
In the UK and the Netherlands, Aegon maintained a limited number of plans that are reportable under Section 219. The non-U.S.
(“HMT”) had previously confirmed that this business activity falls within an acceptable exemption. On October, 22 2016 HMT removed the entity from their consolidated list.
bank account. The pensions are managed in line with applicable legislation and regulation in the UK and the charity is not subject to sanctions in the UK or EU. The relationships are under close ongoing review. IPP #1 has a value of GBP 9,741 as at January 12, 2018, and regular monthly contributions of GBP 69.41 are being received into this policy. IPP #2 has a value of GBP 4,287as at January 12, 2018, and regular monthly contributions of GBP 18.61 are being received. IPP #3 has a value of GBP 193,694 as at January 12, 2018, and regular monthly contributions of GBP 527.91 are being received. IPP #4 has a value of GBP 8,854 as at January 12, 2018, and no further contributions are being received. IPP #5 has a value of GBP 43,119 as at January 12, 2018, and no further contributions are being received. IPP #6 has a current value of GBP 8,348 as at January 12, 2018, and no further contributions are being received.
List (‘FSE List’) with Regard to Syria and is listed on the SDN and Blocked Persons List. The FSE List includes persons sanctioned pursuant to E.O. 13608 and are identified with the program tags [FSE-IR] and [FSE-SY]. The customer is not subject to sanctions in the
IPP #1 and #2 are lifelong annuity plans which start at the retirement age of 65 (January 2023). The annual pensions benefits as of
Compliance with regulations Compliance with regulations Compliance with regulations Compliance with regulations
Risks relating to Aegon’s business The following covers key risk factors that may affect Aegon’s businesses and operations, as well as other risk factors that are particularly relevant to Aegon in periods of significant economic uncertainty. Additional risks to which Aegon is subject include, but are not limited to, the factors mentioned under 'Forward-looking statements', and the risks of Aegon’s businesses described elsewhere in this Annual Report.
Aegon’s results of operations and financial condition may be materially affected from time to time by general economic conditions, such as economic growth, levels of unemployment, consumer confidence, inflation and interest rate levels in the countries in which
Governmental action in the United States, the Netherlands, the United Kingdom, the European Union and elsewhere to address any of the above may impact Aegon’s businesses. Aegon cannot predict the effect that these or other government actions as well as actions by the ECB or the Federal Reserve may have on the financial markets or on Aegon’s businesses, results of operations, cash flows and financial condition.
Aegon also considers credit risk to include spread risk that is the value of the bond reduces due to a general widening of credit spreads.
Netherlands separate account products can include guarantees which protect policyholders against some or all of the downside risks in their separate account portfolio. Reduced separate account values also decrease fee income and may accelerate deferred policy acquisition costs (DPAC) amortization. Reconsideration of assumptions might also affect the DPAC amortization schedule. These factors may have a material adverse effect on Aegon’s results of operations and financial position.
EU), are also at risk if returns are not sufficient to allow amortization of DPAC, which may impact the reported net income as well as shareholders’ equity. Volatile or poor market conditions may also significantly reduce the demand for some of Aegon’s savings and investment products, which may lead to lower sales and net income.
Interest rate volatility or sustained low interest rate levels may adversely affect Aegon’s profitability and shareholders´ equity.
Aegon is exposed to interest rate risk as both its assets and liabilities are sensitive to movements in long and short term interest rates as well as to changes in the volatility of interest rates. 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 affected adversely by the increase in market interest rates. This may result in realized investment losses.
under IFRS-EU. This is inconsistent with the IFRS-EU accounting on much of Aegon’s liabilities, where corresponding economic gains from higher interest rates do not affect shareholders’ equity or income in the shorter term. Over time, the short-term reduction in shareholder equity and income due to rising interest rates would be offset in later years, all else being equal.
guarantees, resulting in increased premium payments on products with flexible premium features and a higher percentage of insurance policies remaining in force year-to-year. The majority of assets backing the insurance liabilities are invested in fixed-income securities.
Aegon manages its investments and derivative portfolio, considering a variety of factors, including the relationship between the expected duration of its assets and liabilities. However, if interest rates remain low, the yield earned upon reinvesting interest payments from current investments, or from their sale or maturation, may decline. Reinvestment at lower yields may reduce the spread between interest earned on investments and interest credited to some of Aegon’s products and accordingly net income may decline. In addition, borrowers may prepay or redeem fixed maturity investments or mortgage loans in Aegon’s investment portfolio in order to borrow at lower rates. Aegon can lower crediting rates on certain products to offset the decrease in spread. However, its ability to lower these rates may be limited by contractually guaranteed minimum rates or competition.
To the extent the foreign exchange component of expected dividends is not hedged or actual dividends vary from expected, Aegon’s net income and shareholders’ equity may fluctuate. As Aegon has significant business segments in the Americas and in the United
Any security Aegon issues in significant volume may be issued at higher financing costs if funding conditions are impaired. The necessity to issue securities can be driven by a variety of factors, for instance Aegon may need liquidity for operating expenses, debt servicing and the maintenance of capital levels of insurance subsidiaries. Although Aegon manages its liquidity position for extreme
Aegon makes use of (bilateral and syndicated) credit facilities to support repayment of amounts outstanding under Aegon’s commercial paper programs and to serve as additional sources of liquidity. An inability to access these credit facilities, for example due to noncompliance with conditions for borrowing or the default of a facility provider under stressed market circumstances, could have an adverse effect on Aegon’s ability to meet liquidity needs and to comply with contractual and other requirements.
Further, a downgrade of Aegon’s credit ratings may also result in additional collateral requirements and affect its liquidity, or even enable counterparties to terminate such derivative transactions.
Underwriting risk relates to the products sold by Aegon insurance entities. The underwriting process requires, among others, the setting of assumptions. Aegon’s reported results of operations and financial condition may be affected by differences between actual claims experience and underwriting and reserve assumptions both due to incurred gains/ losses and from potential changes in best estimate assumptions that are used to value insurance liabilities.
There is a risk that the pricing of Aegon’s products turns out to be inadequate if the assumptions used for pricing do not materialize.
Aegon’s income would be reduced. Furthermore, if less favorable claims experience became sustained, Aegon may be required to change its best estimate assumptions with respect to future experience, potentially increasing the technical provisions for insurance liabilities, which may reduce Aegon’s income. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on the balance sheet and are being amortized into income over time. If the assumptions relating to the future profitability of these policies (such as future claims, investment income and expenses) are not realized, the amortization of these costs may be accelerated and may require write-offs should there be an expectation that the costs are not fully recoverable. This may have a materially adverse effect on Aegon’s results of operations and financial condition.
Certain products, particularly Aegon’s variable annuity products, include death benefit guarantees, guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values. These guarantees are designed, among other things, to protect policyholders against downturns in equity markets and interest rates. As a result, a drop in the value of underlying assets or more volatile markets could result in an increase in the valuation of Aegon’s liabilities associated with these products. An increase in these liabilities may decrease its net income. Aegon uses a variety of hedging and risk management strategies to mitigate these risks. However, these strategies may not be fully effective and hedging instruments may not fully offset the costs of guarantees or may otherwise be insufficient in relation to its obligations. Estimates and assumptions Aegon makes in connection with hedging activities may fail to fully reflect or correspond to the actual (longer term) exposure in respect of guarantees. Further, unexpected policyholder behavior may cause Aegon’s hedging to be less effective. The above factors could have a material adverse effect on its results of operations, financial condition or liquidity.
Aegon is exposed to changes in the fair value of its investments, the impact of interest rate, equity markets and credit spread changes, currency fluctuations and changes in mortality and longevity. Aegon uses common financial derivative instruments, such as swaps, options, futures and forward contracts to hedge some of the exposures related to both investments backing insurance products and company borrowings. Aegon may not be able to manage the risks associated with these activities successfully through the use of derivatives. In addition, a counterparty may fail to honor the terms of its derivatives contracts with Aegon and clearing members and clearing houses may terminate their derivatives contracts with Aegon. Aegon’s inability to manage risks successfully through derivatives, a counterparty’s failure to honor Aegon’s obligations or the systemic risk that failure is transmitted from counterparty to counterparty may each have a material adverse effect on Aegon’s businesses, results of operations and financial condition.
Currently the possible impact of Brexit on clearing houses located in the United Kingdom is unknown. Aegon uses London Clearing
House (LCH) as central counterparty to clear most of its derivatives transactions. If, following Brexit, the system of supervision in the
United Kingdom is not considered equivalent to that of the European Union and LCH has not been granted recognition, new and existing derivatives cleared through LCH and executed by EU27 entities, may not comply to EMIR regulations and possibly existing trades may have to be terminated and replaced by new trades to be cleared by an authorized clearing house located in the EU27. This could lead to additional costs and may impair the effectiveness of Aegon’s hedging programs.
Aegon’s business units may utilize quantitative models, algorithms or calculations (whether proprietary or supplied by third parties)
(Models) or information or data supplied by third parties (Data) for the management of, or to assist in the management of, investment products offered to clients. Examples of such investment products include, volatility controlled funds, mutual funds, separately managed accounts, and other types of advisory accounts. Models and Data are used to construct sets of transactions and investments, to provide risk management insights, and may be used to assist in hedging the investments. If Models and Data prove to be incorrect or incomplete, any decisions made, in whole or part, in reliance thereon expose the investment product to additional risks. For example, by utilizing Models or Data, certain investments may be bought at prices that are too high, certain other investments may be sold at prices that are too low, or favorable opportunities may be missed altogether. Similarly, any hedging based on faulty Models and Data may prove to be unsuccessful. The applicable investment product bears the risk that Models or Data used will not be successful and the product may not achieve its investment objective. Models can be predictive in nature. The use of predictive Models has inherent risks. For example, such Models may incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-tomarket basis. In addition, in unforeseen or certain low-probability scenarios (often involving a market disruption of some kind), such
Models may produce unexpected results, which can result in losses for an investment product. Furthermore, the success of relying on or otherwise using Models depends on a number of factors, including the validity, accuracy and completeness of the Model’s development, implementation and maintenance, the Model’s assumptions, factors, algorithms and methodologies, and the accuracy and reliability of the supplied historical or other Data. Models rely on, among other things, correct and complete Data inputs. If incorrect Data is entered into even a well-founded Model, the resulting information will be incorrect. However, even if Data is input correctly, Model prices may differ substantially from market prices, especially for securities with complex characteristics. Investments selected with the use of Models may perform differently than expected as a result of the design of the Model, inputs into the Model or other factors.
Aegon may be required to increase its technical provisions and/or hold higher amounts of regulatory capital, which may decrease Aegon’s returns on its products.
Commissioners’ (NAIC) in the US or US state regulators may adopt revisions to applicable risk based capital formulas and local regulators in other jurisdictions in which Aegon’s subsidiaries operate may increase their capital requirements.
In addition to requirements imposed directly through regulatory requirements and/or supervisory authorities rating agencies may incorporate higher capital thresholds into their quantitative analyses, thus requiring additional capital for Aegon’s regulated subsidiaries in order for Aegon Group and/or its regulated subsidiaries to maintain their desired credit ratings.
An important example of changed regulatory requirements for insurers originates from the European Commission’s Solvency
De Nederlandse Bank (DNB) to apply, as of July 1, 2017, a revised methodology that includes lowering the conversion factor from 250%
to 150% RBC, and reducing the contribution to own funds by 100% of the local Company Action Level RBC requirement to reflect transferability restrictions. This methodology is subject to annual review and the change enhances comparability with European peers.
In addition, the NAIC is reviewing the use of captives for variable annuity business and is considering actuarial and accounting changes for variable annuities. Aegon utilizes variable annuity captives to align its hedging strategy with capital requirements for a closed block of variable annuities. The NAIC also continues to consider changes to corporate governance and insurers’ use of captives.
Aegon has experienced downgrades and negative changes to its outlook in the past, and may experience rating and outlook changes in the future. A downgrade or potential downgrade, including changes in outlook, may result in higher funding costs and/or affect the availability of funding in the capital markets. In addition, a downgrade may adversely affect relationships with broker-dealers, banks, agents, wholesalers and other distributors of Aegon’s products and services, which may negatively impact new sales and adversely affect Aegon’s ability to compete. A downgrade of Aegon’s credit ratings will have the small effect of increased fees on credit facilities but may result in higher funding costs on future long term debt funding transactions and its ability to obtain reinsurance contracts at reasonable prices or at all.
Changes in government regulations in the countries in which Aegon operates may affect profitability.
(e.g. policyholders), not holders of Aegon capital securities. Changes in existing laws and regulations may affect the way in which Aegon conducts its businesses, the profitability of its businesses and the products offered. Additionally, the laws or regulations adopted or amended from time to time may be more restrictive or may result in higher costs than currently the case, such as with regard to the calculation of capital needs, treatment of own funds, rules or guidance with respect to the modelling of insurance, investment and other risks.
Regulatory changes include or may include capital standards and prudential standards for non-bank companies deemed to be systemically important financial institutions (SIFIs) that are more stringent than the standards applicable to non-SIFIs. Aegon has not been designated a SIFI in the United States. In addition, US state insurance regulators are developing group capital standards. The scope of application of these standards has not yet been determined. The current US administration announced plans to review aspects of the Dodd-Frank Act. This review may result in changes in laws and regulations that may impact US or global operations.
In the United States, the Patient Protection and Affordable Care Act (PPACA) was enacted in 2011 and upheld, with the exception of the Medicaid expansion mandate, by the US Supreme Court in 2012. PPACA significantly changed the regulation of health insurance in the United States, including in certain respects the regulation of supplemental health insurance products. The current US Presidential administration and US Congress have repealed certain provisions of the PPACA and additional changes in laws or regulations that may impact US health insurance industry are possible. The extent to which employers or individuals may discontinue their purchase of supplemental health insurance products as a result of these changes may significantly impact Aegon USA’s supplemental health insurance products business. The extent of the expected changes or impact on Aegon USA’s supplemental health insurance business cannot be determined at this time.
Solvency II became effective in EU member states as per January 1, 2016. Elements of the Solvency II framework may change going forward. This may affect the way Aegon implements the Solvency II framework, including Aegon’s financial position under Solvency
SCR until after the occurrence of statistical ‘1-in-10 year’ equivalent stress scenarios. However, Aegon aspires to consistently maintain higher capital levels and targets local capitalisation levels in the operating units to support sustainable capital generation and stable dividends also until after the occurrence of statistical ‘1- in-10 year’ equivalent stress scenarios. These scenarios do not only reflect narrow statistical events, but can also include a broader range of stress scenarios such as economic, operational, regulatory and political events. Pursuant to these self-imposed criteria, Aegon currently aims to hold a buffer in excess of the 100% minimum Group
Solvency Ratio of 50 to 100%. The calculation of the Group Solvency Ratio in accordance with Solvency II is further described in the section “Regulation and Supervision”.
In the Netherlands, the Dutch Central Bank provided guidance with regard to assumptions underlying Aegon’s factor for the loss absorbing capacity of deferred taxes (LAC-DT). Reduction of this factor would impact the Group Solvency II ratio. From June 30, 2017 to year-end, the factor of LAC-DT taken into account in Aegon the Netherlands’ Solvency II ratio remained unchanged at 75%. The factor is reassessed quarterly. The Solvency II sensitivity for a 25-percentage points change in the factor is given in the section “Capital and liquidity management”. The treatment of LAC-DT under the Solvency II framework is also one of the elements of the Solvency
The United States Department of Labor (DOL) issued a ‘Conflict of Interest’ or ‘Fiduciary’ rule in April 2016 (the ‘DOL Rule’) that substantially broadens the definition of ‘fiduciary’ with respect to retirement savings and investment plans and products (‘qualified assets’). The final rule would, with limited exemptions and carve-outs, make agents and brokers who provide recommendations on qualified assets, subject to a best interest/fiduciary standard. The DOL Rule best interest standard becomes effective with additional requirements and exemptions as of July 1, 2019. The DOL announced that it would further review the DOL Rule and propose additional changes before the DOL Rule becomes fully applicable. In addition the SEC has announced that it will propose a harmonized standard of care for broker dealers and investment advisers. Finally, New York and several other states have proposed or are expected to propose a heightened standard of care for financial professionals in their state and/or relating to the sale of life insurance as well as retirement savings and investment products.
The DOL Rule could have a material adverse impact from a prospective sales perspective both as to Aegon USA’s retirement plan and annuity businesses, and could create other challenges to the operating model of these businesses. In addition, the SEC or the US’
USA’s business. In late 2017, the additional requirements applicability date was extended to July 1, 2019. It is expected that the DOL
Other initiatives, such as by the International Association of Insurance Supervisors, may lead to regulations that would increase capital needs and other requirements that would not be applicable to all carriers and create an uneven competitive playing field.
An abandonment of the euro currency by one or more members of the European Monetary Union may affect Aegon’s results of operations in the future.
It is possible that the euro may be abandoned as a currency in the future by countries that have already adopted its use. This may lead to the re-introduction of individual currencies in one or more European Monetary Union member states, or in more extreme circumstances, the dissolution of the European Monetary Union. It is not possible to predict the effect on the European and global economies of a potential dissolution of the European Monetary Union or the exit of one or more European Union member states from the European Monetary Union. Any such event may have a materially adverse effect on Aegon’s future financial condition and results of operations.
The United Kingdom (UK) leaving the European Union ('Brexit'), potentially followed by more countries, may affect Aegon’s results and financial condition.
(De Nederlandsche Bank N.V., “DNB”) and the Dutch Minister of Finance to intervene in situations where an institution, including a financial group such as Aegon, faces financial difficulties or where there is a serious and immediate risk to the stability of the
Journal of the European Union on 12 June 2014 (the “Bank Recovery and Resolution Directive”). The Bank Recovery and Resolution
Act could have a material adverse effect on the performance by the failing institution, including Aegon, of its obligations (of payment or otherwise) under contracts of any form, including the expropriation, write-off, write-down or conversion of securities such as shares and debt obligations issued by the failing institution. Furthermore, the terms of contracts, including debt obligations may be varied
(e.g. the variation of maturity of a debt instrument). The Dutch Intervention Act and the Bank Recovery and Resolution Directive aim to ensure that financial public support will only be used as a last resort after having assessed and exploited, to the maximum extent practicable, the resolution tools, including the bail-in tool. The Dutch Ministry of Finance has published a proposal of law at the end of 2017 on recovery and resolution of insurers, and potentially other entities belonging to insurance groups, based in the
Netherlands. The act is currently under review in Parliament. If and when formally adopted, this act will replace and complement the provisions of the Dutch Intervention Act. The risks related to this new act are comparable to the risks related to the Dutch Intervention
Act described immediately above. In addition, the new act will allow the resolution authority (the DNB) to require a Dutch insurance or reinsurance company or a group to remove, ex ante, impediments to effective resolution of a Dutch insurance or reinsurance undertaking (such as the revision of financing arrangements, the reduction of exposures, the transfer of assets, the termination or limitation of business activities, or the prohibition to start certain business activities, change the legal or operational structure of the group, securing certain critical business lines). The use of this tool may adversely affect Aegon’s business, results of operations and financial position.
Legal and arbitration proceedings and regulatory investigations and actions may adversely affect Aegon’s business, results of operations and financial position.
Aegon subsidiaries regularly receive inquiries from local regulators and policyholder advocates in various jurisdictions, including the United States, the Netherlands, and the United Kingdom. Regulators may seek fines or penalties, or changes to the way Aegon operates. In some cases, Aegon subsidiaries have modified business practices in response to inquiries.
Government investigations, including this one, may result in the institution of administrative, injunctive or other proceedings and/
(‘beleggingsverzekeringen’) have been controversial and the target of litigation since 2005. Allegations include excessive cost, unfair terms, inadequate disclosure, and failure to perform as illustrated. Consumer groups have formed to address these issues and initiate mass claims against insurers. Regulators as well as the Dutch Parliament have been involved ever since, with the principal goal of achieving an equitable resolution. Aegon has made improvements across its product lines, including after settlements reached in 2009 with Stichting Woekerpolis and Stichting Verliespolis. In 2013 Aegon took a charge of EUR 25 million after the Dutch Supreme
Court ruled adversely in litigation concerning premium amounts charged in the KoersPlan product. Some of the unit linked products are still involved in ongoing litigation. In March 2014, consumer interest group Vereniging Woekerpolis.nl filed a claim against Aegon in court. The claim related to a range of unit linked products that Aegon sold in the past, including Aegon products involved in the earlier litigation. In June 2017, the court issued a verdict which upheld the principle that disclosures must be evaluated according to the standards at the time when the relevant products were placed in-force. Most of the claims of Vereniging Woekerpolis.nl were dismissed under this standard, although the court found that Aegon did not adequately disclose certain charges on a limited set of policies.
This court decision has been appealed by both parties. Aegon expects the claims and litigation on unit linked products to continue for the foreseeable future. Developments in similar cases against other Dutch insurers currently before regulators and courts may also affect Aegon. Lawsuits have also been brought against providers of securities leasing products (‘aandelenlease producten’). Although sales of securities leasing products ended more than a decade ago, litigation relating to these products has resurfaced. In 2016, the
Dutch Supreme Court ruled on a case involving a securities leasing product sold by one of Aegon’s competitors. It decided that the financial institution was liable if a broker (‘remisier’) that advised on the sale of the institution’s products, was not properly licensed.
In July 2016, consumer interest group Platform Aandelenlease filed a class action claim against Aegon Bank regarding securities leasing product Sprintplan. Allegations include, among other things, a lack of a proper license of the brokers involved. There can be no assurances that this matter will not ultimately result in a material adverse effect on Aegon’s business, results of operations and financial position. In October 2017, the district court of The Hague ruled in favor of Aegon that the Sprintplan liability had been conclusively determined in earlier proceedings and there were no grounds to hold further collective proceedings. The plaintiff appealed.
The existence of potential claims may remain unknown for long periods of time after the events giving rise to such claims. Determining the likelihood of exposure to Aegon and the extent of any such exposure may not be possible for long periods of time after Aegon becomes aware of such potential claims. Once litigation is initiated, it may be protracted and subject to multiple levels of appeal.
at the same pace. As a result, there is a chance that risks present in its business strategies and initiatives may not be fully identified, monitored and managed.
Financial Instruments and IFRS 17 – Insurance Contracts. On July 24, 2014, the IASB issued the fourth and final version of its new standard on financial instruments accounting – IFRS 9 Financial Instruments. Application of IFRS 9 is required for annual periods beginning on or after January 1, 2018. IFRS 17 – Insurance Contracts was issued on May 18, 2017 with an effective date of January 1, 2021. However, the IASB has also issued an amendment related to IFRS 4 Insurance Contracts. The objective of the amendment is to address the temporary accounting consequences of the different effective dates of IFRS 9 and IFRS 17. The amendment permits entities whose predominant activities are connected with insurance, to defer the application of IFRS 9 until 2021 (the ‘temporary exemption’); and permit all issuers of insurance contracts to recognize in other comprehensive income, rather than profit or loss, the volatility that could arise when IFRS 9 is applied before the new insurance contracts Standard is issued (the ‘overlay approach’).
Aegon is subject to the substance and interpretation of tax laws in all countries in which Aegon operates or invests. Tax risk is the risk associated with changes in tax laws, or the interpretation of tax laws, later jurisprudence or case law, or the introduction of new taxes or tax laws. This tax risk includes for example the risk of changes in tax rates, changes in loss carry-over rules and new rules restricting the tax deductibility of interest expenses.
The US Congress has, from time to time, considered possible legislation that may make Aegon’s products less attractive to consumers, including legislation that would reduce or eliminate the deferral of taxation on the accretion of value within certain annuities and life insurance products. This may have an impact on insurance products and sales in the United States.
The US Government, as well as state and local governments, also consider from time to time tax law changes that may increase the amount of taxes that Aegon pays. Effective January 1, 2018 the Tax Cuts and Jobs Act lowered US corporate tax to 21%, reducing the amount of tax that Aegon pays. Also significant changes were made to the computation of tax reserves, capitalized policy acquisition costs and the dividends received deduction available to life insurance companies, increasing the amount of tax that Aegon pays.
Aegon may be unable to adapt to and apply new technologies
Such a failure may lead to a chain of defaults that may adversely affect Aegon and Aegon’s contract counterparties. In addition, such a failure may impact future product sales as a potential result of reduced confidence in the insurance industry. The default
of one or more large international financial institutions, which may result in disruption or termination of their cash, custodial or and administrative services, may also have a material adverse impact on Aegon’s ability to run effective treasury and asset management operations.
Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse for the ceded amount in the event a covered claim is paid. However, Aegon’s insurance subsidiaries remain liable to their policyholders for ceded insurance if any reinsurer fails to meet the obligations assumed by it. A bankruptcy or insolvency or inability of any of Aegon’s reinsurance counterparties to satisfy its obligations may have a materially adverse effect on Aegon’s financial position and results of operations. Refer to Schedule IV for a table showing life insurance in force amounts and premiums on a direct, assumed and ceded basis.
In recent years, Aegon has made a number of acquisitions and divestitures around the world and it is possible that Aegon may make further acquisitions and divestitures in the future. Growth by acquisition involves risks that may adversely affect Aegon’s operating results and financial condition. These include: the potential diversion of financial and management resources from existing operations; difficulties in assimilating the operations, technologies, products and personnel of the acquired company; significant delays in completing the integration of acquired companies; the potential loss of key employees or customers of the acquired company; Annual Report 2017
potential losses from unanticipated litigation, and tax and accounting issues. In addition, expansion into new and emerging markets may involve heightened political, legal and regulatory risks, such as discriminatory regulation, nationalization or expropriation of assets, price controls and exchange controls.
Aegon relies on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect Aegon’s intellectual property. Third parties may infringe on or misappropriate Aegon’s intellectual property, and it is possible that third parties may claim that Aegon has infringed on or misappropriated their intellectual property rights. Any resulting proceedings in which Aegon would have to enforce and protect its intellectual property, or defend itself against a claim of infringement of a third-party’s intellectual property, may require significant effort and resources and may not prove successful.
Aegon’s ability to compete. As a result of any proceeding in which Aegon would have to defend itself against a claim of infringement of a third-party’s intellectual property, Aegon may be required to pay damages and provide injunctive relief, which may have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
Inadequate or failed processes or systems, human factors or external events may adversely affect Aegon’s profitability, reputation or operational effectiveness.
As Aegon continues to focus on reducing expenses necessary to support its business, a key part of its operating strategy has been to outsource certain services that are important to its business. Aegon outsources certain information technology, finance and actuarial services, investment management services and policy administration operations to third-party providers and may do so increasingly in the future. If Aegon fails to maintain an effective outsourcing strategy or if third-party providers do not provide the core administrative, operational, financial, and actuarial services Aegon requires and anticipates, or perform as contracted, such as compliance with applicable laws and regulations, suffers a cyber-attack or other security breach, Aegon may not realize the productivity improvements or cost efficiencies, nor find an alternate provider on the same terms and conditions, and instead experience financial loss, reputational harm, operational difficulties, increased costs, a loss of business and other negative consequences, all of which could have a material adverse effect on Aegon’s results of operations. In addition, Aegon’s reliance on third-party providers does not relieve Aegon of its responsibilities and requirements. Any failure or negligence by such third-party providers in carrying out their contractual duties may result in Aegon being subjected to liability and litigation. Any litigation relating to such matters could be costly, expensive and time-consuming, and the outcome of which is uncertain. Moreover, any adverse publicity arising from such litigation, even if the litigation is not successful, could adversely affect Aegon’s reputation and distribution of its products. Finally,
Aegon’s ability to receive services from third-party providers based in different countries might be impacted by political instability, cultural differences, unanticipated regulatory requirements or policies inside or outside of the countries within which Aegon has operations. As a result, Aegon’s ability to conduct its business might be adversely affected.
In January 2018, in connection with the transformation of Aegon’s US business and its long term strategy, Aegon entered into a multiyear third party administration arrangement for the administration of certain US based in-force policies currently administered on up to 25 systems and for new US based insurance business. As part of this arrangement Aegon will modernize the systems upon which it administers its insurance business whereby at least 20 of the systems will be consolidated into a new policy administration system hosted by the third party administrator. Aegon may further reduce the remaining in-scope systems in the future. If Aegon does not effectively develop, implement and monitor its outsourcing relationships, or if third-party providers do not perform as anticipated or if
Changes towards more sophisticated internet technologies, the introduction of new products and services, changing customer needs and evolving applicable standards increase the dependency on internet, secure systems and related technology. Introducing new technologies, computer system failures, cyber-crime attacks or security breaches may disrupt Aegon’s business, damage
Furthermore, the nature of Aegon’s business increasingly becomes more data driven.
To date the highest impact of cyber security incidents Aegon was exposed to were caused by phishing attacks targeted at business partners and customers. Although these historic events were far from material, Aegon has prepared for more significant cyberattacks would they occur. Aegon has taken cyber insurance to decrease the impact of such an event and at the same time continues to focus on strengthening cyber resilience to mitigate the likelihood and impact of significant events.
Pursuant to applicable laws, various government agencies and independent administrative bodies have established rules protecting the privacy and security of personal information. A number of Aegon’s subsidiaries are also subject to contractual restrictions with respect to the information of our clients and business partners. Aegon, and numerous of its systems, employees and business partners have access to, and routinely process, the personal information of consumers. Aegon relies on various processes and controls to protect the confidentiality of personal information and other confidential information that is accessible to, or in the possession of, Aegon, its systems, employees and business partners. It is possible that an Aegon employee, business partner or system could, intentionally or unintentionally, inappropriately disclose or misuse personal or confidential information. Aegon’s data or data in its possession could also be the subject of a cybersecurity attack. If Aegon fails to maintain adequate processes and controls or if Aegon or its business partners fail to comply with relevant laws and regulations, policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of personal information or other confidential information could occur. Such control inadequacies or non-compliance could cause disrupted operations and misstated or unreliable financial data, materially damage Aegon’s reputation or lead to civil or criminal penalties, which, in turn, could have a material adverse effect on Aegon’s business, financial condition and results of operations. In addition, Aegon analyzes personal information and customer data to better manage its business, subject to applicable laws and regulations and other restrictions. It is possible that additional regulatory or other restrictions regarding the use of such techniques may be imposed. Additional privacy and security obligations are likely to be imposed. Such limitations could have material impacts or Aegon’s business, financial conditions and/or results of operations.
Risks relating to Aegon’s common shares Aegon’s share price could be volatile and could drop unexpectedly, and investors may not be able to resell Aegon’s common shares at or above the price paid.
Aegon’s operations, and some of which are related to the insurance industry and equity markets in general. As a result of these factors, investors may not be able to resell their common shares at or above the price paid for them. In particular, the following factors, in addition to other risk factors described in this section, may have a material impact on the market price of Aegon’s common shares: �� Investor perception of Aegon as a company; �� Actual or anticipated fluctuations in Aegon’s revenues or operating results; �� Announcements of intended acquisitions, disposals or financings, or speculation about such acquisitions, disposals or financings; �� Changes in Aegon’s dividend policy, which may result from changes in Aegon’s cash flow and capital position; �� Sales of blocks of Aegon’s shares by significant shareholders, including Vereniging Aegon; �� A downgrade or rumored downgrade of Aegon’s credit or financial strength ratings, including placement on credit watch; �� Potential litigation involving Aegon or the insurance industry in general; �� Changes in financial estimates and recommendations by securities research analysts; �� Fluctuations in capital markets, including foreign exchange rates, interest rates and equity markets; �� The performance of other companies in the insurance sector; �� Regulatory developments in the United States, the Netherlands, the United Kingdom, and other countries in which Aegon operates; �� International political and economic conditions, including the effects of terrorist attacks, military operations and other developments stemming from such events, and the uncertainty related to these developments; �� News or analyst reports related to markets or industries in which Aegon operates; and �� General insurance market conditions.
Aegon held 279,236,609 common shares and 569,676,480 common shares B. All of Aegon’s outstanding common shares are freely tradable, and all shareholders, including large shareholders such as Vereniging Aegon, are free to resell their common shares at any time.
General Meeting of Shareholders of Aegon N.V. on May 15, 2013. For details on the simplification of the corporate structure, please see the section Major shareholders at pages 333-335.
N.V. shares or a proposed business combination by any person or group or persons, whether individually or as a group, other than in a transaction approved by the Executive Board and the Supervisory Board. Accordingly, at December 31, 2017, the voting power of Vereniging Aegon under normal circumstances amounted to approximately 14.34%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon N.V.). In the event of a Special Cause, Vereniging Aegon’s voting rights will increase to 32.6% for up to six months.
Since Aegon’s common shares listed on Euronext Amsterdam are quoted in euros and Aegon’s common shares listed on NYSE New York are quoted in US dollars, fluctuations in exchange rates between the euro and the US dollar may affect the value of Aegon’s common shares. In addition, Aegon declares cash dividends in euros, but pays cash dividends, if any, on Aegon’s shares of New York registry in US dollars based on an exchange rate set the business day following the shareholder meeting approving the dividend. As a result, fluctuations in exchange rates may affect the US dollar value of any cash dividends paid.
In the future, Aegon may issue convertible securities or other securities that permit or require Aegon to satisfy obligations by issuing common shares. Those securities would likely influence, and be influenced by, the market for Aegon’s common shares.
Other principal offices owned by Aegon are located in The Hague, the Netherlands and Budapest, Hungary. Aegon owns its headquarters and leases other offices in the Netherlands (Hoofddorp, Leeuwarden and Groningen), in the United Kingdom and in Spain under long-term leases. Aegon believes that its properties are adequate to meet its current needs.
Employees and labor relations At the end of 2017, Aegon had 28,318 employees. Approximately 39% are employed in the Americas, 35% in Europe, 21% in Asia and 5% in Asset Management. Note that employees of the Holding are included in Europe.
Under Dutch law, members of the Central Works Council responsible for Aegon in the Netherlands are elected by Aegon the
Board, with the approval of Aegon’s Supervisory Board, may also determine the currency or currencies in which the dividends will be paid. Aegon may make one or more interim distributions to the holders of common shares.
Aegon aims to pay out a sustainable dividend to allow equity investors to share in Aegon’s performance, which can grow over time if Aegon’s performance so allows. After investment in new business to generate organic growth, capital generation in Aegon’s operating subsidiaries is available for distribution to the holding company, while maintaining a capital and liquidity position in the operating subsidiaries in line with Aegon’s capital management and liquidity risk policies.
Under normal circumstances, Aegon would expect to declare an interim dividend when announcing Aegon’s first half year results and to propose a final dividend at the Annual General Meeting of Shareholders for approval. Dividends would normally be paid in cash or stock at the election of the shareholder. The relative value of cash and stock dividends may vary. Stock dividends paid may, subject to capital management and other considerations, be repurchased in order to limit dilution.
When determining whether to declare or propose a dividend, Aegon’s Executive Board has to balance prudence versus offering an attractive return to shareholders, for example in adverse economic and/or financial market conditions. Also, Aegon’s operating subsidiaries are subject to local insurance regulations which could restrict dividends to be paid to the Company. There is no requirement or assurance that Aegon will declare and pay any dividends.
Aegon’s NYSE paying agent, based on the foreign exchange reference rate (WM/Reuters closing spot exchange rate fixed at 5.00 pm
Memorandum and Articles of Association Memorandum and Articles of Association Memorandum and Articles of Association Memorandum and Articles of Association
Material differences between Dutch law and US law with respect to the items above Reference is made to the paragraph 'Differences in company law practices for domestic companies' included in the Corporate
Netherlands corporate income tax; iii. Corporate holders of Aegon common shares, the shareholding of which qualifies for the participation exemption
(deelnemingsvrijstelling) of the Netherlands Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969) or would qualify for the participation exemption had the corporate holders of the Aegon common shares been resident in the Netherlands.
Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965), dividends are defined as the proceeds from shares, which include: i. Direct or indirect distributions of profit, regardless of their name or form; ii. Liquidation proceeds, proceeds on redemption of Aegon common shares and, as a rule, the consideration for the repurchase of its own common shares by Aegon in excess of the average paid-in capital recognised for Netherlands dividend withholding tax purposes, unless a particular statutory exemption applies; iii. The nominal value of new common shares issued to a holder of Aegon common shares or an increase of the nominal value of Aegon common shares, except insofar as the (increase in the) nominal value of Aegon common shares is funded out of its paid-in capital as recognized for Netherlands dividend withholding tax purposes; and iv. Partial repayments of paid-in capital recognised for Netherlands dividend withholding tax purposes, if and to the extent there are qualifying profits (zuivere winst), unless Aegon’s General Meeting of Shareholders has resolved in advance to make such repayment and provided that the nominal value of Aegon common shares concerned has been reduced by an equal amount by way of an amendment of the Articles of Association. The term “qualifying profits” includes anticipated profits that have yet to be realized.
A (partial) refund of Netherlands dividend withholding tax is available to a holder of Aegon common shares resident in another
US-residents Residents of the United States that qualify for, and comply with the procedures for claiming benefits under, the Convention between the Kingdom of the Netherlands and the United States of America for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income 1992 (the US/NL Income Tax Treaty) may, under various specified conditions, be eligible for a reduction of the Netherlands dividend withholding tax rate from 15% to 5% if the resident of the United States is a company which holds directly at least 10% of the voting power in Aegon. The US/NL Income Tax Treaty provides, subject to certain conditions, for a complete exemption from, or refund of, Netherlands dividend withholding tax for dividends received by exempt pension trusts and exempt organizations, as defined therein.
The amount of the above mentioned reduction of the withholding tax will be reduced on a pro rata basis to the extent that Aegon distributes dividends to entities that are entitled to a refund of the Netherlands dividend withholding tax. This reduction does not apply in respect of dividends paid to entities that own less than 5% of the nominal paid-up capital of Aegon.
Aegon common shares must be determined on the basis of a deemed return on income from savings and investments (sparen en beleggen), rather than on the basis of income actually received or gains actually realized. This deemed return on income from savings and investments is fixed at percentage of the individual's yield basis (rendementsgrondslag) at the beginning of the calendar year (1 January), insofar as the individual's yield basis exceeds a certain threshold (heffingsvrij vermogen). The individual's yield basis is determined as the fair market value of certain qualifying assets held by the holder of Aegon common shares less the fair market value of certain qualifying liabilities on 1 January. The fair market value of Aegon common shares will be included as an asset in the individual's yield basis. The deemed return percentage to be applied to the yield basis increases progressively depending on the amount of the yield basis. The deemed return on income from savings and investments is taxed at a rate of 30%..
Non-residents of the Netherlands If a person is neither a resident nor is deemed to be a resident of the Netherlands for Netherlands corporate or individual income tax purposes, such person is not subject to Netherlands income tax in respect of income derived from Aegon common shares and gains realized upon the redemption or disposal of Aegon common shares, except if: i. The person is not an individual and (1) has an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands to which permanent establishment or a permanent representative Aegon common shares are attributable, or (2) is, other than by way of securities, entitled to a share in the profits of an enterprise or a coentitlement to the net worth of an enterprise, which is effectively managed in the Netherlands and to which enterprise Aegon common shares are attributable. This income and these gains are subject to Netherlands corporate income tax at up to a maximum rate of 25%; ii. The person is an individual that (1) has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands to which permanent establishment or permanent
Non-residents of the Netherlands No gift or inheritance tax will arise in the Netherlands in respect of the acquisition of Aegon common shares by way of a gift by, or as a result of the death of, a holder that is neither a resident nor deemed to be a resident of the Netherlands for the purposes of the
Netherlands Gift and Inheritance Tax Act 1956. However, inheritance tax will be due in the case of a gift of Aegon common shares by, or on behalf of, a holder who at the date of the gift was neither a resident nor deemed to be a resident of the Netherlands for the purposes of the Netherlands Gift and Inheritance Tax Act 1956, but such holder dies within 180 days after the date of the gift, and at the time of his or her death is a resident or deemed to be a resident of the Netherlands for the purposes of the Netherlands Gift and Inheritance Tax Act 1956. A gift made under a condition precedent is deemed to be made at the time the condition precedent is fulfilled.
The proposed financial transactions tax The European Commission has published a proposal for a Directive for a common financial transactions tax (FTT) in Belgium, Germany,
Under the current proposals, the FTT could apply in certain circumstances to persons both within and outside of the participating
However, the FTT proposal remains subject to negotiation between participating Member States and is subject to legal challenge.
For the purposes of this section, a 'US holder' is a beneficial owner of common shares that is, for US Federal income tax purposes: �� A citizen or individual resident of the United States; �� A corporation created or organized in or under the laws of the United States or any state of the United States (including the District of Columbia); �� An estate, the income of which is subject to US Federal income taxation regardless of its source; or �� A trust, if a court within the United States is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of the substantial decisions of such trust.
Tax consequences to US holders Distributions The gross amount of any distribution (including any amounts withheld in respect of Dutch withholding tax) actually or constructively received by a US holder with respect to common shares will be taxable to the US holder as a dividend to the extent of Aegon’s current and accumulated earnings and profits as determined under US Federal income tax principles. Such dividends will not qualify for the dividends received deduction otherwise allowable to corporations. Distributions in excess of current and accumulated earnings and profits are treated under US tax law as non-taxable return of capital to the extent of the US holder’s adjusted tax basis in the common shares. Distributions in excess of earnings and profits and such adjusted tax basis will generally be taxable to the US holder as capital gain from the sale or exchange of property. However, Aegon does not maintain calculations of its earnings and profits under
US Federal income tax principles. Therefore, US holders of Aegon shares will generally be taxed on all distributions as dividends, even if some portion of the distributions might otherwise be treated as a non-taxable return of capital or as capital gain if the amount
of US earnings and profits was known. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.
Certain 'qualified dividend income' received by individual US holders is taxed at a maximum income tax rate of 20% under current law.
The amount of the qualified dividend income paid by Aegon to a US holder that is subject to the reduced dividend income tax rate and that is taken into account for purposes of calculating the US holder's US foreign tax credit limitation must be reduced by the
Aegon generally affords shareholders an option to receive dividend distributions in cash or in stock. A distribution of additional common shares to US holders with respect to their common shares that is made pursuant to such an election will generally be taxable in the same manner as a cash dividend under the rules described above.
Backup withholding and information reporting Backup withholding and information reporting requirements may apply to certain payments on the common shares and to proceeds of a sale or redemption of the common shares to US holders made within the United States. Aegon, its agent, a broker, or any paying agent, as the case may be, may be required to withhold tax from any payment that is subject to backup withholding if a US holder fails to furnish the US holder's taxpayer identification number, fails to certify that such US holder is not subject to backup withholding, or fails to otherwise comply with the applicable requirements of the backup withholding rules. Certain US holders are not subject to the backup withholding and information reporting requirements.
Prospective investors should consult their own tax advisors concerning the application of the information reporting rules to their particular circumstances.
Principal accountant fees and services Principal accountant fees and services Principal accountant fees and services Principal accountant fees and services
Maximum number of shares that may yet be purchased under the plans or programs at end of month 1 The shares have been purchased as part of a share purchase program, to neutralize the dilution effect of issued stock dividends and agent-related incentive programs. Excluding Aegon shares purchased by index funds controlled by Aegon. Such purchases are made to the extent necessary to maintain a basket of securities within the relevant fund reflecting the underlying index. Please refer to note 20 ‘’Dividend per common share’’ and to the section ‘’Major shareholders’’ in the ‘’Other information’’.
Purchases of equity securities by the issuer and affiliated purchasers Purchases of equity securities by the issuer and affiliated purchasers Purchases of equity securities by the issuer and affiliated purchasers Purchases of equity securities by the issuer and affiliated purchasers
Net deposits (on and off balance sheet) (6,003) 2,297 (563) (12,820) (17,088) 7,615 1,125 (2,539) (3,492) 2,709
the Group solvency position. With this consolidation method, diversification benefits in the calculation of capital requirements are allowed.
Actuarial funding enables a life insurance company to reduce the size of the unit reserves it holds for unit-linked business to reflect some or all of the unit-linked charges it expects to receive in the future from the units nominally allocated.
Actuarial funding is used on those contracts that have surrender penalties and the Company will hold a minimum of the surrender value at all times.
Authorised Control Level (ACL) is the level regulators are permitted to seize control of a company.
Deferred Policy Acquisition Cost (DPAC) - are the variable costs related to the acquisition or renewal of insurance contracts and investment contracts with discretionary participation features.
Diversification is the general concept of reducing the total risk of a portfolio of assets and/or liabilities by spreading it across a mix of different risk exposures. Risk reduction occurs due to the less than perfect correlation among the individual risk exposures in the portfolio, meaning risks will not materialize all at the same time.
Effective interest rate method is a method of calculating the amortized cost of a financial asset or liability and of allocating
Local Unit capitalization, using a range approach and a ladder of intervention to trigger timely conversations and escalating management actions.
Fixed charge coverage is a measure of the Aegon’s ability to service its financial leverage. It is calculated as the sum of underlying earnings before tax and interest expenses on financial leverage divided by interest payments on financial leverage. The fixed charge coverage includes the impact of interest rate hedging.
if more appropriate. The resulting exchange differences are recognized in the FCTR.
Guaranteed minimum income benefits are a type of option that annuitants can purchase for their retirement annuities. When the annuity is annuitized, this specific option guarantees that the annuitant will receive a minimum value's worth of payments, regardless of the current level of the account value.
Policy acquisition costs are the expenses incurred in soliciting and placing new business as well as renewal of existing business.
Stochastic modeling is a statistical process that uses probability and random variables to predict a range of probable investment performances.
Transitional measures allow EEA entities to gradually move to a full implementation of Solvency II over a period of time.
Transamerica is outsourcing administration of approximately 10 million insurance and annuities policies to Tata
6. Aegon has set up, for example, a dedicated Aegon Analytics
Company also has a Digital Marketing course in Europe, and organizes two-day Digital Acceleration programs to bring management up to speed with latest technologies.
8. Aegon Ireland is accounted on a held for sale basis.
13. Source: Insurance Association of Turkey, org.tr/official-statistics.aspx?pageID=1003. Webpage visited 14. Source: MNB, Aranykönyv, 2016, hu/felugyelet/idosorok/v-aranykonyv. Webpage visited 15. Source: ADSS, vo-fondoch?year=2017#documents.Webpage visited 16. Source: KNF,
18. Note that on a consolidated group level Aegon Bank is not included in the calculation of the Solvency II ratio.
21. Mr. Rider was appointed as CFO and member of Aegon’s Executive Board on May 19, 2017. Conditional variable compensation is disclosed on an annualized basis for Mr. Rider.
Aegon’s products; �� Changes in accounting regulations and policies or a change by Aegon in applying such regulations and policies, voluntarily or otherwise, which may affect Aegon’s reported results and shareholders’ equity; �� Aegon’s projected results are highly sensitive to complex mathematical models of financial markets, mortality, longevity, and other dynamic systems subject to shocks and unpredictable volatility. Should assumptions to these models later prove incorrect, or should errors in those models escape the controls in place to detect them, future performance will vary from projected results; �� The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including
Aegon’s ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; �� Catastrophic events, either manmade or by nature, could result in material losses and significantly interrupt
Aegon’s business; �� Aegon’s failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving and excess cash and leverage ratio management initiatives; and �� This press release contains information that qualifies or may qualify as inside information within the meaning of