Welcome to Aegon’s 2019 Integrated Annual Report To prosper, we believe companies must create long-term value for the societies and communities in which they operate, their shareholders, customers and business partners.
Aegon makes economic and social contributions through returns to shareholders, tax and support for local communities, as well as through investments both for our own account and on behalf of our customers. Our aim is to be a responsible corporate citizen, fully aware of the impact we have on our stakeholders, society as a whole and environment.
This Integrated Annual Report is also used as the basis for our Form 20-F (in compliance with our listing on the New York
If you have comments or suggestions about this report, please contact our offices in The Hague. Contact details may be found on page 440.
References Throughout this document, Aegon N.V. is referred to as either ‘Aegon’ or ‘the Company’. Along with its member companies,
Aegon uses ‘EUR’ and ‘euro’ when referring to the lawful currency of European Monetary Union member states; ‘USD’ and ‘US dollar’
2019 At a glance 4 2019: A year of progress 5 Performance highlights 6 Letter from our CEO 8 Letter from our Supervisory
Aegon’s business environment 14 Global macroeconomic climate 14 Wealth and health 15 Working with regulators, worldwide 16 Business Environment Scan
Aegon: A partner to the world 31 Customers 31 Employees 33 Partners and suppliers 33 Investors 34 Society
Financial information 124 Selected financial data 126 Results of operations 127  Results 2019 worldwide 133  Results 2019 Americas 137  Results 2019 Europe 142  Results 2019 Asia 145  Results 2019 Aegon Asset
Consolidated financial statements of Aegon N.V. 147 Exchange rates 148 Consolidated income statement of Aegon N.V.
Financial statements of Aegon N.V. 315 Income statement of Aegon N.V. 316 Statement of financial position of Aegon N.V.
Other financial information 341 Schedule I 342 Schedule II 344 Schedule III 346 Schedule IV 347 Schedule V
Additional information 349 Overview of Americas 357 Overview of the Netherlands 363 Overview of United Kingdom 367 Overview of Southern and
Other non-financial information 413 Non-financial data 416 Basis of preparation 419 Reference tables 419  International Integrated
Business Conduct Agreement 431 Glossary 437 Abbreviations 438 Disclaimer 440 Contact
Transamerica organized itself for further growth by establishing two dedicated business lines –
May Aegon signed a deal to divest its stake in its Japan-based joint ventures with Sony Life.
Transamerica reduced fees for multiple investments, helping to maximize overall value for customers.
Mike Holliday-Williams will succeed Adrian Grace as CEO of Aegon UK.
NPS Coverage (% of the business covered in our relational NPS program)
Percentage of customers with two or more products (% of total customers)
This is particularly true in recent years as increasing longevity and lower birth rates, combined with other trends in society, have added to the strain on social security and other government benefits. The responsibility for financial security up to and into retirement is increasingly shifting to the individual, who is often not prepared for the task.
EUR 59 billion in claims, benefits and plan withdrawals globally in 2019 alone. While our local businesses have their own unique cultures and business models, we all share the same purpose.
At the same time, we continued to execute on our strategy and we reached a number of important milestones, by simplifying
Manage for Value Manage for Value consists of our at-scale, mostly spread-based businesses, which we manage by optimizing capital generation.
Aegon Asset Management continued to grow in 2019 and recorded its eighth consecutive year of positive net inflows from third parties. Under new leadership, this business has been realigned as a fully global asset management organization and is set up for future growth.
And finally in the UK, in the Drive for Growth category, we completed the Cofunds integration, thereby achieving the targeted expense savings and confirming our position as the largest player in the UK platform market.
Scale-up for Future The Scale-up for Future category brings new platforms, technology and business models to capture meaningful new growth opportunities.
In 2019, we announced the creation of Aegon International, which brings together our businesses in Asia and Southern and
We are also reaching out to customers directly as we continue expanding our digital platforms. In this regard I would like to point out an interesting development in China, where our insurance joint venture is partnering with a major e-commerce player to offer term life products on its platforms. The first product launch in October 2019 led to the sale of 150,000 new term life policies in the fourth quarter of 2019, indicating the strong potential of the e-commerce model.
As a result, we decided to sell our stake in the partnership with
This is in addition to other data and analytics programs available for all our employees.
We are also running a number of projects at business-unit level to further streamline our operations. These projects create opportunities to inspire new business ideas, leading to better service for our existing customers and opening of new markets.
Investments As a major institutional investor entrusted with the management and servicing of almost EUR 900 billion in customer assets, we strive to deliver on our promise of a secure and healthy financial future while caring about the environment in which we all live.
Like other companies operating around the world, Aegon is exposed to the challenges resulting from the coronavirus pandemic. We are taking measures aimed at safeguarding the interests of all our stakeholders in this difficult time.
Aegon made significant progress in its transformation in 2019 and the Supervisory Board is committed to supporting the focus on accelerating sustainable growth to benefit all of Aegon’s stakeholders.
This makes Aegon – with roots stretching back 175 years –
Long-term view As we are entrusted with overseeing the Company strategy, the Supervisory Board plays an important role in helping
The activities in Southern and Eastern Europe and Asia have been brought together in a new division called Aegon International.
The coronavirus outbreak has introduced new uncertainty, and the Supervisory Board is being kept informed of the measures
– had a busy agenda in 2019. Key topics included corporate governance, compliance, reputation, human capital, as well as overseeing and advising on the Company strategy. The Audit and Risk Committees evaluated internal reports and engaged with Aegon’s senior management and regulators to ensure the integrity of Aegon’s financial statements, internal control systems and processes to deal with risks as diverse as how Aegon does business, the security of our IT systems and how we comply with existing and planned regulations.
Remuneration at publicly owned companies has been the subject of much discussion in recent years. The EU’s new
Shareholder Rights Directive has mandated some changes to remuneration policies, and at Aegon we value the opinions of our various stakeholders on this important subject.
Board as a whole, and the Nomination Committee in particular, therefore devoted significant attention to managing the succession process, which was first announced in late 2018.
After thorough assessments of a strong bench of internal and external candidates, we announced in August that Lard Friese will be proposed for appointment as CEO at the AGM in May 2020.
The Supervisory Board was also involved in discussions in 2019 concerning important appointments of Management Board members, including for Aegon Asset Management, Aegon
Nominations and appointments The Supervisory Board continually evaluates its own composition and effectiveness, and mindful of Aegon’s commitment to diversity, we will over time propose the appointment of new members. We are delighted to propose the appointment of Caroline Ramsay to the Supervisory Board at the AGM in May 2020. Caroline has substantial experience in finance and auditing, as well as extensive managerial expertise acquired in executive roles with several large insurance companies. We have also proposed that Thomas Wellauer, who has an in-depth knowledge of the insurance industry, will be appointed to the Supervisory
 The Aegon brand operates as Aegon Insights in Australia, China, Indonesia, Japan, Thailand and Hong Kong.  The Transamerica brand operates as Transamerica Life Bermuda in Hong Kong, Singapore and Bermuda.
Aegon is an integrated, diversified financial services group that offers innovative and effective savings and protection solutions for customers worldwide. Aegon traces its roots back to the 19th century. We now serve more than 20 countries, with 29.9 million customers and EUR 898 billion of revenue-generating investments. Our holding company, Aegon N.V., is headquartered in The Hague, the Netherlands.
Asian businesses to focus on growth. Aegon the Netherlands and Aegon UK, currently reported under Europe, will become separate reporting segments.
As a global financial services group, we are equipped to share capital, talent, knowledge, processes and technologies across geographies and business lines. To this end, at the beginning of 2019, we grouped our businesses into three distinct strategic categories:  Drive for Growth  Manage for Value  Scale-up for Future
(CAGR) and earnings before tax have grown at a 20% CAGR.
Chinese conglomerate THTF. We serve more than 730,000 individual customers and approximately 270,000 group life clients, across 11 provinces in China. We make use of traditional distribution through intermediaries as well as direct online channels. New premium production has grown at a 34% CAGR since a change in JV partner at the end of 2014.
Internet sales are also driving positive momentum in India where we own 49% of Aegon Life. We were amongst the first in the market to launch online term insurance sales and are now expanding our e-commerce capabilities and offerings through partnerships with payments platforms PAYtm,
Mobikwik, firstcry.com and Flipkart that combined give us access to approximately 600 million users.
Our network of partnerships in China and India positions us for growth in markets where financial protection and investment management are fast-growing markets.
Aegon’s products and services Aegon’s services and products include: Diversified distribution channels Aegon offers both direct and intermediary-assisted access to products throughout all its divisions. This allows us to both benefit from direct relationships with our customers while continuing to offer our customers more sophisticated solutions which require financial advice.
Aegon distributes its products and services through brokers, agents, banks, employee benefit consultants and independent financial advisors. Our multi-channel approach to intermediary distribution serves a diverse customer universe and allows us to build tailored solutions requiring advice based on input we receive from our network of informed business partners.
• Retirement plan services • Annuities • Mutual funds • Stable value solutions
Distribution Our products and services are then branded, marketed and distributed. We offer products and services via intermediaries, like brokers, banks or financial advisors. We also sell directly to our customers.
Investments In exchange for products and services, customers pay fees or premiums On certain pension, savings and investment products, customers make deposits. By investing this money, we earn returns for our customers.
We use the skills, time and resources of our employees to develop, price and market our products and services. We also have well-established systems, investment platforms and processes to manage and model risk, and to provide effective customer service.
World Financial Group in the US and Canada. We also develop e-commerce partnerships, for example in India and China.
We have also developed and are growing our direct distribution capabilities for simpler types of solutions where we can engage with customers directly – e.g., in our Dutch digital bank, Knab.
Aegon’s largest shareholder is Vereniging Aegon, which holds 14.1% of the common shares.
Capital position We carefully manage our capital position to protect Aegon and its customers against fluctuations in global financial markets and changing business conditions. At the end of 2019, our Solvency
Asia Asset Management 1 Total number includes Holding and others (not shown in chart). 2 Figures relate to Aegon Asset Management only.
Where our earnings come from (underlying earnings before tax, in EUR millions)
Claims and benefits We pay out claims, benefits and plan withdrawals, and with the remainder we cover our expenses, fund new investments, and generate profits for our shareholders.
Our aim is for an engaged and committed workforce. We know by experience the more engaged our workforce, the better our customer service. We look to improve internal processes – to make our customer service as quick and reliable as possible. We also share our knowledge and research on pensions and retirement.
As a company, we take in financial resources – essentially debt and equity – from our investors and creditors. This gives us the financial capital we need to run our businesses and do strategic investments. From our resources, we pay employees, reinsurers, suppliers and intermediaries – and invest in our business.
To sell our products and services, we rely on key relationships with customers, intermediaries and other business partners. These relationships provide important services and give us access to local markets. At the core of these relationships is trust in our two main brands, Aegon and Transamerica.
A detailed and practical understanding of our operating environment is essential to successfully running our business. Our ecosystem is shaped by complex demographics, socioeconomic, macro-financial, regulatory, and technological trends, which we capture and systematically analyze in a formal Business Environment Scan process.
Wealth and health Demographic trends support Aegon’s continued efforts to build its business based on the concept of providing long-term solutions related to wealth and health to its customers.
As the worldwide population ages, individuals and societies contend with the need to fund longer lifespans. This challenge can be addressed through a number of coherent measures which
Aegon calls a ‘New Social Contract’. This requires solidarity between generations and sustainable solutions for retirement provisions that are highly adaptable to the rapid pace of change.
budgets. It will also support health and happiness by keeping people more closely engaged with society as they age.
Our research has shown that physical and psychological wellbeing and personal financial security exist symbiotically and are mutually supportive.
We can help to support comfortable and healthier retirements by providing effective long-term investment and protection solutions, including financial solutions that can augment the income promised by public pension plans.
During the accumulation phase, we provide well-managed, competitively priced investment solutions that seek long-term capital appreciation. We also provide vital services to public and corporate pension funds, and retirement programs that people contribute to throughout their working lives.
In retirement, we offer decumulation solutions like annuities and other services that contribute to lifetime income and security.
We see development of the new-age decumulation and older-age healthcare solutions as key priorities for society as a whole and the financial services industry in particular.
As a provider of financial security, we understand that health spend is the the largest cost category in people’s later years.
We therefore have a vested interest in the health and well-being of our customers. If we can encourage customers to adopt healthy lifestyles and behaviors, we can alleviate some of this future financial burden.
Working with regulators, worldwide Evolving regulatory landscape Over the past decade, financial services regulation has become increasingly sophisticated. After the financial crisis, financial regulators focused on increasing financial stability, both of individual companies and of the financial system as a whole. More recently, regulatory focus has shifted to the role the financial sector can play in supporting the real economy
Authority was given a prominent coordinating role in Europe in the supervision in this area. As a result of the European Market
(IMD). IDD provides for enhanced consumer protection in the purchasing of insurance products, as well as facilitating competition between distributors. We are also seeing further efforts to open Europe’s financial services market via MiFID II.
IFRS 17, which is expected to become effective per 2023, will significantly change the accounting for insurance contracts in financial statements, and this is expected to impact Aegon.
The Business Environment Scan was completed in 2019, and since then the risk of pandemic has significantly increased as a result of the Covid-19 coronavirus.
H ig h Business Environment Scan Aegon conducts a biennial Business Environment Scan (BES) to identify material topics and issues for our business. This scan brings together the expert-driven emerging risk identification process and the materiality assessment as described in Aegon’s Integrated Annual Report 2018.
The aim of BES is to identify topics, including new and developing opportunities and risks, that could significantly impact
We pro-actively identify regulation-driven opportunities for the benefit of our customers, business partners and shareholders. We engage with regulators in our markets to prepare us for upcoming changes, and to gather insights from our businesses for regulators to help them shape a legislative landscape conducive to our ability to serve society. For example, Transamerica, our US subsidiary, strongly advocated the adoption of the SECURE Act. This Act among other things, will make it easier for small business owners to establish retirement plans through multi-employer plans (MEPs). MEPs are less expensive and easier to administer. Furthermore, the SECURE Act pushes back the age at which plan participants must take required minimum distributions, and remove the age limit at which the contributions to traditional individual retirement accounts can be made.
If we are not well prepared for new regulations, we may miss on commercial opportunities or will need to invest substantial additional resources into regulatory-driven internal changes. This diverts limited resources from identifying and satisfying customer needs, and may also increase our cost-of-service.
New technologies may arise quickly and disrupt our markets by making our offerings less competitive or relevant to customers. Furthermore, intense competition in individual markets or segments can lead to the decisions to downsize or exit our operations, or to close them for new business.
Aegon aims to stay abreast of changes in technologies so that we can offer improved solutions and better, more efficient service to our customers. We continuously optimize our IT architecture, modernize the technologies in use, and work with suppliers of state-of-the-art technological solutions. For example, in our workplace-related businesses we have focused on enhancing the transparency for, and experience of, pension plan participants by creating simple technology-driven solutions, and by systematically enhancing their customer journeys across online and offline spaces.
Use of data is highly regulated across a number of different regulatory regimes, and so at Aegon we are carefully considering which data can be used, and to what purpose we may use that data. As our competitors also invest substantially in advanced data analytics capabilities, we risk falling behind if we invest too slowly or in the wrong projects. Furthermore, data-related projects can be complex, and therefore can be subject to execution risk.
Aegon’s business is reliant on the trust of its customers and regulators. We earn that trust by conducting our business ethically and by fulfilling our financial obligations. In today’s world, our customers increasingly rely on peer references – for example, in social media – which continuously increases the importance of customer experience and Net Promoter Score (NPS). 88% of our businesses by customer count have adopted NPS as one of the main steering metrics.
As our data analytic and AI capabilities grow, we may benefit from more accurate underwriting of risk, but will need to be mindful of our obligation to make financial and insurance services widely available. Genome mapping (genomics) creates opportunities to offer more individualized insurance solutions and offer more targeted pricing of the underlying risk. Ethical discussions, however, are taking place worldwide about what data to share and how. The development of these discussions will influence insurance solutions and access to them. In many markets, lifestyle is increasingly intertwined with insurance products; as an insurer, we have an opportunity to inform and engage customers about lifestyle choices, and consider how we can also reflect those in our underwriting and pricing.
Talent is a scarce and valuable resource for Aegon, especially as global cross-industry competition for rare skill sets intensifies. Our diversity and inclusion initiatives seek to make Aegon an attractive employer that can recruit employees with diverse backgrounds and career goals. To stay competitive, we need to continuously develop and train our employees. For example, we maintain ongoing internal and external programs, including worldwide efforts such as PULSE leadership development initiative and Digital Marketing Academy as well as local programs.
Active portfolio management Our strategy is to reallocate capital towards attractive and profitable business opportunities by building on a number of global societal, macroeconomic and technological trends, and evolving our operating model in order to achieve substantial growth. Aegon’s businesses are grouped into three distinct strategic categories – Manage for Value, Drive for Growth, and
If businesses do not fulfil our expectations, we may close them down, put them in runoff, or divest from them. In 2019, we sold our stake in the partnership with Sony Life in Japan. This allows us to fully focus on the most promising businesses, customer segments and opportunities in Asia.
Within Transamerica, we made further strides in transferring the administration of its life and annuity business to a third-party,
Nationwide portfolio onto our digital platform in the UK. This makes us nimbler and allows for investments in customer propositions in order to drive future growth.
In these businesses, it is also important to maintain a low and variable cost base. In 2019, we began the process of moving the administration of Aegon UK’s Existing Business to an external partner. In the Netherlands, we are transferring administration of the pension book from our life insurance company to our inhouse administrator, TKP.
Investing in the future In 2019, we continued to make investments intended to make us a more data-driven, innovative, customer-centric, and agile company.
We have also ramped up the Aegon Analytical Academy and are inspiring our leaders of the future with the PULSE program.
We measure our performance in terms of the experience we offer to our customers through the Net Promoter Score (NPS).
Our comprehensive NPS program covers the majority of our customers in all relevant geographies in which we operate, and is embedded in our internal processes and remuneration targets.
In 2019, in two out of three of our main markets, the Netherlands and the UK, our businesses saw an increase in both the absolute
NPS scores as well as in the relative position in the market.
In the US, however, despite the stable absolute score, our relative position in the market has somewhat deteriorated. On a positive note, we were pleased to see improved relative NPS scores in several of our businesses which previously significantly trailed their peer groups (i.e. were in the fourth quartile).
We seek to introduce our products and solutions to new users and to make every customer a life-long customer. We also seek to reach new customers through our thought leadership in the areas of financial planning and insurance issues, particularly our annual deep dive into retirement readiness around the world, and our advocacy for new ways of thinking about retirement and later life entrepreneurship.  Continue to realize efficiency gains: Our technology investments create lasting benefits for Aegon. Automation and artificial intelligence also create better and safer experiences for our customers, which aids in asset gathering and retention.
Transamerica Ventures Fund and Aegon Growth Capital, that enable us to benefit from the opportunities to invest in and collaborate with fintechs and insurtechs.
1 Move away from traditional family models to more flexible, complex life journeys requiring more flexibility in financial models and provisions. 2 Shift away from state and employer funded pension models towards individual models (in NL: 3rd and 4th pillar).
We have strong relationships with global and local employee benefit consultants serving our target markets, and we offer attractive fee-based defined contribution and savings solutions. As individuals have needed to take more responsibility for their financial well-being, Aegon has expanded its pension offerings with additional options for voluntary savings, additional life coverages, and personal or automated advice.
We are connecting where possible with individual retirement and pension plan participants through digital workplace platforms so that we can provide them with transparency, convenience, and enhanced service in order to help them achieve financial security.
As shown in the graphic below, the drivers of change in retirement differ by country. Nevertheless, the direction of travel is the same in all our main markets. We benefit from our global approach in dealing with these trends.
Performance in 2019 Financial markets were turbulent during the year. Interest rates dropped considerably worldwide, whereas equity markets rose and credit spreads were volatile, in particular in the Netherlands. We sought to execute on our return to growth strategy, having reorganized much of the company in recent years. Efficiencies and lower one-time charges led to a rise in net income, while our return on equity was impacted by the lower interest rate environment. Our normalized capital generation was strong and our Solvency II ratio demonstrated resilience.
The effect on Aegon’s financial results will depend on a range of factors, including financial markets and underwriting results.
45%-55% 41% The pay-out ratio was below target despite the 2 cents increase in dividend per share, compared to 2018. This was driven by the strong normalized capital generation.
Solvency II ratio 150-200% 201% The Solvency II ratio remained above the target range, supported by strong normalized capital generation and management actions lowering risks.
Net deposits (25,130) (4,656) NM Net deposits were negative mainly because of outflows in the US Retirement Plans business, following contract discontinuances and higher participant withdrawals.
Net Promoter Score (NPS) coverage1 88% 89% -1 pp Customer centricity
Number of new customers 4.3 million 3.8 million 13.4% Growth/customer centricity
Percentage of customers with two or more products2 19% 18% 1 pp Lifecyle approach
Employee engagement score 67 65 2 pp Customer centricity ('winning outside starts inside')
The way we do business is underpinned by a comprehensive responsible business approach, i.e. our environmental, social and governance (ESG) commitments that provide for our license to operate: Individual Responsible products Aegon engages with stakeholders through polls and surveys, conferences, perception studies, workshops and face-to-face meetings so that we can learn about their lives, aspirations and unmet needs. These engagements, alongside panels with our customers and employees, help us to improve our products and services, to price our offerings appropriately and to reach untapped or underserved customer needs around the world.
In this way Aegon serves individuals with specific needs in markets around the world. Aegon seeks to serve a wide array of customers, which includes the traditional middle- and upper-class clients worldwide, while making efforts to bring financial services and products to under-served lower-income ones.
In several countries, we sell products for customers on low incomes – for example: our ‘My Family’ micro-insurance product in Brazil and low-cost life insurance in Romania. We also provide support to those facing chronic illness. In China, for example, our critical illness coverage offers protection against both diabetes and cancer; we also have products that help customers suffering from cervical and breast cancer.
Smart financial planning In addition to our products, we also support financial education programs for individuals – especially as people are taking more personal responsibility for their finances. In the Netherlands, for example, we partnered with the Van Schulden naar Kansen
program, where Aegon employees volunteer as budget coaches to help customers in financial difficulty. In the US, we work closely with the National Foundation for Credit Counseling.
We operate in a responsible way catering to the needs of individuals, society and the environment
Society We as Aegon believe that a thoughtful approach to secure retirement and healthy aging is essential for our progress as a society.
ESG Foundation A strong ESG foundation provides us with a license to operate by meeting our stakeholders’ additional expectations.
Mongeral Aegon’s WinSocial bundles the power of innovative technology, global underwriting skills, reinsurance and social media influencers to offer life insurance for the first time to people with diabetes in Brazil.
In 2019, Brazil’s population topped 210 million but its insurance industry remains constrained by traditional underwriting techniques and technologies. Fewer than 10%
Through an app and website interface, WinSocial builds an underwriting framework around the applicant’s responses to questions about health, fitness, lifestyle and wellbeing, and then validates those responses using resting and active heart rate recordings and a simple glucose test. While we are in the early stages of a pilot program in one market, we do see potential here for data analytics and digital technology to be employed jointly to improve the underwriting process for people who need insurance while living with chronic diseases.
Society Retirement research Healthy aging and financial security are at the heart of our business, as longer lifespans are transforming societies around the world. Aegon serves society by engaging in deep yet practical research on financial planning, retirement, health and insurance issues so that society at large can effectively plan for longer and more active retirement.
The Aegon Center for Longevity and Retirement (ACLR) was established to increase awareness and stimulate dialogue on trends, issues and opportunities around longevity, population aging and retirement security. Our ambition is to bring these themes on the agenda of policymakers across the globe. ACLR
Aegon also encourages financial literacy around the world and engages with individuals, non-profit organizations, and policymakers in charge. This includes, for example, partnerships with the World Economic Forum, the American Association of Retired Persons, the Milken Institute, the Global Coalition on Aging and the Organization for Economic Co-operation and
Environment We take our responsibility towards society also by caring about the environment. Back in 2015, Aegon signed the Paris Pledge for Action which affirms our commitment to taking actions supportive of keeping global warming well below 2 degrees
Financial Disclosures (TCFD). Our Dutch subsidiaries have also supported local climate-related initiatives like the Dutch National
guidelines. We look into climate-related risk as part of the investment process for our general account, where our customers have delegated investment decisions to Aegon.
Investment Policy which we put into force as of January 2020.
We strongly support impact investing. In 2019, for example our own and managed investments in green bonds reached the new high of EUR 709 million, and our own and managed investments into renewables amounted to EUR 718 million.
Carbon neutrality of own operations Aegon’s operations in the Netherlands, the UK and the US have been carbon neutral since 2016 through a combination of reductions in facility-level emissions and the supporting of offset projects. For 2019, we extended the scope of our carbon offsetting to cover all our wholly-owned operations.
In 2019, we launched an effort called Start-up Plus. This is an 8-week online learning and coaching program developed by Aegon and the Leyden Academy on Vitality and Ageing in the Netherlands. In 2019, we invited participants older than 50 to learn principles of entrepreneurship. Aegon’s commitment to ‘olderpreneurship’ is part of our drive to help people achieve a lifetime of financial security.
If the app detects a change from normal behavior which could indicate a fall or other emergency, it asks the user to check in. If there is no reply, the app sends a signal to a caregiver.
Contribution to target 1.2 • Products for low-income customers, including micro-insurance in Brazil and low-cost life insurance in Romania. • Working with customers in financial difficulty – budget coaches in the Netherlands /
Good health and well-being Ensure healthy lives and promote well-being for all at all ages
Contribution to target 7.2/7.3/7.a • Investments in renewable energy. • Investments in green bonds.
Contribution to target 8.10 • Support for economic growth and job creation through our businesses and investments.
• Providing a long-term source of employment for communities in which we operate. • Inclusion of minimum labor standards in Aegon’s responsible investment and procurement policies.
• Exclusion of oil sands extraction and transportation from new investment in the updated Responsible Investment Policy.
• Aegon’s major operation in the Netherlands, UK and US have been carbon neutral since 2016 through a combination of reductions in facility-level emissions and the supporting of offset projects.
To support our responsible business objectives, Aegon via its subsidiary Aegon Asset Management actively applies a global set for responsible investment principles that define and guide our approach. These principles act as a set of building blocks that account for local differences while reflecting market-leading standards. They are arranged in a way that mirrors our policy:  ESG integration – The integration of material environmental, social and governance (ESG) factors in investment decisionmaking across all portfolios.
 Active ownership – Active engagement with investees to improve their ESG profile and address sustainability issues.  Solutions – ESG-focused strategies and products, ranging from exclusions and best-in-class approaches to sustainability-themed and impact investments.
ESG integration We believe responsible investing creates value and helps contribute to long-term outperformance. As a result, our investment process integrates material ESG factors into the bottom-up research and decision making.
By integrating ESG considerations in traditional financial analysis, the research team arrives at an independent view of an issuer’s fundamentals. Our ESG-integrated fundamental research is a critical element of all our investment decisions.
Management’s responsible investment team works with issuers to deepen their understanding of ESG issues and improve corporate responsibility performance.
Responsible Investment Policy, thematic engagements driven by our view of long-term ESG risks and opportunities, and product support engagements targeted at driving change according to specific investment strategies. When possible, we work with other investors to maximize our influence. In 2019, we engaged with 564 companies in 37 countries. We engaged on several issues, including climate risk and reporting, critical health issues and corporate governance. When engaging, our aim is to improve companies’ business practices, and reduce investment risk for ourselves and our customers.
Aegon regards engagement as increasingly important. We expect sound behavior, strategies and actions from companies in which we invest, and emphasize investments in companies and countries who are making better choices and continuous improvement with respect to sustainability.
Asset Management provides a range of responsible investment solutions to pursue ESG objectives alongside financial returns.
rating alongside traditional financial analysis to tilt the portfolio toward issuers with more favorable ESG profiles.  Sustainability-themed strategies – Sustainability-themed strategies focus on selecting issuers or sectors which contribute to solving sustainability issues while maintaining the primary objective to generate long-term financial returns.
One example of this is our Sustainable Fixed Income strategy, which uses our proprietary sustainability assessment to identify issuers with products, services and assets that aim to contribute to the long-term sustainability of the global economy, environment and society.  Impact investments – Impact investments focus on targeted investment themes to pursue financial returns alongside positive social and/or environmental impact. Examples include affordable housing, care homes, and renewable energy.
We strive to create long-term value for multiple stakeholders, including customers, business partners, employees, equity and debt investors, and society as a whole. Our core belief is that our business is beneficial to society and that the value we create is widely shared.
Aegon defines its stakeholders as any individual or organization affected, or likely to be affected, by its business or that may, in turn, affect the environment in which the Company operates.
We recognize five main stakeholder groups: Aegon: A partner to the world
As our business progresses and grows, we are better able to provide our employees with fulfilling careers, advancement opportunities, and educational support.
Our equity holders have enjoyed years of rising dividends and can potentially benefit from capital appreciation.
Business partners Distributors, joint venture partners, reinsurers and suppliers of goods and services
Society Governments, regulators, charities, tax authorities, community groups and other non-governmental organizations, academic and public institutions
Customers Customer-centric solutions Customer needs and preferences are continuously evolving, and we at Aegon seek to respond to this by working in an agile and customer-centric way. We strive to provide faster and simpler digitally-enabled solutions and experiences to meet those needs. However, most of our propositions are low-engagement and high-complexity, and so we believe in also providing the valuable human touch around the moments that really matter to our customers.
The solutions we offer to our customers are about providing peace of mind, as well as protecting what’s important to them – their loved ones, their health, savings, and property.
initiative in Transamerica (covering process optimization in US call centers) has led to significantly improved customer feedback.
As an example, the virtual assistant on our web portal in the Netherlands offers the maximum level of convenience to customers for simple inquiries. Our efforts to improve customer service have been recognized by several external organizations. For example, Aegon UK has won Contact Center
Satisfaction and loyalty Customer retention and extension of customer relationships to multiple services are indispensable for our commercial success, and so continuously improving customer satisfaction and loyalty is our clear priority. To measure our performance, we use Net Promoter Score (NPS). NPS is measured following selected interactions (‘touchpoint NPS’), aggregated in the logic of customer journeys (‘journey NPS’), and complemented by more in-depth surveys focusing on the overall quality of customers experience with Aegon (‘relational NPS’). All of the above measurements are used for steering, improving quality of our internal processes and the customer experience we deliver. NPS measurements are included in targets at different management levels.
In our key markets, we benchmark relational NPS scores against peers through systematic consumer surveys conducted by an independent third party. In 2019, in the Netherlands and the UK
our businesses saw an increase in their relative positions in the market. In the US, however our relative position has deteriorated.
We have provisions ensuring that incentives and variable pay do not compromise integrity, and do not encourage excessive risk-taking. In 2019, we paid out EUR 2.1 billion in salaries and benefits to our 23,757 employees.
these aims in a fast-changing world, we adopted a Future Fit program back in 2016. This is based on four principles that stress cooperation, intellectual flexibility, focus and responsibility:  Acting as One  Agility  Customer Centricity  Accountability
An engaged workforce can only be effective if it is a healthy and happy community. To promote health and welfare of our employees we:  Seek opportunities for their career development;  Use a new performance management process that has a stronger focus on development;  Promote greater diversity within an inclusive workplace; and  Foster training and development to equip our employees with future-ready capabilities.
We provide specialized training in areas including products and sales, new regulations, risk management, responsible investment, and information security and data privacy. We also offer leadership training and awareness programs in diversity, health and safety. All employees have access to our Global
Learning Catalogues and are encouraged to use it to help shape their development journeys. In 2019, we spent a total of EUR 17 million on training and development, equivalent to over EUR 700 for each employee.
Inclusion and diversity As Aegon is a global company, we understand the importance of embedding inclusion and diversity in who we are and everything we do. In July 2019, Aegon updated its Statement on Inclusion & Diversity to create a truly safe and inclusive working environment.
Code of Conduct. In the Netherlands, our latest collective labor agreement stipulates equal pay for men and women performing the same functions. We monitor our business for potential pay disparities and found that so far, we have achieved parity among employees with identical job functions. Similarly, a pay equality analysis was undertaken in 2019 by Transamerica which did not identify any significant areas of concern.
Netherlands, for example, we are signatories to the Talent to the Top program, which works to increase the number of women in senior management. Two of our current six Supervisory Board
Aegon has administered its Analytics for Leaders training to more than 1,000 senior employees around the world. The program combines analytics and leadership training so that our senior leaders gain fluency in analytic techniques and, most importantly, have guidance about how to apply data analytics in the day-to-day management of their teams. We are especially interested in helping executives understand the ways in which leveraging data can create new options for better decision-making.
th er n o n -fin an cial in fo rm atio n members are women – in line with Dutch government objectives.
The certificate also recognizes how Aegon shows a positive and direct impact on the lives of LGBT people through policies and practices both within the organization and the communities we work in. In the latest US Corporate Equality Index, we were ranked as one of the best places to work for LGBT employees.
In 2019, we rolled out unconscious bias training for all employees worldwide.
In this way, the foundation inspires organizations to benefit from the power of all their constituent backgrounds and perspectives.
Partners and suppliers Aegon enables the businesses of its partners and suppliers.
Aegon can build sustainable financial services practices of their own as they draw on our insights and products to serve their customers. The relationship is symbiotic as this network of independent financial intermediaries brings insurance and investment assets to Aegon, along with market intelligence that helps us to create and distribute targeted offerings to the end customer.
We also seek to develop strong business relationships with suppliers and aim to use suppliers that serve our communities well. We currently have over 650 suppliers who are subject to our minimum supplier standards; as such, they have agreed to our
Our shareholders receive regular dividends, subject to customary approvals. An interim dividend is generally paid following half-year results. Final dividends are generally paid after approval by Aegon’s General Meeting of Shareholders in May, where shareholders are asked to approve the total dividends for the preceding financial year. Shareholders can opt for payment of dividends in cash or stock and we generally engage in share buyback programs to neutralize the effects of stock elections on the total outstanding shares, if our capital position allows.
Corporate Center and found zero divergence in pay for men and women performing the same jobs, when accounting for age, work experience, and length of service. We are committed to improving on that result worldwide and recognize that for some women, having a shorter tenure or work history is the direct result of unaddressed inequalities throughout history.
Shareholders may also derive (or lose) value from the performance of our shares. In 2019, Aegon’s stock price increased by 0.3%. The European insurance sector in general performed better with the Stoxx Europe 600 Insurance index ending the year up by 24.4%. We believe the reasons for the relative underperformance include the lower interest rates in the US – to which we are more exposed than other European insurers – and the regulatory overhang from the upcoming
We have created a thematically driven community program and donations framework that reflects Aegon’s purpose and values.
We support two keys themes:  Financial security and education, which includes promoting financial literacy and later life employment solutions;  Well-being and longevity, which includes promotion of physical fitness, mental vitality, disease prevention and support for livable communities.
Volunteer work We also encourage our employees to volunteer, and the vast majority of our staff worldwide can claim paid time-off to work on local community projects. In 2019, Aegon employees volunteered approximately 19,500 hours – equivalent of EUR 0.9 million, based on their average salaries.
Through our businesses, we support more than 500 local charities and good causes. Among the largest recipients in 2019 were United Way and Habitat for Humanity in the US, the VUMC
Global Tax Policy online. This policy outlines Aegon’s approach to responsible tax, which seeks to align the long-term interests of all our customers, employees, business partners, investors, and wider society. We also hold regular meetings with NGOs to discuss Aegon’s tax strategy and policy.
th er n o n -fin an cial in fo rm atio n the process of being built. We strive for this technology to make tax compliance such as preparation of Dutch corporate income tax and value added tax returns more automatic.
Policy, compliance with the Global Tax Policy is part of a quarterly attestation and our Global Tax training program. The Tax Risk
US: 153 Netherlands: 259 UK: 74 Asia: 32 Others: 97 3 Includes dividends, interest, royalties and others 4 Policyholders (including social security tax)
For a breakdown of corporate income tax by country/region, please see page 415. Some numbers may not add up due to rounding.
Aegon is governed by three corporate bodies:  General Meeting of Shareholders  Supervisory Board  Executive Board
Record date The record date is used to determine shareholders' entitlements with regard to their participation and voting rights. In accordance with Dutch law, the record date is 28 days before the day of the General Meeting of Shareholders.
This includes proxies submitted electronically. All shareholders wishing to take part must provide proof of their identity and shareholding, and must notify the Company ahead of time of their intention to attend the meeting. Aegon also solicits proxies from New York registry shareholders in line with common practice in the United States.
Composition of the Supervisory Board Members of the Supervisory Board are appointed by the General Meeting of Shareholders, following nomination by the Supervisory Board itself. Aegon aims to ensure that the composition of the Company's Supervisory Board is in line with Aegon's diversity policy for the Supervisory Board,
Executive Board and Management Board and is as such wellbalanced in terms of professional background, geography, gender and other relevant aspects of the diversity policy.
Supervisory Board members are appointed for a four-year term, and may then be reappointed for another four-year period.
th er n o n -fin an cial in fo rm atio n years at the most. Supervisory Board members are no longer eligible for (re)appointment after reaching the age of 70, unless the Supervisory Board decides to make an exception.
Remuneration of the Supervisory Board members is determined by the General Meeting of Shareholders. In 2019, no transactions were concluded between the Company and any of the Supervisory
Board members. Furthermore, the Company did not provide loans or issue guarantees to any members of the Supervisory
Board. At present, Aegon's Supervisory Board consists of six members, all of whom qualify as independent in accordance with the Dutch Corporate Governance Code. During the Annual General
Executive Board Aegon's Executive Board is charged with the overall management of the Company and is therefore responsible for achieving
Aegon's Articles of Association determine that for certain decisions the Executive Board must seek prior approval from the Supervisory Board and/or the approval of the General
Mr. Friese will succeed Mr. Wynaendts as Chief Executive Officer of the Company.
In 2019, no transactions were concluded between the Company and either member of the Executive Board. Furthermore, the Company did not provide any loans to or issue guarantees in favor of either of the members of the Executive Board.
Management Board Aegon's Executive Board is assisted in its work by the Company's Management Board, which has 11 members, including the members of the Executive Board.
The members have both regional and global responsibilities. This ensures that Aegon is managed as an integrated international business. While the Executive Board is Aegon's sole statutory executive body, the Management Board provides vital support and expertise in pursuit of the Company's strategic objectives.
In the relationship between the Supervisory Board and the Management Board, the CEO shall be the first contact for the Supervisory Board and its Chairman. Further, the members of the Boards will act in accordance with the provisions provided therefore in the Management Board Charter, the Executive Board
The capital of the Company Aegon has an authorized capital of EUR 1,080 million, divided into 6 billion common shares and 3 billion common shares
Each common share carries one vote. There are no restrictions on the exercise of voting rights by holders of common shares.
Significant shareholdings On December 31, 2019, Vereniging Aegon, Aegon's largest shareholder, held a total of 288,702,769 common shares and 559,712,240 common shares B.
Under the terms of the 1983 Merger Agreement as amended in May 2013, Vereniging Aegon has the option to acquire additional common shares B. Vereniging Aegon may exercise its call option to keep or restore its total stake to 32.6%
On December 23, 2019, Aegon N.V. repurchased 13,227,120 common shares B from Vereniging Aegon for the amount of EUR 1,384,046 based on 1/40th of the Value Weight
In this section below where reference is made to any filings with the Dutch Autoriteit Financiële Markten or the SEC the terms
To Aegon’s knowledge based on the filings made with the Dutch
Fund, BlackRock, Inc. and Franklin Resources, Inc. each hold a capital or voting interest in Aegon of 3% or more.
Markten as at June 20, 2018, Dodge & Cox International Stock
Based on its filing with the Dutch Autoriteit Financiële Markten as at June 10, 2015, Franklin Resources, Inc. (FRI), a US based investment management firm, stated to hold 81,510,408 shares, representing 3.0% of the issued capital as at 38 39CONTENTS
Special Cause, Vereniging Aegon is not allowed to exercise more votes than is proportionate to the financial rights represented by its shares. This means that in the absence of a Special Cause,
Meeting of Shareholders. In this event, Vereniging Aegon retains full voting rights on its common shares B for a period limited to six months. Vereniging Aegon would, for that limited period, command 32.6% of the votes at a General Meeting of Shareholders.
Issue and repurchase of shares New shares may be issued up to the maximum of the Company's authorized capital, following a resolution adopted by the General Meeting of Shareholders. Shares may also be issued following a resolution of the Executive Board, subject to approval by the Supervisory Board, providing, and to the extent that, the Board has been authorized to do so by the General Meeting of Shareholders. A resolution authorizing the Executive Board to issue new shares is usually presented at Aegon's Annual General Meeting of Shareholders.
Common shares B can only be transferred with the prior approval of Aegon's Supervisory Board.
Aegon's Articles of Association or to dissolve the Company, in accordance with a proposal made by the Executive Board and approved by the Supervisory Board.
Dutch Corporate Governance Code As a company based in the Netherlands, Aegon adheres to the Dutch Corporate Governance Code. The version of the code applicable to the financial year 2019 is the version that came into force on January 1, 2017. Aegon endorses the Code and strongly supports its principles for sound and responsible corporate governance and long-term value creation. Aegon regards the Code as an effective means to help ensure that the interests of all stakeholders are duly represented and taken into account. It is the responsibility of both the Supervisory Board and the Executive Board to oversee Aegon's overall corporate governance structure.
In general, Aegon applies the best practice provisions set out in the Code. There is one best practice provision with which
Corporate Governance Statement For an extensive review of Aegon's compliance with the Dutch
Members of the Executive Board are appointed and dismissed by the General Meeting of Shareholders, as inside directors are in the United States. The Remuneration Policy as regards the members of the Executive Board is adopted by the General
Composition of the Boards Members of the Executive Board 1 On August 12, 2019, Aegon announced that its Supervisory Board intends to propose the appointment of Mr. Lard Friese as CEO to the Annual General Meeting in 2020.
He was appointed as a member of Aegon's Executive Board in 2003, overseeing the Company's international growth strategy. In April 2007, Mr. Wynaendts was named Aegon's Chief
Operating Officer. A year later, he became CEO and Chairman of Aegon's Executive Board and Management Board.
Mr. Wynaendts has been appointed as Independent Director of the Board of Air France-KLM S.A. since May 2016, as Independent Director of the Board of Citigroup Inc. since
September 2019 and as Chairman of the Supervisory Board of Puissance B.V. (not listed) since May 2017.
Matthew J. Rider (1963, American)‍ CFO and member of the Executive and Management Boards of
Aegon on January 1, 2017, and was appointed as CFO and member of the Executive Board of Aegon at the Annual General
Mark Bloom has over 30 years' experience in information technology. He joined Aegon from Citi in February 2016, where he served as Global Head of Consumer Digital and Operations
Technology, responsible for digital, data and operations technology solutions and innovations. Prior to that, he held a number of technology leadership positions in financial services and the aerospace industry.
1 On September 10, 2019, Aegon announced that Mr. Grace would retire from the company on March 31, 2020. Mr. Mike Holliday-Williams has been appointed as the successor of Mr. Grace.
Maarten Edixhoven has over 25 years of experience in the financial services industry. He was head of corporate compliance at ING Group N.V. from 1995 to 2010, and served as a director of ING the Netherlands and Nationale Nederlanden in the period 2004 to 2008.
He was appointed CEO of the Dutch business in January 2017.
CEO of Aegon UK and member of the Management Board of
Adrian Grace held various roles at GE Capital and Sage Group Inc.
He joined Aegon UK in 2009, and was appointed CEO of Aegon
UK in 2011 and as a member of the Management Board of Aegon in 2012. Mr. Grace is a non-executive Director at Clydesdale Bank and a member of the Financial Conduct Authority practitioners'
Board (within the Prudential plc Group). Ms. van Hövell-Patrizi joined Aegon at the end of 2015. She was appointed Chief Risk
CEO three years later. Mr. Keim was appointed CEO of Aegon the Netherlands and member of Aegon´s Management
Europe as well as Asia. Mr. Keim is a member of the Supervisory
Aegon Integrated Annual Report 2019 42 43 Composition of the Boards
Onno van Klinken has over 25 years' experience providing legal advice to a range of companies and leading Executive Board offices. Mr. Van Klinken started his career at Allen & Overy, and previously worked for Aegon between 2002 and 2006.
He then served as Corporate Secretary for Royal Numico, before it was acquired by Groupe Danone. His next position was as General Counsel for the Dutch global mail and express group TNT, where he served from 2008 until the legal demerger of the group in 2011. This was followed by General Counsel positions at D.E. Master Blenders 1753 and Corio N.V.. Mr. Van
Carla Mahieu (1959, Dutch)‍ Global Head Human Resources and member of the Management
Following several years as a consultant – during which time she worked for Spencer Stuart, among other companies – Ms.
Mahieu joined Aegon in 2010 as Global Head Human Resources, and has been a member of Aegon's Management Board since
Mark Mullin (1963, American)‍ CEO of Aegon Americas and member of the Management Board of Aegon N.V.
Mark Mullin has spent more than 20 years with Aegon in various management positions in both the United States and Europe.
Mr. Mullin served as President and CEO of one of Aegon´s US
Chairman of the Board of Directors of the American Council of Life Insurers for the period October 2017-October 2018 and was a member of the Board of Directors and Executive
Board in June 2019. Having obtained a Master of Laws (2000)
He is also a member of the Board of Directors of The Netherlands-America Foundation (NAF) and a member of the Leadership Council of AmeriCares, a non-profit disaster relief and global health organization.
Members of the Supervisory Board William L. Connelly (1958, French)‍ Chairman of the Supervisory Board
(LFN) and a member of the Senior Management Committee of Lincoln Financial Group (LFG), before retiring in 2013. Before joining Lincoln Financial Group, Mr. Dineen was Senior Vice
Inc. (not listed, US-based) and was a member of Lincoln New York
Board in May 2014, and stepped down as per October 11, 2019.
Mr. Ellman was appointed to Aegon's Supervisory Board in 2017, and his current term ends in 2021. He is a member of the Supervisory Board Audit Committee and the Supervisory
Mr. Noteboom is also a member of the Supervisory Board of Royal Ahold Delhaize N.V. and Chairman of the Supervisory
Ben van der Veer (1951, Dutch)‍ Chairman of the Audit Committee
General Meeting of Shareholders, and his third and final term ends in 2020. He is Chairman of the Supervisory Board Audit
Mr. Van der Veer is a member of the Supervisory Board of Royal
Siemens Nederland N.V. (not listed) and a former non-executive member of the Board of Directors of RELX PLC and a former member of the Supervisory Board of Royal FrieslandCampina N.V.
Ms. Wortmann-Kool is also a member of the Supervisory Board of Het Kadaster (not listed), Chairman of the Board of Trustees of Save the Children Netherlands and member of De Autoriteit
Financiële Markten Capital Markets Advisory Committee. She was vice president of the European People's Party until March 2018 and member of the Advisory Council of the Centraal Bureau voor de Statistiek until June 2018.
Report of the Supervisory Board The Supervisory Board is entrusted with supervising and advising the Executive Board on management of the Company, and overseeing Aegon's strategy and the general course of its businesses.
Executive Board, of the general course of affairs and strategy of the Company, and of its businesses. In performing their duties, members of the Supervisory Board are guided by the interests of
Corporate Governance Code can be found on pages 36-40 of this Annual Report and in the Corporate Governance Statement published on aegon.com.
Composition of the Supervisory Board and Executive Board Supervisory Board The composition of the Supervisory Board is discussed regularly in Board meetings and in particular by the Nomination and
There was one change to the Supervisory Board in 2019: after having been a member of the Supervisory Board for five years,
On May 17, 2019, shareholders reappointed Mr. Ben Noteboom for an additional four-year term. During the Annual General
Meeting on May 15, 2020, the Supervisory Board will propose to the shareholder to appoint Mr. Thomas Wellauer and
During the Annual General Meeting on May 15, 2020, it will be proposed to the shareholders to appoint Mr. Lard Friese as member to the Executive Board. Following his appointment,
Aegon Integrated Annual Report 2019 46 47 Report of the Supervisory Board
Supervisory Board. All Supervisory Board meetings were attended by all Board members. All committee meetings were attended by all committee members, except for one Risk Committee meeting that Ben Noteboom was unable to attend. Next to the Supervisory Board and Supervisory Board Committee meetings, additional meetings have taken place in relation to the succession of Alex Wynaendts as member of the Executive
Ben van der Veer 7/7 5/5 - 1/1 - 6/6 4/4 3/3
Based on the agenda topics, members of the Executive Board and
Annual Report were discussed in the March 2020 meeting in the presence of the external auditor PwC. At the Supervisory
Board meeting in December 2019, the budget for 2020 was approved and the Medium Term Plan was discussed.
Board strategy meeting, the strategy is discussed as part of the annual strategy process. Plans and projects were discussed during executive sessions and in regular meetings, together with the strategic focus for all operating segments. Furthermore, the focus on execution and the modernization of the business were additional important strategic priorities that were discussed during the Supervisory Board meetings.
M&A and balance sheet transactions, including but not limited to the sale of its 50% stake in the variable annuity joint ventures in Japan and the reinsurance of part of the longevity exposure in the Netherlands.
In 2019, Supervisory Board discussions included the following topics:  Strategy, including Aegon’s long-term value creation, its responsible business strategy and business reviews;  Acquisitions, divestments, the strategic direction of Aegon’s businesses and the focus on execution and modernization, which included strategic administration partnerships;  Executive Board and senior management succession planning;  Executive remuneration, including the risks of the remuneration framework;  Corporate Governance;  Composition of the Supervisory Board, including the
Aegon’s engagement with regulators;  Highlighted topics by Supervisory Board Committees;  Regulatory changes at both a regional and global level;  Customer due diligence processes;  Tax policy and tax developments; and  Technology, including the technology strategy, technological developments and innovations.
Board reviewed and adopted Aegon's 2018 Annual Report, the Consolidated Financial Statements of Aegon N.V., and the Financial Statements of Aegon N.V.. In May, August and
November, the Supervisory Board reviewed Aegon's first, second and third quarter 2019 results respectively.
Risk Management. In particular, the Board discussed the state of the Legal and Compliance functions, General Data Protection
In 2019, the Chairs of the Supervisory Board, Audit Committee and Risk Committee visited the group supervisor, the Dutch
Educational sessions The Board and its Committees received updates and presentations on topics including developments in acquisitions and divestments, corporate governance and regulatory compliance, roles and responsibilities of the Board and the management and remuneration regulations for the insurance sector, responsible business and information technology.
Board reviewed the performance (results) of the individual members of the Executive and Management Boards over the preceding calendar year in February 2019. The performance of the members of the Executive and Management Boards was also discussed regularly during the year.
Aegon Integrated Annual Report 2019 48 49 Report of the Supervisory Board
Board. These reports provide an overview of the responsibilities and activities of the Committees.
The Risk Committee is responsible for supervising the activities of, and advising the Supervisory Board's Audit Committee with respect to, the Company's enterprise risk management framework and internal control systems. The Audit Committee primarily relies on the Risk Committee for these topics, as stated in the Dutch Corporate Governance Code.
The Audit Committee reports to the Supervisory Board on its activities, identifying any matters about which it considers action or improvements are needed, and making recommendations as to the steps to be taken. For more information about the functioning of the Audit Committee, please see the Audit
Committee meetings In 2019, the Audit Committee held six meetings, one of which was a combined meeting with the Risk Committee of the Supervisory Board in December 2019. Audit Committee meetings were attended by the members of the Audit Committee,
Center, the Chief Risk Officer, the Chief Internal Auditor, and partners of PwC, Aegon's external auditor.
Risk management and internal controls With respect to their oversight of internal controls (provided they did not pertain to the work and responsibilities of the Risk
Security, Solvency II, third party management and administration partnerships, General Data Protection
Regulation, performance management and integrity;  Reviewed the internal control framework, among others with respect to the Sarbanes-Oxley Act; and  Discussed the internal control statement with the
External audit effectiveness The Audit Committee discussed and approved the external auditor's engagement letter for 2019. Aegon has wellestablished policies on audit effectiveness and independence of auditors that set out, among other things:  The review and evaluation of the external auditor and the lead partner of the external audit team on at least an annual basis;  Non-audit services performed by the external auditor;  Rotations of the external auditor and lead partner; and  Discussions about planning and staffing of the external audit activities.
For more information about the policies relating to the effectiveness and independence of the external auditor, please see Annexes A, B and C of the Audit Committee Charter on aegon.com.
The Risk Committee Composition On December 31, 2019, the composition of the Risk Committee was as follows:  Dona D. Young (chair);  Mark A. Ellman; and  Ben J. Noteboom.
Risk management and Internal controls Recurring items on the Risk Committee agenda in 2019 were risk exposure information, risk policy compliance monitoring,
IT security and data protection and risks associated with large modernization and change programs in the company. The Risk
Aegon Integrated Annual Report 2019 50 51 Report of the Supervisory Board
 Assessing a quarterly modernization dashboard that outlined risks with regards to the execution of the strategic change programs in each region, and how those risks were monitored and mitigated;  Reviewing the Group Risk appetite, which consists of the risk strategy and risk limits and tolerances; and  Reviewing the risk governance structure and risk competencies, including the skills necessary for the risk function.
The Risk Committee also discussed several regulatory topics on a regular basis, including the DNB Focus report and the consequences and actions in the context of Recovery and
Further to the activities mentioned below, the Nomination and Governance Committee discussed senior management team developments and governance matters and structures.
The Nomination and Governance Committee also reviewed the important outside board positions of the members of the Management and Supervisory Board, and discussed specific appointments to important outside board positions where applicable.
Furthermore, the existing and impending vacancies in the Supervisory Board were discussed. A Supervisory Board competency overview is published on aegon.com.
Executive and Management Board related activities During 2019, the Nomination and Governance Committee was actively involved in a thorough succession process to identify a successor during the final term of CEO Alex Wynaendts, resulting in the announcement that the Supervisory Board intends to propose the appointment of Mr. Lard Friese as CEO
to the Annual General Meeting of Shareholders. Lard Friese joined the company as CEO-designate effective March 1, 2020 and will succeed Alex Wynaendts at the AGM to be held on May 15, 2020.
The Committee was also kept appraised of major organizational changes, developments in employee engagement, talent management and international mobility. The Supervisory Board was also informed about the annual Global Employee Survey, which was conducted at the end of 2019. The Supervisory
Board discussed the outcome of this survey in detail in the first quarter of 2020.
Supervisory Board is an important issue for Aegon. Selection and appointment is based on expertise, skills and relevant experience, and the Supervisory Board takes diversity into account with 51 CONTENTS
Aegon Integrated Annual Report 2019 51 Report of the Supervisory Board
a view to achieving its aim of having a balanced Supervisory,
Board and the Management Board in terms of nationality, age, gender and educational, professional and geographical background and experience of the individual members.
When identifying candidates for open positions in the Executive and Supervisory Boards, the Committee actively searches for female candidates. It also instructs external search firms to present female candidates. More information on diversity within the Board is available in the Supervisory Board
Committee was as follows:  Ben J. Noteboom (chair); and  William L. Connelly.
This includes:  Reviewing the Aegon Group Global Remuneration Framework and making recommendations on the remuneration policies;  Overseeing the remuneration of the Executive Board and
Heads of Group Control functions;  Preparing recommendations regarding variable compensation both at the beginning and at the end of the performance year; and  Preparing the information provided to shareholders on remuneration policies and practices, including the
In 2019, the Remuneration Committee was actively involved in amending the remuneration policies for the Executive Board and the Supervisory Board, in order to implement the changes as required by the Shareholder Rights Directive implementation
Annual Accounts This Annual Report includes the Annual Accounts for 2019, which were prepared by the Executive Board and discussed by both the Audit Committee and the Supervisory
Board. The Annual Accounts are signed by the members of the Executive Board and the Supervisory Board, and will be placed on the agenda of the 2020 Annual General Meeting of Shareholders for adoption. The Supervisory Board recommends that shareholders adopt the annual accounts.
Acknowledgement The members of the Supervisory Board are very grateful for the work undertaken by Executive and Management Boards in pursuit of Aegon's purpose of helping people achieve a lifetime of financial security.
Finally, the Board wishes to thank all those who invest in Aegon for their continued trust and confidence.
Aegon Integrated Annual Report 2019 53 Report of the Supervisory Board
Remuneration Report The 2019 Remuneration Report from our Remuneration Committee on behalf of the Supervisory Board
This is followed by chapter two which contains a general introduction to Aegon’s Global Remuneration Framework, Human
Resources Strategy, Remuneration Principles, the concepts of Total Compensation and Variable Compensation, Risk
Management in relation to remuneration and remuneration of Material Risk Takers. The third chapter is the 2019 Supervisory
Executive Board Remuneration Report provides a summary of the Executive Board Remuneration Policy which applied to 2019, the Executive Board remuneration over the recent years and the 2020 Executive Board performance indicators. The sixth and final chapter presents the proposed 2020 Executive Board
Aegon into the next phase of development. Aegon operated in a challenging environment in 2019, with persistent low interest rates in our key markets. At the same time, we continued to execute on our strategy and we reached a number of important milestones, by simplifying Aegon’s structure and adopting an even more proactive approach to managing our portfolio of businesses. (For a more detailed update, please see the ‘Letter from our CEO and the ‘Letter of Supervisory Board
was below our target of 10%. However, Aegon increased the normalized capital generation which, combined with a number of management actions, enabled us to maintain a strong capital position. Commercial momentum has improved with an increase in new life sales. Net deposits were lower mainly due to contract discontinuances in Retirement Plans in the Americas, despite the fact that the gross deposits were higher compared to 2018. The market consistent value of new business has been lower due to Variable Annuities in the United States, reflecting the significant decline in interest rates, which led to negative margins. This was partially offset by higher margins on workplace business in the United Kingdom. Digitally connected customers increased strongly with more mobile application users in the United States and a continued increase of platform users in the Netherlands and UK. Lastly, the relational net promotor score (r-NPS) reached a record high as a result of our NPS
Officer and member of the Executive Board). Mr. Wynaendts was appointed to the Executive Board in 2003 for four years. He was re-appointed at the Annual General Meeting of Shareholders in 2007, 2011, 2015 and most recently in 2019 for his last term.
Mr. Rider was appointed as a member of the Executive Board for four years at the Annual General Meeting of Shareholders on May 19, 2017. Mr. Rider’s current term ends at the General
Aegon’s Executive Board is assisted in its work by the Company’s
Management Board, which has 11 members, including the members of the Executive Board. In 2019 Aegon’s Management
Officer and Chairman of the Executive Board. In preparation of this appointment Mr. Friese joined Aegon as CEO-designate per
Mr. Friese to ensure a seamless leadership transition and remains available to Aegon until September 30, 2020. Mr. Wynaendts will not be eligible for a severance payment.
Policies to the Solvency II remuneration rules from December 8, 2017 onwards. Aegon preferred this switch as the Solvency
As a result, Aegon selected positions in which employees could have a material impact on the company, based on the Solvency
(each having their own selection criteria). Under Solvency II these positions are called Material Risk Takers and are defined as
‘the administrative, management or supervisory body, persons who effectively run the undertaking or have other key functions and other categories of staff whose professional activities have a material impact on the undertaking’s risk profile’. Up to 2019 Aegon selected these type of positions under the Capital
Employees which have been selected as Material Risk Taker are subject to various risk assessments and stricter requirements around the pay-out of variable compensation compared to other employees (for more details, see “Material Risk Takers” further below). Per 2019 Aegon revised the vesting schedule of variable compensation for Material Risk Takers, in accordance with
Solvency II. These new vesting schedules were made globally consistent for the first time and were only differentiated by seniority as follows:  Management Board members, excluding Executive Board members 1: 33.33% upfront cash / 66.67% deferred shares, cliff-vesting after 3 years.
Committee Chairman from EUR 10,000 to EUR 13,000 and that of the other Risk Committee Members from
On December 1, 2019, the Dutch Act to implement the revised
In 2019 Aegon paid out EUR 185 million in variable compensation and 24 employees received EUR 1 million or more in total annual compensation (i.e. the sum of fixed compensation, variable compensation and pension contributions paid in 2019).
Looking ahead to 2020 At the Annual General Meeting of Shareholders on May 15, 2020,
Aegon will ask its shareholders to:  Cast an advisory vote on this Remuneration Report, which will be an annual agenda item going forward;  Approve the proposed 2020 Supervisory Board Remuneration
The total compensation level of Mr. Friese is at the same level as that of the incumbent CEO, Mr. Wynaendts, although structured differently. Mr. Friese’s gross Fixed Salary will become EUR 1,485,000, with an annual gross Target Variable
Compensation opportunity, but the Pension contribution will be lower compared to the incumbent CEO. When Mr. Friese was hired as CEO Designate, Aegon offered a sign-on arrangement.
Aegon took note of developments which could change the applicable rules, regulations and guidance, such as the draft
2. Remuneration at Aegon in general This chapter contains a general introduction to Aegon’s Global
Remuneration Principles, the concepts of Total Compensation and Variable Compensation, Risk Management in relation to remuneration and remuneration of Material Risk Takers.
Global Remuneration Framework Aegon has a Global Remuneration Framework (GRF) which outlines the Aegon Group Human Resources Strategy, the Aegon Group Remuneration Principles and the Aegon Group
Remuneration Guidelines which apply to all Aegon employees, including the Executive Board members1. The GRF has been designed in accordance with relevant rules, guidelines and interpretations, such as the Dutch Financial Supervision Act, the Dutch Civil Code, the Dutch Corporate Governance Code and the Solvency II Legal Framework.
All steps in the remuneration process are governed by the GRF
or cultural beliefs; creating global alignment in the total compensation of all Material Risk Takers; and aiming at controlled market competitive remuneration, by providing total compensation packages in line with an appropriately established peer group at a country and/or functional level;  Aegon remuneration is risk-prudent by: aligning business objectives with risk management requirements in the target setting practices throughout the Aegon Group; giving an incentive to appropriate risk-taking behavior while discouraging the taking of excessive risks; and protecting the risk alignment effects embedded in the remuneration arrangements of individual staff against any personal strategies or insurance to counter them.
(where in line with the local market practice), pension and other benefits. Market survey information from reputable sources is used to regularly assess the competitiveness of compensation levels and practices which Aegon offers its employees.
Variable Compensation Variable compensation, if any, is capped at an appropriate level as a percentage of fixed compensation.
IV compensation ratio (i.e. 100% of fixed compensation). This provision was specifically created for corporate office employees of companies based in the Netherlands, which employ at least 75% of their employees abroad. In 2019, Aegon met this criterion and offered selected senior corporate office employees a variable compensation opportunity up to this maximum.
Europe such an opportunity in 2019. The Company's capital was not adversely impacted by the maximum variable compensation that could be paid out.
Variable compensation for senior management is usually paid out in cash and shares over multiple years, and is subject to further conditions being fulfilled. Variable compensation already paid out may also be retrieved under certain circumstances ('claw-back').
Staff. Given the rationale for having a separate policy for Material
Aegon endeavors to seek an appropriate balance of ex-ante and ex-post risk assessments to ensure effectiveness in both the short- and long-term risk taking behavior of employees.
Legal entities within the Aegon Group, which are directly subject to the Capital Requirements Directive, Solvency Directive, the Alternative Investment Fund Managers Directive and/
‘Identified Staff’. Their selection is based on the selection criteria of the applicable European Directive, its guidelines and local regulatory requirements (where available).
In order to differentiate between the Material Risk Takers who are selected at the holding level of the company and at the various legal entities within the Group, the former are called Group
The Group and Local Material Risk Takers are subsequently subject to risk assessments and remuneration rules from the applicable European Directive, its guidelines and local regulatory requirements (where available). This means that their personal objectives are subject to an ex-ante risk assessment at the start of the performance year. A minimum portion of their variable compensation will be deferred and paid in non-cash instruments (such as Aegon shares or investment in own funds).
Before the allocation of variable compensation they are subject to an ex-ante risk assessment, while before pay-out of any deferred variable compensation they are subject to ex-post risk assessments. Based on these risk assessments, Aegon can adjust the intended or allocated variable compensation awards downward where deemed appropriate (however never upward).
3. 2019 Supervisory Board Remuneration Report The 2019 Supervisory Board Remuneration Report has been prepared by the Remuneration Committee of the Supervisory
Supervisory Board Remuneration Policy in 2019 Aegon's Supervisory Board Remuneration Policy is aimed at ensuring fair compensation and protecting the independence of the Supervisory Board members. Terms and conditions for the Supervisory Board members are the responsibility of the Remuneration Committee of the Supervisory Board.
Board’s Committees;  An attendance fee for each Committee meeting attended, be it in person or through video and/or telephone conference; and  An additional fee for attending meetings that require intercontinental, continental or US interstate travel between the Supervisory Board member's home location and the meeting location.
Zurich Insurance Group. This peer group is slightly different from the European peer group for the Executive Board, as a result of excluding the UK companies.
KPN, NN Group, Philips, Randstad and Wolters Kluwer. This reference group is equal to the Dutch reference Group for the Executive Board.
Board remuneration policy at this time. The IFRS-EU expenses for these fees are equal to the amounts in the table below.
William L. Connelly (as of May 19, 2017) 2019 95 54 20 169
Mark A. Ellman (as of May 19, 2017) 2019 56 39 20 115
Dirk P.M. Verbeek (up to May 18, 2018) 2018 19 10 - 29
William L. Connelly (as of May 19, 2017) Fees - - 98 119 169
Mark A. Ellman (as of May 19, 2017) Fees - - 114 103 115
Ben J. Noteboom (as of May 20, 2015) Fees 113 109 102 86 103
Robert W. Dineen (up to Oct 11, 2019) Fees 121 115 104 101 101
Robert J. Routs (up to May 18, 2018) Fees 143 140 134 125 -
Inflation in the Netherlands Consumer Price Index 0.6% 0.3% 1.4% 1.7% 2.6%
All fees that have been paid to the Supervisory Board members were in accordance with the applicable Supervisory Board remuneration policy at the time, as they’ve been exclusively based on their membership of and function in the Supervisory
This was after the fees for the first quarter of 2019 were already paid, based on the old fees. Therefore some Supervisory Board members received a correction payment for the first quarter as part the second quarter payment.
4. Proposed 2020 Supervisory Board Remuneration Policy A. Policy A.1 Remuneration Policy This Supervisory Board Remuneration Policy (the “Policy”)
“SB members”), to be submitted for approval by the Shareholders of Aegon N.V. (the “Shareholders”) at the Annual General Meeting of Shareholders on May 15, 2020. This Policy replaces the Aegon
A.3 Policy Changes The Supervisory Board made the following changes to this Policy compared to the previous version, while leaving the fees unchanged:  Increasing transparency for all Stakeholders by clarifying how the Policy contributes to Aegon’s strategy, long-term interests and sustainability and how it takes into account
These changes were made in order to comply with the new
A.4 Policy Considerations The Policy contributes to Aegon’s strategy, long-term interests and sustainability through the remuneration of the SB members in various ways:  The Policy provides the Supervisory Board with the means to attract, motivate, and retain competent, diverse, and experienced SB members for the long-term. Having motivated, competent, and experienced SB members on board is essential for executing Aegon’s strategy, and safeguarding and promoting its long-term interests and sustainability.
 SB members receive fixed remuneration for their responsibilities which does not depend on the Aegon results in order to protect their independence when supervising the manner in which the Executive Board members implement the long-term value creation strategy. These responsibilities are part of the membership of the Supervisory Board and its
The Supervisory Board took Aegon’s identity, purpose, and values into account when developing the Policy and its changes:  Aegon is an international financial services group based in the
America. The Policy provides the Supervisory Board with the means to attract, motivate, and retain SB members from various countries, predominantly based in the Netherlands and the US. As Aegon is based in the Netherlands, the Policy considers the European Insurance peers as well as Dutch
General Industry peers to be the relevant external reference for the SB member’s Remuneration. The Policy is also influenced by the European and Dutch rules and regulations on (Executive) remuneration, which apply to Aegon as a result of its identity (i.e. for being an Insurance firm in Europe and for being a listed and financial company in the Netherlands).  Aegon’s purpose is to help people achieve a lifetime of financial security. In order to fulfill this purpose, Aegon has a strategy to which this Policy actively contributes (see above).  The four Future Fit values ‘Acting as one, Customer centricity,
Agility, and Accountability’ aim to create a company that is fit for the future: one that meets customers’ expectations, is right for our digitally-connected, data-driven world, and can adapt quickly to changing market conditions. These values are not explicitly reflected in the Policy as a result of the fee-based remuneration structure. However, these values are strongly incorporated in the Supervisory Board Charter.
The Supervisory Board has not taken the internal compensation structures and levels into account as the fee-based compensation structure for SB members is significantly different from these internal compensation structures and levels.
The Supervisory Board developed draft Policy changes based on the requirements of the new Dutch Act which implemented the Shareholder Rights Directive. Subsequently, the Supervisory
Board actively reached out to a number of stakeholders to consult or discuss the draft Policy and its changes in order to assess its public support. The Chairman of the Remuneration
Shareholder interest groups on the draft changes. The Chairman of the Remuneration Committee discussed the draft Policy with the European Works Council, while the Chairman of the Supervisory Board discussed it with the Central Works
Within Aegon, constant monitoring of (social) media takes place, including sensitive topics such as remuneration, and such feedback is shared with the Supervisory Board.
Committee. The Remuneration Committee may suggest revisions to the Policy or a new policy to the Supervisory Board.
When endorsed, the Supervisory Board will submit a proposal to the Shareholders to adopt the revised or new policy at the Shareholders’ Meeting.
C. Remuneration Structure C.1 Supervisory Board remuneration A Supervisory Board member is entitled to (i) base fees for their Supervisory Board membership (see C.2) and membership of a Committee(s) of the Supervisory Board (see the C.3), (ii)
C.3 Supervisory Board Committee membership fee Base fee for Supervisory Board Committee membership per year:  Chairman of the Audit or Risk Committee: EUR 13,000;  Member of the Audit or Risk Committee: EUR 8,000;  Chairman of other committees: EUR 10,000;  Member of other committees: EUR 5,000.
Extra Supervisory Board meetings are meetings in addition to the minimum required regular Supervisory Board meetings as defined in the Aegon N.V. Supervisory Board Charter.
A Supervisory Board member can also receive an attendance fee for additional work outside committee meetings, which require similar effort and representation such as, but not limited to, attending meetings with shareholders and other stakeholders.
D.1 Travel fees The SB member will receive a fee to cover the time to travel for attending Supervisory Board (Committee) meetings and related meetings and events.
Board Committee meeting, and related meetings and events in accordance with the Aegon N.V. Supervisory Board Charter.
The local employee travel and reimbursement policies are used as reference.
Annex The Supervisory Board assesses the competitiveness of the Supervisory Board’s remuneration structure and levels against the peer companies.
Total Assets;  Geographic scope: Preferably companies which operate globally;  Location: Headquarters based in Europe excluding UK.
Akzo Nobel, ASML, DSM, KPN, and Wolters Kluwer. The last update of this peer group was in 2019, when ING, NN Group,
Remuneration Policy which applied to 2019, the Executive Board remuneration over the recent years and the 2020 Executive
Board performance indicators. The section on remuneration over the recent years is split into a) fixed compensation 2017-2019, b) conditional variable compensation 2019, c) provisional variable compensation 2019, d) variable compensation 2017-2019, e) pay-out of allocated variable compensation, f) pension 64 65CONTENTS
The Executive Board Remuneration Policy that has been applied in 2019 was adopted at the General Meeting of Shareholders on May 12, 2011. This policy has been subject to annual reviews by the Supervisory Board.
Executives in various ways:  The Policy provides the Supervisory Board with the means to attract, motivate and retain competent and experienced
Aegon’s strategy and safeguarding and promoting its long-term interests and sustainability.
 Aegon’s strategy is about building life-time relationships with customers, to create financial security and well-being throughout their lives. To pursue this strategy our focus is on sustainable growth through expanding our customer base, increasing efficiency, capitalizing on the advantages of being a global group and investing more in growth businesses.
To support Aegon’s strategy execution, the Policy makes unadjusted and risk-adjusted financial (growth) indicators as well as personal indicators related to the Aegon strategy mandatory for the Executive.
(50%) in Shares. These shares are paid partially upfront and partially deferred tranche-vesting over a 3-year period. After pay-out Shares are subject to an additional holding period of 3 years (even for the upfront Shares). This is combined with prohibiting the Executive in this Policy from using personal hedging strategies or insurance which could undermine this long-term alignment of interests.
Executive Board variable compensation plan per year, with a single variable compensation award which is subsequently split into cash and shares, rather than operating separate Short-Term
Committee will conduct scenario analyses to determine the long-term effects on the level and structure of compensation granted to each Executive Board member and reports their findings to the Supervisory Board. The Supervisory Board can subsequently decide on referring the proposed Policy changes to the Annual General Meeting of Shareholders for adoption.
responsibilities, experience and expertise of the Executive into account as well as internal and external reference information.  The internal references are the compensation structure and levels of Management Board members and the annual compensation changes of the general employee population and senior managers within Europe and the Netherlands specifically.
 The external references are compensation trends in the market, economic developments (e.g. inflation) as well as a quantitative assessments of the competitiveness against a peer group of European Insurance companies and a reference group of General Industry companies based in the
The European Insurance peer group has been selected by the following criteria:  Industry: preferably Life Insurance;  Size: companies with similar number of employees, assets, revenue and market capitalization;  Geographic scope: preferably the majority of revenues generated outside of the country of origin; and  Location: companies based in Europe.
In addition, the following reference group of 12 companies is used in order to monitor alignment with the General Industry in the Netherlands: ABN AMRO, Ahold Delhaize, Akzo Nobel,
Randstad and Wolters Kluwer. This reference group is equal to the Dutch reference Group for the Supervisory Board.
The Remuneration Committee and the Supervisory Board regularly review the composition of both groups in order to ensure that they continue to provide a reliable and suitable basis for comparison. The Supervisory Board updated both the European Insurance peer group and the Dutch General
Ageas, RSA Insurance Group, Swiss Life Holding and Talanx were added to the European Insurance peer group, while Old Mutual and Standard Life Aberdeen were removed. The peer group size increased from 14 to 16 in order to create a more balanced selection around Aegon’s size data. In the Dutch General Industry reference group ABN AMRO, DSM, ING Group, NN Group and
Control, Human Resources and Compliance departments to ensure alignment with the company's objectives, business strategy, risk tolerance and long-term performance remains strong.
 The non-financial performance indicators are consistent with risk tolerance levels, regulatory requirements, reasonable stakeholder expectations and are supporting sound and responsible business practices and integrity of the products and services delivered.
Committee prepares a recommendation for the allocation of a variable compensation award to each Executive Board member.
This recommendation is based on the results on each of the selected performance indicators, its threshold, target and maximum levels and takes a second ex-ante risk assessment by the Company’s Risk Management team into account. This risk assessment looks into whether there are reasons for a downward adjustment of the intended variable compensation award (malus)
The Remuneration Committee sends its recommendation and the second ex-ante risk assessment to the Supervisory Board, which - based on its informed judgement - can approve, revise or reject the recommendation. This Supervisory Board decision includes validating that, when taken together, the results of the performance indicators represent a fair reflection of the overall performance of the Executive Board member over the performance year.
The allocated variable compensation award is subsequently split into equal parts of cash and Aegon shares, of which 40% is paid out upfront (i.e. in the year following the performance year) and 60% is deferred. The deferred part is paid in three equal tranches over the subsequent three-year period. All shares, both upfront and deferred, are subject to an additional three-year holding period after they are paid1. The variable compensation payout can be illustrated by the following example and the graph below. For every 1,000 in variable compensation 400 is paid out in the year following that performance year (year N). This upfront part will be paid 50% in cash (=200) and 50% in a number of shares
(=200 / Aegon share price at grant = number of allocated shares). The remaining 600 is deferred and paid-out during the subsequent three years (years N+1, N+2 and N+3).
unchanged or adjusted downward). The Remuneration Committee sends its recommendation and the ex-post risk assessment to the Supervisory Board. The Supervisory Board can approve, revise or reject the recommendation.
Claw-back provision Aegon's Supervisory Board can claw-back variable compensation that has already been paid to the Executive in case of a material financial restatement or individual gross misconduct, after considering a risk assessment by the Company’s Risk
From January to May 2019, Mr. Wynaendts’ pension arrangement included retirement provisions that allowed benefits to be taken at the end of the term. From June 2019 onwards, Mr. Wynaendts received a gross allowance for pension purposes, which equaled 40% of the fixed compensation in 2019. In addition to this, Mr.
Mr. Rider’s pension contributions equaled 40% of his fixed compensation in 2019 consisting of:  Participation in Aegon’s career average defined benefit pension plan for NL-based employees, for his fixed income up to EUR 107.593 (2019 threshold set by Dutch law);  Participation in Aegon’s defined contribution pension plan for
 A gross allowance for pension purposes of around 15%, in order to make the sum of all pension contributions equal to 40% of his fixed compensation in 2019.
Agreement with a notice period of three months. The Company may terminate the board agreement by giving six months' notice if it wishes to terminate the agreement.
Executive Board remuneration in recent years A. Fixed compensation 2017-2019 Mr. Wynaendts' annual fixed compensation level increased with 2.5% from EUR 1,294,867 to EUR 1,327,239 per June 2019, which resulted in a total fixed compensation pay-out of EUR
Matt Rider Total (EUR thousand)‍ 470 753 941 in cash (EUR thousand) 235 376 470
Meeting of Shareholders on May 15, 2020, Mr. Wynaendts has been awarded EUR 1,047,722 in conditional variable compensation for the 2019 performance year (78.9% of fixed compensation) and Mr. Rider EUR 742,786 (78.9% of fixed compensation). Each variable compensation award will be paid in the following cash and share parts, with the shares being subject to an additional holding period of three-years after pay-out.
The tables below show the results on each of the Aegon and personal indicators which determined the conditional variable compensation awards of Mr. Wynaendts and Mr. Rider, followed by the indicator definitions. The Aegon performance results were scored on a performance scale which was used to fund the 2019 bonus pools within Aegon: 50% for the threshold
(minimum), 100% for target level and 150% for the maximum level. The 2019 Aegon performance result on this performance scale was 79%. Converted to the performance scale that applied to the variable compensation of Mr. Wynaendts and
Represents how much value the sale of new insurance policies is generating for the company. This value represents the present value of our best estimate of incoming premiums and outgoing claims, benefits and expenses related to these new sales.
Underlying earnings before tax reflect our profit from underlying business operations and exclude components that relate to accounting mismatches that are dependent on market volatility or relate to events that are considered outside the normal course of business.
Aegon non-financial Relational NPS The Net Promoter Score (NPS) is a customer loyalty metric based on the percentage of customers that would likely recommend our products and services to friends and family (scores 9 and 10) minus the percentage that would not be likely to do so (scores 0 to 6). The Relational NPS measures the whole scope of the client relationship: 1) the contact experience, 2) the products/prices and 3) our brands.
Succession planning Contains personal goals to further improve succession planning for the Management Board and other critical positions.
Strategy execution capability Contains personal goals to further grow and accelerate the capability to execute the strategy (staffing, skills and competencies).
Cultural transformation Measures the personal contribution to embedding the Future Fit values in the organization (‘Acting as one, Customer centricity, Agility and Accountability’).
D. Variable compensation 2017-2019 The amounts in the first table represent the total conditional variable compensation awards allocated in relation to the performance year concerned. No circumstances have been identified to lower payout of the deferred payment from prior performance years in 2019 (the so called 'ex-post assessment') or to lower the payout of the upfront payment of the 2018 performance year variable compensation in 2019
(the so called 'ex-ante assessment'). The 2017 variable compensation for Mr. Rider has been for the period as Executive
E. Pay-out of allocated variable compensation The following tables show for each current and former Executive
Board member how much variable compensation has been paid in shares and cash respectively in 2017, 2018 and 2019 and how much conditional variable compensation is scheduled to be paid-out in the coming years. The vesting price of the share were: EUR 4.423 on May 19, 2017, EUR 5.848 on May 18, 2018 and
EUR 4.287 on May 17, 2019. After vesting all shares are subject to an additional three-year holding period.
F. Pension contributions 2017-2019 The allocated amounts in the first table represent the total pension contributions made in relation to the performance year concerned. The second table contains the expenses for pension, as recognized under the IFRS-EU accounting treatment in the income statement.
The 2017-2019 pension contributions for Mr. Wynaendts, under his defined benefit arrangement, include a back service liability which reflects the increase of his fixed compensation in 2016 and 2018, as well as the current low interest rates1. This defined benefit arrangement ran up to May 2019, when the final settlement was made.
of their fixed compensation level. Mr. Wynaendts continued to be entitled to a gross payment of 28% of his fixed compensation level as part of a grandfathered pension arrangement. The 2017 pension contributions for Mr. Rider have been for the period as Executive Board member (per May 19, 2017). His annualized 2017 pension contribution was EUR 360,118.
95,400.The IFRS-EU expenses for these benefits are equal to the amounts in the table below.
EUR 5.8 million (2018: EUR 6.3 million; 2017: EUR 5.3 million).
All remuneration that has been paid and allocated to the Executive Board members was in accordance with the applicable Executive Board remuneration policy. There were no deviations from the policy.
The table below presents the total compensation that has been paid in the last five calendar years on an annualized basis and the year-on-year annual change in total compensation. Please note that therefore Mr. Rider’s 2017 total compensation level has been annualized, as well as the parts of his 2017 variable compensation award, which have been paid in the calendar years 2018 and 2019 (increasing the total 2018 and 2019 awarded and due level compared to the table above). Additionally the table show the Aegon net income, a proxy of the financial and non-financial business performance, the vesting price of the Aegon shares, the inflation in the Netherlands and the average employee compensation over the same period.
2020 Executive Board performance indicators Looking ahead to the 2020 performance years, the 2020 performance indicators for Mr. Wynaendts and Mr. Rider are presented in the tables below, including the definitions and target levels of each of the performance indicators.
Aegon Non-financial 10% Relational NPS 1 year 10% Strategy Execution 1 year
Scope Performance indicators Definition Aegon financial Normalized capital generation The movement in our capital position (on a Solvency II basis) during a period in the normal course of business net of market impacts (e.g. changes to interest rates, credit spreads, equity returns) and one-time effects. Impacts from dividends and capital injections that do not generate capital but do affect Own Funds are excluded from capital generation. The 2-year target is the 20192020 target from the 2019-2021 target which was disclosed last year.
Relative TSR Aegon position relative to 7 US and 7 non-US peers when looking at Total Shareholder Return for a 1-year performance period. These peers are selected for being the most similar to Aegon based on their index listing, industry classification, 5 year monthly Beta, Market Capitalization and Total Revenue1. The target is to be in the top 5 out of the 15 companies.
Represents how much value the sale of new insurance policies is generating for the company. This value represents the present value of our best estimate of incoming premiums and outgoing claims, benefits and expenses related to these new sales. The target is part of the approved 2020 budget.
Return on equity The return on equity (ROE) measures the rate of return that the owners of common stock of a company receive on their shareholdings. Return on equity signifies how good the company is in generating returns on the investment it received from its shareholders. Aegon’s ROE is calculated by dividing underlying earnings after tax and after cost of leverage by average shareholders' equity excluding revaluation reserve. The target is part of the approved 2020 budget.
Strategy execution Measures the execution of the three projects which are key for a successful execution of Aegon’s strategy. The targets are derived from the approved 2020 project plans.
Alex Wynaendts Sustainable Organization Measures a combination of ESG related goals through personal goals on Employee Engagement and Inclusion & Diversity.
Matt Rider Sustainable Organization Measures a combination of ESG related goals through personal goals on Employee Engagement, governance during CEO transition and Control Environment.
Finance Transformation Measures the progress of three transformation processes within the Finance function.
1 The US peers are Axa Equitable Holdings, Principal Financial Group, Unum Group, Lincoln National Corp, Prudential Financial, Brighthouse Financial and MetLife. The non-US peers are Athene Holding, NN Group, Swiss Life Holding, Assicurazioni Generali, Baloise Holding, Prudential and ASR Nederland.
outlines the terms and conditions for the board agreement with and remuneration of the members of the Executive
Board of Aegon N.V. (the “Executives”), to be submitted for approval by the shareholders of Aegon N.V. (the “Shareholders”)
at the Annual General Meeting of Shareholders on May 15, 2020. This Policy replaces the Aegon N.V. Executive Board
Meeting, even if this would be four years after the approval of this Policy. Subsequently the Supervisory Board is required to submit a new proposal to the Shareholders to adopt a Policy at the next Shareholders’ Meeting (and if rejected again, the next
A.3 Policy Changes The Supervisory Board made several material changes to this
The main changes in the Policy are:  Increased transparency by clarifying how the Policy contributes to Aegon’s strategy, long-term interests and sustainability and how it take into account Aegon’s identity, purpose, values and Stakeholder environment.
Aegon’s long-term commitments to its Shareholders and other Stakeholders.  The portion of the Variable Compensation award that will be paid in Aegon N.V. shares (“Shares”) is increased from 50%
to 33 1/3%. This changes adds further alignment between the Executive, the long-term interests of Aegon and its
Compensation award for 40% upfront and for 60% deferred in three tranches over a 3-year period, with each upfront and deferred part split into 50:50 in Cash and Shares. All Shares were subject to an additional holding period of 3 years. This change raises the restriction period of the Shares from an average 4.2 years to 5 years, adding to the alignment of the
Policy directly aligns the Executive’s personal long-term interests with that of Aegon and its Shareholders by paying a significant part of the Executive’s Variable Compensation
Shareholders and other Stakeholders through the use of mandatory performance indicator categories of Earnings,
Netherlands which provides life insurance, pensions and asset management (identity). The main operations are in the US, the
 Agility: Aegon is active in a highly dynamic environment which requires it to respond quickly to changing conditions.
Using performance indicator categories rather than specific performance indicators, provide the Executive and
The Supervisory Board took the internal compensation structures and levels into account when selecting the remuneration elements and their levels for this Policy. Aegon has employees worldwide, so the compensation structures and levels vary from country to country and strongly depend on the local market practices. Whilst the majority of the Aegon employees are located outside of Europe, predominantly in the US, the remuneration levels of the Executives are aligned with the internal compensation structures and levels of employees in Europe (the Netherlands specifically) and external European and Dutch market references (see C.1 for more details). The Fixed
Compensation level of the Executive is following the internal compensation trend line, taking into account the additional responsibilities of the Executive compared to the Aegon
Group Material Risk Taker Variable Compensation Plan and the Individual Defined Contribution pension plans for Aegon employees in the Netherlands
The Supervisory Board developed draft Policy changes based on the requirements of the new Dutch Act which implemented the Shareholder Rights Directive and shareholder feedback on the previous version. Subsequently the Supervisory Board actively consulted with a number of stakeholders to discuss the draft Policy and its changes in order to assess its public support. The Chairman of the Remuneration Committee, supported by the Investor Relations and the Compensation &
Council, while the Chairman of the Supervisory Board discussed it with the Central Works Council in the Netherlands. All feedback was shared with the Supervisory Board. They took note that while not all Stakeholder feedback was aligned, there were no significant conflicts either. The Supervisory Board revised and fine-tuned several parts of the draft Policy for its final version, such as the definitions of the performance indicator categories.
On an ongoing basis, the Supervisory Board and the Executives regularly discuss remuneration related topics with the supervisory authorities, legislators and politicians. Within Aegon constant monitoring of (social) media takes place, including sensitive topics such as remuneration, and such feedback is shared with the Supervisory Board.
The Policy links the development of Share price in two ways to the Executive’s remuneration. The Executive’s Variable
Subsequently, two-thirds of the Variable Compensation award is paid in Shares. These Shares are restricted for a period of 5 years (a 3-year vesting period plus an additional 2-year holding period), which exposes the Executive to Share price movements during this period.
The Committee concluded that the impact of the Policy changes were reasonable and reported these findings to the Supervisory
A.5 Policy Review and Revision Each year, the Policy will be reviewed by the Remuneration
When endorsed, the Supervisory Board will submit a proposal to the Shareholders to adopt the revised or new policy at a
or provision in this Policy, as long as it continues to stay:  In line with the general spirit of this Policy as described in
A.4;  In line with the internal and external references as defined in this Policy (see C.1), and;  Compliant with the applicable legislation and regulations.  The Supervisory Board will adopt a derogation which includes at least the following details:  An explanation why the derogation is required in order to serve the long-term interest and sustainability of Aegon as a whole or to assure its viability;  Which remuneration element or provision is derogated from and how it affects the Executive’s compensation levels;  An assessment which confirms that the Policy allows the proposed derogation and that it complies with the applicable rules and regulations;  The period of derogation. This period is limited to the moment the Shareholders have adopted a revised or new policy at a Shareholders’ Meeting.
In case a future change in rules and regulations conflicts with (a part of) this Policy, the Supervisory Board may deviate from this Policy to ensure compliance with the new rules and regulations. The Supervisory Board will disclose the deviation in the Remuneration Report and submit a proposal to the Shareholders to adopt a revised Policy at a Shareholders’
B. Appointment The Shareholders appoint and reappoint an Executive for a maximum term of four years per (re)appointment in accordance with the Dutch Civil Code and the Articles of Association of Aegon N.V.. The Executive and Aegon N.V. enter into a board agreement for the duration of this term (the “Board Agreement”).
The Supervisory Board determines and regularly reviews the appropriate selection of remuneration elements and their
Variable Compensation elements and their levels are reviewed at least once a year. The Pension Arrangements and Other
Benefits & Arrangements and their levels are reviewed at least every four years. In their review the Supervisory Board takes the specific role, responsibilities, experience and expertise of the
Executive into account as well as internal and external reference information:  The internal references are the compensation structure and levels of the members of the Management Board of Aegon
 Additionally, the Remuneration Committee conducts a scenario analysis in case of a Policy change to determine the long-term effect on the remuneration structure and level of each Executive and reports their findings to the
Supervisory Board and may be amended from time to time by the Supervisory Board.
 A permanent or temporary gross monthly Fixed Allowance, when the Supervisory Board considers this an appropriate alternative for other remuneration elements. The level of this gross monthly Fixed Allowance cannot fluctuate each month or year based on the Executive’s performance. Examples are a temporary Fixed Allowance for additional interim responsibilities or a permanent Fixed Allowance for expatriate arrangements in line with the internal collective International
The Supervisory Board may increase the Base Fee level, as long as it stays in line with the internal and external references as referred to in C.1. This most commonly is an annual correction based on economic or market developments, such as inflation.
C.3 Variable Compensation C.3.1 Variable Compensation level The Executive is eligible for Variable Compensation with a target level of 80% of the Executive’s annual Base Fee, with a threshold level of 50% and a maximum opportunity of 100% of their annual Base Fee.
C.3.2 Variable Compensation plan rules The Executive’s Variable Compensation is subject to the Aegon
Group Material Risk Taker Variable Compensation Plan, which is the collective policy for all Material Risk Takers within Aegon.
These plan rules have been adopted by the Supervisory Board and may be amended from time to time by the Supervisory Board
of the award will be deferred in Shares and will cliff-vest after 3-years as soon as possible after the adoption of the Aegon
This means the Executive has a shareholding requirement based on time (i.e. 5 years after allocation) and not based on a relative amount compared to the annual Base Fee. For reference, once the Vesting Schedule is fully phased in, at least 135%
C.3.7 Collective Variable Compensation rules At the date of the Policy approval, the main Variable
Compensation Plan Rules for all Material Risk Taker (including the Executives) are:  The Variable Compensation is conditionally granted and the conditional right to Variable Compensation is subject to the conditions precedent:  That, unless stated otherwise or approved by the Aegon, the Executive will remain employed within the Aegon uninterruptedly until the Vesting Date of each part of the
Variable Compensation;  That the performance and development, the behavior and overall contribution are assessed (see also C.3.3.);  An Ex-ante and an Ex-post Malus assessment has been carried out (see also C.3.3 also C.3.4).
 The grant price is the volume weighted average Share price on the Euronext stock exchange in Amsterdam, the
Executive, without cause by the Participant, during the period until a vesting date and, consequently, such Executive is considered to be a Good Leaver. In addition, the Supervisory
Board may, at its full discretion, declare an Executive to be a Good Leaver.
Compensation before vesting.  Vested Shares, whether or not subject to a holding period (see
 In connection with any actual or potential sale or change of control or a transaction concerning the sale of a subsidiary or business unit within Aegon, the Supervisory Board will take all such actions hereunder as it may determine to be necessary or appropriate to treat the Executive equal and equitably, including without limitation the modification or waiver of applicable performance indicators, and whether to establish or fund another arrangement intended for Variable
Defined Contribution pension plan up to the applicable annual fiscal threshold on eligible earnings and an optional Individual
Examples of these circumstances are but not limited to, competition in recruiting the same candidate (i.e. increased market value), competition from the candidate’s employer, differences in compensation and benefits compared to the candidate’s previous employer, loss of income by the candidate as a result 81 CONTENTS
of a non-compete period, the candidate losing unvested variable compensation at their previous employer and losing the variable compensation opportunity of the current performance year at the previous employer. When the arrangement replaces forfeited compensation (opportunity), it should be on substantially similar terms (e.g. deferral periods) and at the moment of conversion not more generous compared to the value that was lost.
C.5.2 Retention bonus The Supervisory Board may allocate a retention bonus within the rules of the Dutch Financial Supervision Act. At the time of the
Executive the following other benefits:  A Company Car in accordance with the local Company Car policy for employees;  A driver for the Company Car for business related purposes;  Reimbursement of the Executive’s (fiscal) costs for the private use of the Company Car;  Third party tax services to ensure compliance with the applicable tax law(s);  To participate in other collective benefits which are offered to
The Supervisory Board may also apply the collective (local) Aegon employee provisions regarding reimbursement of expenses, sickness-absence and disability to the Executive.
The Supervisory Board will not approve any personal loans, guarantees or the like to Executives, unless in the normal course of business and on terms that collectively apply (local)
Mr. Wynaendts has a grandfathered arrangement, which is an additional annual contribution for Pension purposes of 28%
respectively, depending on the Aegon priorities of the performance year;  For at least 20% based on a retrospective 3-year performance horizon and for the remainder based on a 1-year performance horizon, and;  At least containing one indicator from each of the following mandatory performance indicator categories: 82 83CONTENTS
Growth Market Consistent Value of New Business, Fees and Premium based Revenues, Annualized Revenue on Net Deposits
Aegon non-financial Stakeholders Customer: Net Promoter Score, Number of Customers, Number of Products per Customer. Employees: Employee Training, Employee Turnover
These categories, and therefore the resulting Cash and Share based Variable Compensation awards, are a carefully selected mix of key focus areas, which together contribute to Aegon’s strategy, long-term interests and sustainability.
 Strategy: Contributes most directly to a successful execution of Aegon’s strategy by focusing on the execution of the most essential processes and/or projects at that moment (e.g.
To align the Executive to Aegon’s long-term interests, the following mandatory performance indicator categories are included in this Policy (see also A.4):  Shareholders: Focuses specifically on the long-term financial value creation for Shareholders, as one of the key long-term interests of Aegon.
Each year the Supervisory Board will disclose the selected performance indicators and weights at the start of the performance year in the Remuneration Report of the previous year. For example, the 2019 Remuneration Report will contain the performance indicators and weights for the 2020 performance year.
D.2 Target Setting At the start of the performance year, the Supervisory Board approves a minimum (threshold), at-target, and a maximum level for each of the Aegon and personal performance indicators.
The Supervisory Board is supported in the target setting process by business experts such as Finance, Human Resources and Risk.
Performance Level Below threshold / minimum Between minimum and target Target
When measuring the results on qualitative targets, the performance level is first established using the qualitative performance level descriptions and then matching percentages are applied.
Each year Variable Compensation is allocated based on performance against the set of performance indicators, weights and target levels that have been agreed by the Executive with the Supervisory Board. The result for each performance indicator and the related Variable Compensation calculation will be disclosed in the Remuneration Report each year.
E. Other Conditions E.1 Other conditions The Supervisory Board may include other conditions which are common in a board agreement. Examples are a confidentiality, a disclosure clause and other collective (non-remuneration)
F. Termination and notice period F.1 Termination by operation of law The Executive’s appointment is terminated by operation of law after completion of the term for which the Executive was appointed or when Shareholders terminate the appointment of the Executive in accordance with the requirements laid down in the Dutch Civil Code and Articles of Association of Aegon N.V.
F.3 Termination by the Supervisory Board The Executive’s Board Agreement may be terminated by Aegon, represented by the Supervisory Board, with immediate effect and with no notice being required during the appointment, with no obligation for Aegon to pay damages and with no entitlement for the Executive to a Termination Fee, in the event of:  Acts or omissions of the Executive which constitute an urgent cause, imputable acts or negligence, a disturbed relationship or seriously culpable actions or neglect of the Executive in fulfilling his duties; or  Acts or omissions on the side of the Executive which constitutes gross negligent behavior of the Executive, including but not limited to a situation where any Dutch authority supervising the activities of Aegon takes the view that the Executive cannot continue in his position any longer.
Based on these criteria, the current peer group consists of the following 16 European Insurance companies: Ageas,
Zurich Insurance Group. The last update of this peer group was in 2020. Ageas, RSA Insurance Group, Swiss Life Holding and
Talanx were added, while Old Mutual and Standard Life Aberdeen were removed. The increased peer group size (from 14 to 16)
Based on these criteria, the current secondary peer group consists of the following 12 AEX companies: Ahold Delhaize,
The table below shows how various environment, social and governance (ESG) risks are incorporated into Aegon’s decisionmaking processes, as well as the measurement of outcomes, policies and metrics.
• Incidents of possible fraud involving employees, intermediaries and third parties increased to 4,541 in 2019. The increase is related to an increase in attempted account takeovers in the US. We are comfortable that the controls implemented in 2018 are effective as very few attempts have been successful.
• Donations as % of net income • Value of employee volunteering hours granted
Aegon Integrated Annual Report 2019 86 87 Non-financial policies, procedures and outcomes
• To Aegon’s knowledge, the security attacks and events it experienced in 2019 were not material in nature.
• Commits Aegon, where possible, to using renewable or sustainable sources of energy.
• Gross carbon dioxide-equivalent (CO2e) emissions totaled 59,275 metric tons, down 10% compared with 2018. Net CO2e emissions totaled 17,831, down 7% compared with 2018. The decrease in emissions was due to lower energy consumption and air travel. Accordingly, net emissions per employee were 11% lower at 1.0 metric ton, and net emissions per EUR million were 0.6 metric tons, 8% lower than 2018.
Human rights Human Rights Policy • Based on the UN Declaration of Human
• Commits Aegon to upholding international human rights standards at all businesses where the Company has sufficient management control and, where possible, to ensure partners live up to the same standards.
Results of Aegon’s global human rights risk assessment (this assessment is conducted internally, based on external sources2); Aegon’s countries of operation are assessed for civil and political rights, corruption, human development, health coverage, business environment, illicit economy, gender equality, working conditions, rule of law and internet inclusion.
Investment Responsible Investment Policy • Covers all major asset classes • Sets out minimum environmental, social and governance (ESG) standards for Aegon’s proprietary investments.
Aegon’s approach in this area is overseen by our Responsible Business and Investment Committee (‘RBIC’), which is chaired by a Management Board member. It is responsible for monitoring, discussing and advising the Management Board on all subjects and issues deemed relevant for the proper execution of the Responsible Investment (RI) Policy. The Responsible Investment department at AAM works closely with risk management and compliance functions to ensure that RI activities are part of company reporting, compliance and risk management activities where possible. Aegon also has an extensive program of engagement with issuers, focused on ESG issues.
Throughout 2019, we refreshed our company-wide Responsible Investment Policy which we put into force as of January 2020. In this policy, next to reiterating all our previous environmental commitments, we further limit our coal-related investments.
• Work-related injuries and illnesses increased to 184, from 167 the previous year.
• Absentee rate • Our absentee rate decreased to 1.8%, from 2.4% the previous year.
• Variable pay for Aegon executives and other senior management is based on both financial and non-financial performance metrics (including employee engagement and customer loyalty scores).
• Percentage of compliance with requirements of the Global Remuneration Framework
• 94% compliance with requirements of the Global Remuneration Framework (up from 92% compliance the previous year)4.
1 Includes any fine in excess of EUR 100,000. 2 Aegon’s assessment is derived essentially from the UN Declaration of Human Rights. The assessment uses external data from (among others) Freedom House,
Aegon Integrated Annual Report 2019 88 89 Non-financial policies, procedures and outcomes
and employees of all Aegon companies around the world, including associate companies, joint ventures and other cooperative ventures.
Employees are also required to follow a mandatory e-learning to help embed the principles of the Code in the way they work.
Committee of the Supervisory Board. As part of an open and supportive culture Aegon will protect employees against any form of retaliation who, in good faith and with due care, report concerns of poor practice, inappropriate, unethical or illegal behavior. Employees who believe they have experienced retaliation are encouraged to immediately bring the issue to the attention of the Group Compliance Officer.
II, which came into effect in EU member states on January 1, 2016, introduced economic, risk-based capital requirements for insurance and reinsurance companies in all EU member states, as well as for groups with insurance and/or reinsurance activities in the EU. The Solvency II approach to prudential supervision can be described as a 'total balance sheet-approach,' and takes material risks to which insurance companies are exposed into account.
Pillar 1 comprises quantitative requirements (including technical provisions, valuation of assets and liabilities, solvency requirements and own fund requirements). Pillar 2 requirements include governance and risk management requirements, and requirements for effective supervision (the supervisory review process). Pillar 3 consists of disclosure and supervisory reporting requirements. These three pillars should not only be considered in isolation, but also in terms of how they interact with one another. More complex risks, for instance, require a stronger risk management and governance structure, and a more complex governance structure could lead to higher capital requirements.
EU insurance and reinsurance undertakings apply, with necessary modifications, at group level. The core focus of EU insurance supervision is, however, on the supervision of individual
that should reduce volatility of the own funds (the excess of assets over liabilities).
An irreparable breach of the MCR would lead to the withdrawal of an insurance or reinsurance company’s license. Insurance and reinsurance companies are required to hold eligible own funds against the SCR and MCR. Own funds capital is divided 90 91CONTENTS
authorizes the commissioner of the state of domicile to take whatever regulatory actions considered necessary to protect the best interest of the policyholders and creditors of the insurer.
Company Action Level RBC requires the company to prepare and submit an RBC Plan to the commissioner of the state of domicile.
process. In general, Solvency II requires insurance and reinsurance companies to maintain an effective system of governance that is proportionate to the nature, scale and complexity of the insurance or reinsurance company. A number of risks that insurance or reinsurance companies face can only be addressed through proper governance structures, rather than quantitative requirements. Management of the insurance or reinsurance company is ultimately responsible for the maintenance of an effective governance system.
(where appropriate)). A number of key functions are required to be part of the system of governance (compliance, risk management, the actuarial function and internal audit).
The persons responsible for these functions are required to be fit and proper. The Pillar 2 requirements include specific requirements relating to the risk management system. This should cover at least the following areas: underwriting and reserving, asset-liability matching, investments (in particular derivatives and similar commitments), liquidity and concentration risk management, operational risk management, deferred taxes, reinsurance and other risk mitigating techniques. Risk management relating to Solvency II is discussed in further detail in the section Risk management on page 109. As part of the risk management system, insurance and reinsurance undertakings are required to undertake an ORSA, which includes the overall solvency needs of the undertaking, taking into account the risk profile, risk tolerance limits and business strategy, the ongoing compliance with Solvency II capital requirements and rules regarding technical provisions, and the extent to which the risk profile of the undertaking deviates from the assumptions underlying the calculation of the SCR. Solvency II Pillar 2 requirements also include detailed requirements with respect to outsourcing, including intra group outsourcing. The Supervisory
Review Process (SRP), which is part of Pillar 2, allows supervisory authorities to supervise the ongoing compliance of insurance and reinsurance undertakings with Solvency II requirements. Possible enforcement measures include: the imposition of capital add-ons
(threatening) breach of the MCR); and ultimately, the revocation of an insurance or reinsurance license (a measure that relates to EU-licensed insurance or reinsurance undertakings, and not to the Group as a whole, which does not have a license).
II does however require groups to maintain eligible own funds, 91 CONTENTS
The difference between these two methods primarily affects the extent in which diversification can be taken into account in the group capital requirements. Under the Accounting
However, subject to certain conditions, entities in other financial sectors may be included in accordance with the accounting consolidation method. In particular, this may be the case when the group supervisor is satisfied as to the level of integrated management and internal control regarding these entities.
Furthermore, the DNB may require groups to deduct any participation from the own funds eligible for the Group
on a solo basis and on consolidated basis, whereby consolidation takes place at the level of Aegon Bank N.V. The prudential requirements (including CRD IV and CRR) are described in more detail on page 90.
section, Aegon uses a combination of the two aggregation methods defined within the Solvency II framework to calculate the Group Solvency ratio, the Accounting Consolidation method and the Deduction and Aggregation method. Aegon applies the Accounting Consolidation method as the default method.
Solvency position. US insurance and reinsurance entities are included in Aegon’s group solvency calculation in accordance with local US Risk-Based Capital (RBC) requirements. Until June 30, 2017, Aegon used 250% of the local Company Action Level
(CAL) RBC as the SCR equivalent. Aegon received approval from the DNB to apply a revised methodology, as of July 1, 2017, that includes lowering the conversion factor from 250% to 150%
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. The RBC and CAL, as well as the allocation of restricted
Recent developments Solvency II Solvency II 2018 review On June 18, 2019, the EU Regulation that contains amendments to the Solvency II Delegated Regulation as a result of the 2018 review of the Solvency II framework was published in the Official
Absorbing Capacity of Deferred Taxes (LAC DT), further alignment between the group and solo-approach to the look-through of investment fund participations, amended treatment of certain risk mitigating techniques, for the standard formula calculation, adjustments of the treatment of derivatives, the recognition of local/regional government issued guarantees and the recalibration of non-life premium and reserve-risk standard deviations in certain sub-modules.
II Directive has commenced, referred to as the Solvency II 2020 review. On February 10, 2019, the European Commission has requested EIOPA to provide, in the context of the 2020 review, by June 30, 2020, technical advice in the following areas:  Long-term guarantees (LTG) measures and measures on equity risk; 92 93CONTENTS
Sustainability and Solvency II On March 8, 2018, the Commission adopted its Action Plan on Sustainable Finance in which it announced several actions to incorporate sustainable finance in the heart of the financial system. Further to this Action Plan, the Commission adopted, on May 24, 2018, a package of legislative measures on sustainable finance. The Commission has requested technical advice from (inter alia) EIOPA and ESMA on the delegated acts that would supplement this package amending, or, where necessary, introducing level 2 measures of, inter alia, the Solvency II Directive with the aim of incorporating sustainability risks, i.e. environmental, social and governance risks by financial market participants subject to those rules. In that context, on the request of the European Commission, EIOPA has provided, on September 30, 2019, an opinion to the European
Commission will take the EIOPA opinion into account in the Solvency II 2020 review. In addition, EIOPA has provided, on April 30, 2019, the European Commission with technical advice on the integration of sustainability risks and factors in the delegated acts under Solvency II and IDD. This advice focused primarily on Pillar 2 requirements in Solvency II and IDD.
Recovery and resolution and systemic risk G-SII designation On November 3, 2015, Aegon was designated by the Financial
The Holistic Framework consists of an enhanced set of supervisory policy measures and powers of intervention, an annual IAIS global monitoring exercise and collective discussion on the outcomes and appropriate supervisory responses, and an assessment of consistent implementation 93 CONTENTS
of supervisory measures. ComFrame establishes supervisory standards and guidance focusing on the effective groupwide supervision of IAIGs. ComFrame is a comprehensive and outcome-focused framework that provides supervisory minimum requirements tailored to the international activity and size of IAIGs. ComFrame builds on the Insurance Core Principles that are applicable to the supervision of all insurers.
If the FSB would, as referred to above, discontinue the annual identification of G-SIIs after the review of the Holistic
Recovery and resolution Dutch Act on Recovery & Resolution for Insurers On January 1, 2019, the Dutch Act on Recovery & Resolution for Insurers (R&R Act) came into force in the Netherlands, replacing the previously applicable intervention regime for insurance companies in the Netherlands faced with financial difficulties. The R&R Act has introduced a revised regulatory framework for recovery and resolution of Dutch insurance and reinsurance companies and provides for a range of measures to be taken by these companies and the Dutch Central Bank ex ante, in order for these insurance and reinsurance companies to be prepared for recovery in circumstances where it no longer meets the required solvency requirements and for orderly resolution, in circumstances where it is failing or is likely to fail.
Bank, in its capacity as national resolution authority in gone concern circumstances (as opposed to its role as supervisory authority in going concern) is required to draw up and maintain a resolution plan, which should provide for the orderly resolution of the Dutch insurance and reinsurance entities in the group, or the group, to avoid unnecessary damage to policyholders and beneficiaries and to provide an alternative to ordinary bankruptcy proceedings. The R&R Act allows DNB to require a Dutch insurance or reinsurance company or a group in certain circumstances, 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, or securing certain critical business lines.
The R&R Act allows DNB to intervene in situations where a Dutch insurer or reinsurer, where it is failing or is likely to fail, as defined in the R&R Act. The powers under the R&R Act may also extend to the level of the Group and to entities, other than in insurance or reinsurance entities in the Netherlands, that are part of the group, such as Aegon N.V.. The powers include the transfer of the undertaking to a third party, the transfer to a bridge institution and the transfer of certain specific assets and/
As a result of the recent adoption of the IAIS Holistic Framework, the developments with respect to the identification of G-SIIs by the FSB and the introduction of the Dutch Act on Recovery &
& Resolution of Insurers) and the liquidity risk management plan (which is not required under the Dutch Act on Recovery
Insurance Capital Standards The IAIS is developing a risk based global Insurance Capital
Standard (ICS). The ICS is designed to be appropriate for IAIGs, 94 95CONTENTS
substantially the same) outcomes across jurisdictions. Ongoing work is intended to lead to improved convergence over time on the key elements of the ICS towards the ultimate goal.
According to the IAIS, not prejudging the substance, the key elements include valuation, capital resources and capital requirements. In November 2019, the IAIS adopted ICS Version 2.0, which is being used during a five-year monitoring period for confidential reporting to group-wide supervisors and discussion in supervisory colleges.
The ICS will not be used as a group-wide Prescribed Capital
In previous years, Aegon has participated in the ICS field testing to understand the potential consequences for Aegon of the ICS, both from capital and operational perspectives.
Aegon follows a number of guiding principles in terms of capital and liquidity management:  Promoting strong capital adequacy in Aegon’s businesses and operating units;  Managing and allocating capital efficiently in support of the strategy and in line with its risk tolerance;  Maintaining an efficient capital structure, with an emphasis on optimizing Aegon’s cost of capital;  Maintaining adequate liquidity in both the operating units and the Holding to ensure that the Company is able to meet its obligations by enforcing stringent liquidity risk policies; and  Maintaining continued access to international capital markets on competitive terms.
Aegon believes that the combination of these guiding principles strengthens the Company's ability to withstand adverse market conditions, enhances its financial flexibility, and serves both the short-term and the long-term interests of the Company, its customers and other stakeholders.
The management and monitoring of capital and liquidity is firmly embedded in Aegon's ERM framework, and is in line with Aegon's risk tolerance. Aegon's risk tolerance focuses on capital generation, solvency and liquidity, risk balance and responsible business with effective controls. Its core aim is to assist management in carrying out Aegon's strategy within the Group's capital and liquidity resources.
Regulatory capital requirements The Solvency II regulatory framework determines the regulatory capital requirements for EU-domiciled insurance and reinsurance entities. In Aegon's Non-EEA (European Economic Arena) regions,
Adequate capitalization To calculate its Group Solvency Ratio, Aegon applies a combination of the Group consolidation methods available under Solvency II: the Accounting Consolidation (AC) and
II capital requirements are mainly used for the EEA-based insurance and reinsurance entities, applying the Accounting
Aegon Integrated Annual Report 2019 96 97 Capital and liquidity management
in 2019.The capitalization levels of the most relevant country units are as follows: Aegon USA (Life entities) (RBC CAL) 470% 465%
Aegon United Kingdom (Solvency II ratio) 157% 184% 1 The Solvency II ratios are estimates, are not final until filed with the regulator and are subject to supervisory review. 2 Refer to section ‘Internal capital management framework’ for the bottom-end of Aegon’s capitalization targets. 3 Note that as per 1H 2019, Aegon Bank is not included in the Aegon the Netherlands SII ratio.
requirements for insurance companies. RBC calculations measure the ratio of a company's statutory capital, which is measured on a prudent regulatory accounting basis, to a minimum capital amount determined by the risk-based capital formula. The RBC
measure is the Company Action Level (CAL) risk-based capital requirement. This is the regulatory intervention level below which a company must submit a remediation plan to its state regulators. The domiciliary state regulator has the authority to require additional capital depending on the type, volume and nature of the business being conducted. The domiciliary state regulator also has the ability to require corrective actions if a company is deemed by the commissioner to pose a Hazardous
Solvency II figures through Deduction & Aggregation using available and required capital as per the local capital regimes. US insurance and reinsurance entities are included in Aegon's group solvency calculation in accordance with local US
of the local RBC Company Action Level as the Solvency II SCR
equivalent for including the US life insurance and reinsurance entities into the Group solvency calculation. In addition, reducing own funds by a 100% RBC Company Action Level requirement to reflect transferability restrictions. The US conversion methodology is subject to annual review and approval by the DNB. The non-regulated US entities and the US holding companies are included in the Aegon Group Solvency II results through application of the Accounting Consolidation method under Solvency II, using Solvency II valuation and capital requirement calculations for these entities. The contribution of the Aegon Americas entities to the Group Solvency II position on December 31, 2019, is estimated to be 217% (2018: 210%).
The Americas ratio does not include a diversification benefit between the US life companies and there is no diversification benefit between US life insurance and reinsurance entities and other group entities.
The initial internal model of Aegon the Netherlands was approved on November 26, 2015, by the supervisor, the DNB, as part of the Internal Model Application Process. The combined Solvency 97 CONTENTS
VA narrowing from 24bps to 7bps, the decrease of LAC DT and a decline of interest rates. Furthermore, the lowering of the UFR
from 4.05% to 3.90% led to a decrease in Own Funds, and a change in the treatment of illiquid assets increased SCR as well.
II capital ratio of the Group and Aegon the Netherlands does not include any contingent liability potentially arising from unit-linked products sold, issued or advised on by Aegon in the Netherlands in the past, as the potential liability cannot be reliably quantified at this point.
Mortgage spreads -50bps 6% n.a. n.a. n.a. 14% n.a. n.a n.a.
EIOPA VA +5bps 3% n.a. n.a. n.a. 9% n.a. n.a n.a. 1 Government spreads +/- 50bps, mortgage spreads +/- 50bps and EIOPA VA +/- 5bps sensitivities were introduced in 2019 and therefore they are not available
(n.a.) on December 31,2018. These new sensitivities are introduced as these are more relevant than the previous sensitivities, refer to note 2. 2 The sensitivities applied on US includes US regulated (life) companies, non-regulated holding companies and the employee pension plan.
Aegon the Netherlands and Aegon UK, with Aegon Americas being the largest contributor.
For Aegon the Netherlands, losses in the down shock come from the private equity investments in the general account and the mismatch between the guarantee provision and associated hedge assets.
For Aegon UK, under an equity down scenario, the reduction in Own Funds is offset by the reduction in SCR with the main exposures coming from the Staff Pension scheme and the unitized business.
Interest Rates Sensitivities The Group is exposed to a fall in interest rates driven by higher
SCR and lower Own Funds. The higher SCR is driven by Aegon the Netherlands and Aegon UK, whereas the reduction in Own
In Aegon Americas, a decrease in interest rates results in a higher setup of reserves for Variable Annuity and Universal
Life products, partly offset by payoffs from interest rate hedge programs. Own funds decrease further from an increase in employee pension plan liabilities relative to the invested assets. The opposite occurs in rising interest rate scenarios.
Own Funds gains when rates go down. This results in Aegon the Netherlands’ solvency ratio being exposed to rising interest rate scenario.
For Aegon UK, the main exposure to interest rates arises from the swaps in the shareholders’ funds which reflects a gain if rates go down, partly offset by the higher present value of expenses on the fee based business. The gain in Own Funds under a down interest rate scenario is offset by an increase in the SCR.
Exposure to government spreads sensitivities is contributed by Aegon the Netherlands and Aegon UK both of which are exposed to spreads widening due to the reduction in value of their fixed income assets.
Rating agency ratings Aegon's objective is to maintain very strong financial strength ratings in its main operating units, and this plays an important role in determining the Company's overall capital management strategy. Aegon maintains strong financial strength ratings from leading international rating agencies for its main operating units, and a strong credit rating for Aegon N.V..
A.M. Best 1 On February 21, 2020 S&P Global lowered the financial strength ratings of Aegon USA and Aegon the Netherlands from AA- to A+.
Internal capital management framework In managing the capital adequacy of the Group and its operating units, Aegon's capital management framework is built on, among other things, managing capital in the operating units and the Group within target capital management zones. Under
Aegon United Kingdom 145% Solvency II Capital Ratio 1 Capitalization targets follow the revised capital management policy as of the second quarter of 2019 2 For Aegon USA (Life entities), Aegon the Netherlands and Aegon United Kingdom, this refers to the bottom-end of the capitalization target range
The frequent monitoring of actual and forecasted capitalization levels of both Aegon Group and of its underlying businesses is an important element in Aegon's capital framework in order to actively steer and manage towards maintaining adequate capitalization levels. Aegon's capital framework is based on several capital management zones in which escalating management actions are called for in a timely manner to ensure that there is always adequate capitalization of both the Aegon
The capital management zones and the management interventions connected to these zones are set consistently throughout the Group, as illustrated in the table below.
Aegon Integrated Annual Report 2019 100 101 Capital and liquidity management
1 Capitalization management zones follow the revised capital management policy as of the second quarter of 2019.
Aegon United Kingdom 1) 100% Solvency II SCR 157% Solvency II SCR EUR 1.0 bln 1 Please note, this disclosure is based on Aegon’s estimated capitalization levels. 2 Excluding Aegon Bank. 3 Please note, this amount is based on local RBC framework
Improving risk-return profile Aegon continues to take measures to improve its risk-return profile. These measures include de-emphasizing the selling of various spread based products and the strategic growth in feebased businesses. In 2017, Aegon continued its commitment to optimize its portfolio by divesting UMG in the Netherlands and completing the sale of the majority of its US run-off businesses. In 2018, Aegon divested its business in Ireland and the remaining US run-off business, acquired the income protection service provider Robidus in the Netherlands and expanded its business in the Netherlands and Spain. In 2019,
Extensive asset-liability management and hedging programs are also in place. Examples of these programs include hedging the interest rate and equity risk stemming from guarantees in the Netherlands, hedging the interest rate risk and equity risk in Aegon UK, and hedging the capital position in the Americas against adverse equity and interest rate movements.
In addition, Aegon is actively involved in hedging longevity risk in the Netherlands and has an active global reinsurance program in order to optimize the risk-return profile of other insurance risks. Aegon monitors the risk-return profile of new business written, withdrawing products that do not meet the required hurdle rates for all stakeholders including policyholders and shareholders.
Own Funds. Aegon's total Own Funds are comprised of Tier 1,
Americas, and a restriction equal to the Own Funds of Aegon
Bank. These restrictions, applied to Aegon's basic own funds, result in Aegon's available Own Funds.
Restricted Tier 1 capital consists of Aegon's junior perpetual capital securities, perpetual cumulative subordinated bonds, and perpetual contingent convertible security. Both junior perpetual capital securities and perpetual cumulative subordinated bonds are grandfathered. Perpetual contingent convertible securities are Solvency II compliant liabilities which were issued in 2019. Restricted Tier 1 capital is subject to eligibility restrictions to qualify as eligible Own Funds
in 2019, the Solvency II compliant subordinated liabilities that were issued during 2018, and grandfathered dated subordinated notes. Tier 2 capital is subject to eligibility restrictions to qualify as eligible Own Funds.
Aegon's Tier 3 capital under the Solvency II framework consists of Aegon's deferred tax asset position under Solvency II.
Eligible Own Funds Under Solvency II regulation, restrictions apply to the eligibility of restricted Tier 1, Tier 2 and Tier 3 capital. The total of Tier 2 and Tier 3 capital may not exceed 50% of the SCR while the eligibility of Tier 3 capital is limited to 15% of SCR. Restricted
Tier 1 capital may not exceed 20% of Tier 1 Own Funds. As a result, it is possible that part of the Own Funds overflows to another tier or that is not considered eligible in determining the Group Solvency II ratio.
Aegon's use of leverage Aegon uses leverage in order to lower the cost of capital that supports businesses in the Aegon Group, thereby contributing to a more effective and efficient use of capital.
Aegon Integrated Annual Report 2019 102 103 Capital and liquidity management
Funding and back-up facilities The majority of Aegon's financial leverage is issued by Aegon N.V., the parent company. A limited number of other Aegon companies have also issued debt securities, but for the most part these securities are guaranteed by Aegon N.V.
The Company's principal arrangements comprise a EUR 2 billion syndicated revolving credit facility and an LOC facility of USD 2.2 billion. The syndicated revolving credit facility matures in 2023. The LOC facility matures in 2024. In addition, Aegon also maintains various shorter-dated bilateral backup liquidity facilities, and committed and uncommitted LOC facilities.
Liquidity management Liquidity management is a fundamental building block of Aegon's overall financial planning and capital allocation processes. The Company's liquidity risk policy sets guidelines for its operating companies and the holding in order to achieve a prudent liquidity profile and to meet cash demands under extreme conditions.
Aegon N.V. The main sources and uses of liquidity at the holding company
As at December 31, 2019, Aegon held a balance of EUR 1.2 billion in excess cash in the holding, compared with EUR 1.3 billion on December 31, 2018. The decrease of EUR 0.1 billion reflects the net impact of remittances from subsidiaries and capital injections in subsidiaries, divestments, acquisitions, earn-out payments, the issuance and redemptions of capital instruments and senior unsecured notes, holding expenses and capital returns to shareholders. During 2019
Aegon exercised the right to redeem the USD 500 million perpetual capital securities with a coupon of 6.5% issued in 2005 (grandfathered Restricted Tier 1) and the USD 1 billion perpetual capital securities with a coupon of 6.375% issued in 2005 (grandfathered Restricted Tier 1). This was prefinanced by the issuance of a EUR 500 million Restricted Tier 1 perpetual contingent convertible securities, with a fixed coupon of 5.625% until October 15, 2029; and a USD 925 million
(EUR 251 million). Dividends from other units were more than offset by capital injections and investments, amounting to a net outflow of EUR 219 million.
Asset liability management Aegon specializes in writing long-term life insurance business with key markets in the US, Europe and Asia. Its product suite includes savings and annuity products that feature a guaranteed level of benefit. Aegon also issues mortgage loans in the Netherlands that are initiated using long-term insurance funds. Products are priced using a market-consistent framework, and comprehensive asset liability management (ALM) programs are implemented to ensure that the assets backing policyholder benefits are invested prudently over the long term.
Aegon USA also writes a significant volume of variable annuity business, which is managed using sophisticated dynamic hedging techniques. Clearly-defined hedge strategies cover first order
Aegon UK primarily uses ALM to protect Solvency II own funds.
This is achieved by using equity options and interest rate and inflation swaps to guard against fluctuations in best estimate liabilities. A new Solvency II unit matching program is in place to reduce residual basis risk associated with unit-linked liabilities.
Programs are also in place to match assets with the liabilities of the remaining annuity book and the staff pension scheme.
The UK with-profits business is written in the policyholder-owned fund (otherwise called the 'with-profits fund'). The funds with the highest guaranteed rates have been closed to premiums since 1999, and all funds have been closed to new business with investment guarantees since October 2002 (except for a small increase in regular payments). The fund contains free assets that have not yet been fully distributed to individual policyholders.
In order to minimize its reinsurer defaults exposure, Aegon regularly monitors the creditworthiness of its reinsurers, and where appropriate, arranges additional protection through letters of credit, trust agreements and overcollateralization. For certain agreements, funds are withheld for investment rather than relying on the reinsurer to meet investment expectations. Default exposure is further reduced by the use of multiple reinsurers within certain reinsurance agreements. Aegon has experienced no material reinsurance recoverability problems in recent years. Aegon ceded businesses to a subsidiary of Scottish
The Pennsylvania Insurance Commissioner filed an application in January 2020 with the state’s Commonwealth Court to have
External reinsurance counterparties are, in general, major global reinsurers (approximately 60% of reinsurance premium) with more local reinsurers ensuring a balance between regional and global considerations. The key way in which reinsurance is used and the role that it plays by region is as follows: Corporate Center Global coordination takes place through Aegon Corporate
Aegon's Reinsurance Use Policy and facilitates approval of transactions if counterparties are not pre-approved. Reports are shared with the Global Risk and Capital Committee and Group
United Kingdom Aegon UK uses reinsurance to both manage risk and maximize financial value. The degree to which reinsurance is used across the product lines varies, depending largely on the appropriateness and value of reinsurance available in the market. The protection business is significantly reinsured. A reinsurance panel is in place to provide reinsurance, predominantly on a quota share basis, across the range of benefits. A facultative reinsurance panel is also used to assist the placement of very large cases.
This means that both its joint ventures in Spain & Portugal and own business are treated as a whole, with similar economic conditions and a similar panel of reinsurers, while individual profit shares without losses are carried forward by each entity belonging to Aegon Spain. The main contract for mortality and 107 CONTENTS
its individual risk and group risk policies. Aegon Spain thereby seeks to optimize the cost of reinsurance coverage, while achieving prudential diversification of its insurance risk by limiting the maximum possible losses on risks that exceed retention levels. Household insurance contracts for the Aegon Santander joint ventures follow the same principles, with maximum retention levels varying both by product and by the nature of the risk being reinsured. Natural catastrophe reinsurance programs are also in place to provide cover for high impact - low frequency events.
India: Aegon Life In India, Aegon Life reinsures the mortality and morbidity risks of the policies it sells.
Risk management General As an insurance group, Aegon manages risk for the benefit of its customers and other stakeholders. As a result, the Company is exposed to a range of underwriting, operational and financial risks. Aegon's risk management and internal control systems are designed to ensure that these risks are managed effectively and efficiently in a way that is aligned with the Company's strategy.
Enterprise Risk Management (ERM)‍ framework Aegon's ERM framework is designed and applied to identify and manage potential risks that may affect Aegon. This means identifying and managing individual and aggregate risks within Aegon's risk tolerance in order to provide reasonable assurance regarding the achievement of Aegon's objectives.
Commission (COSO). The ERM framework applies to all of Aegon's businesses for which it has operational control.
ERM framework directly, or tailor it to local needs while meeting the requirements of the Group level ERM framework.
Risk strategy, risk appetite statement and risk tolerances The formulation of the risk strategy starts with the principle that taking a risk should be based on serving a customer's need.
Aegon's strategy using the resources available to Aegon. The risk appetite statement is linked to Aegon’s purpose of helping people achieve a lifetime of financial security. Aegon’s risk appetite statement emphasizes that Aegon businesses: “Fulfill our promises towards our customers and other stakeholders by delivering sustainable growing long-term free capital generation, with strong resilience in solvency and liquidity, healthy balance in exposures, and by running a responsible business with effective controls.”
Following from the risk appetite statement, risk tolerances are defined on: 1 Capital generation, to ensure free capital generation remains sufficiently in line with projections.
3 Risk balance, to ensure a healthy balance of risk exposures that supports delivering on targets for capital generation and return on capital.
Risk exposures are compared with the limits as defined by Aegon's risk tolerance statements. Reporting also includes risk policy compliance and incident and compliance reporting.
Low - Accepted to serve customer needs, but mitigated as much as possible.
Currency exchange rate risk As an international company, Aegon is exposed to different currencies, and therefore to movements in currency exchange rates. Foreign currency exposure exists primarily when policies are denominated in currencies other than the issuer's functional 110 111CONTENTS
th er n o n -fin an cial in fo rm atio n currency. Currency risk in the investment portfolios backing insurance and investment liabilities is managed using asset liability matching principles. Assets allocated to equity are held in local currencies to the extent shareholders' equity is required to satisfy regulatory and self-imposed capital requirements.
Evaluations and scenario testing of security controls - including detection and response capabilities - are performed by both internal and external experts, and identified vulnerabilities are tracked and monitored by management. This program is overseen by Aegon's Global Chief Information Security Officer, who has a direct reporting line to the Global Chief Technology Officer, who is a member of the Management Board, in conjunction with local business unit management and information security officers.
Conduct risk Both industry-wide and within Aegon, cultural and behavioral elements of risks increasingly play a role within overall risk frameworks. Relevant in this context are, among others, the European Insurance Distribution Directive (IDD) and the General Data Protection Regulation (GDPR). Conduct risk refers to the risks inherent in behaviors, business and staff integrity and business culture, including, but not limited to, meeting the standards of Aegon's Market Conduct Principles.
Fraud risk Aegon is committed to a strong anti-fraud program to protect its and clients assets from fraudulent behavior of clients, business partners, employees or any other external entity or individual. Mandatory requirements for identifying, mitigating and monitoring internal, external and intermediary fraud risks are captured in the Group Anti-Fraud policy. Aegon Regions have implemented these requirements in local policies, processes and procedures. As part of Systematic Integrity Risk Analysis
Topic identification, mapping and selection are based on desk research, interviews with experts and management selection.
Risk governance framework Aegon's risk management is based on clear, well-defined risk governance. The goals of risk governance are to:  Define roles and responsibilities, and risk reporting procedures for decision makers;  Institute a proper system of checks and balances;  Provide a consistent framework for managing risk in line with the targeted risk profile; and  Facilitate risk diversification.
Governance structure Aegon's risk management framework is represented across all levels of the organization. This ensures a coherent and integrated approach to risk management throughout the Company. Similarly,
Aegon's statutory executive body, the Management Board provides vital support and expertise in safeguarding
is Aegon's most senior risk committee. It is responsible for managing Aegon's balance sheet at the global level, and is in charge of risk oversight, risk monitoring and risk management related decisions on behalf of the Executive Board in line with its charter. The GRCC ensures risk-taking is within Aegon's risk tolerances; that the capital position is adequate to support financial strength, credit rating objectives and regulatory requirements, and that capital is properly allocated. The GRCC
informs the Executive Board about any identified (near) breaches of overall tolerance levels which threaten the risk balance, as well as any potential threats to the Company's solvency, liquidity or operations.
Board and Management Board with financial risk framework setting and maintenance across all group-level balance sheet bases, including policies, standards, guidelines, methodologies and assumptions.
The purpose of the NFRC is to assist the GRCC, Executive Board and Management Board with non-financial risk framework setting and maintenance, including policies, standards, guidelines and methodologies and to act as formal discussion and exchange of information platform on matters of concern regarding nonfinancial risk management.
Committees;  Providing subject matter expertise from the Centers of Excellence of the global Risk Management function to business areas through review of key initiatives, transactions, programs, projects, assumptions, methodologies and results across all important paradigms;  Providing assurance on the integrity of models and modelled cash flows through model validations and maintenance of model validation policies and standards; and  Promoting a strong risk management culture across Aegon, including review of performance targets and remuneration in line with the Aegon Group Global Remuneration Framework.
is prepared for use by the GRCC, the Management Board, the
Company’s risk profile and informing the Management Board and the Supervisory Board about the on-going performance, suggesting improvements;  Monitoring risk exposures and risk policy compliance, including review of the Own Risk and Solvency Assessment (ORSA) and
Internal control system Aegon has developed an internal control system that serves to facilitate its compliance with applicable laws, regulations and administrative processes, and the effectiveness and efficiency of operations with regard to its objectives, in addition to the availability and reliability of financial and non-financial information. The overall internal control system ensures appropriate control activities for key processes and the documentation and reporting of administrative and accounting information. The internal control system is embedded through policies and frameworks such as the ERM framework, the Model Validation Framework and the Operational Risk
Management (ORM) Framework, which is considered more encompassing in scope than the Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission' (COSO, 2013), on which criteria for the internal control system are based.
In 2019, risk management and internal control topics were discussed by the relevant management committees and bodies, including the Management Board, the Executive Board, the Risk
Committee, the Supervisory Board and the Audit Committee of the Supervisory Board. No material weaknesses were observed, and no significant changes or major improvements were made or planned to the risk management and internal control systems following from the review.
Eonia and LIBOR has been a major topic on the global agenda since the G20 asked the Financial Stability Board (FSB)
In the EU this is adopted in the new Benchmark Regulation (BMR)
Aegon recognizes that IBOR transitions potentially have implications for all reporting units, including our insurance, asset 114 115CONTENTS
Geopolitical environment The United Kingdom has left the European Union and is currently in a standstill transition period until the end of December 2020.
Technically, this period can be extended by two years but that has to be agreed by June at the latest according to the Withdrawal
Agreement between the EU and the UK. Hence, Brexit remains of special consideration this year because of the uncertainty regarding the future relationship between the EU and the UK after the transition phase expires, which could expose
Aegon's internal audit function assists the Executive Board in maintaining effective controls by independently and objectively evaluating the adequacy and effectiveness of the organization's internal control and risk management systems. Criteria established under 'Internal Control -
Committee, is responsible for determining the overall internal audit work and for monitoring the integrity of the financial statements of Aegon N.V.
Aegon's directors and management have adopted a going concern basis on the reasonable assumption that the Company is and will be able to continue its normal course of business in the foreseeable future.
The main areas assessed were financial performance, capital adequacy, financial flexibility, liquidity, and access to capital markets, together with the factors and risks likely to affect
Commentary on these areas is set out in the 'Capital and liquidity management', 'Risk management', 'Results of operations'
On the basis of the above, Aegon's Executive Board states the following with respect to risks to the Company's financial reporting:  The report provides sufficient insights into any failings with regards to the effectiveness of the internal risk management and control systems;  Aegon’s risk management and control systems provide reasonable assurance that the Company’s financial reporting does not contain any material inaccuracies;  Based on the current state of affairs, it is justified that the financial reporting is prepared on a going concern basis; and  The report states those material risks and uncertainties that are relevant to the expectation of the Company’s continuity for the period of twelve months after the preparation of the report.
The statements in this section are not statements in accordance with the requirements of Section 404 of the US Sarbanes-Oxley Act.
Responsibilities for the financial statements and the Annual Report The Executive Board is responsible for preparing the financial statements and the Annual Report in accordance with Dutch law and the International Financial Reporting Standards as adopted by the European Union (IFRS-EU).
Statement of materiality, significant audiences and responsibility Materiality: Every year, we identify our material topics. These are the topics that, we believe, will have the most impact on our business in the years ahead, not only on our financial performance, but also our ability to continue creating long-term value for the societies in which we operate. This report looks in detail at these topics, and at how we, as a financial services company, are meeting the challenges and opportunities they represent for our business. Our material topics are also built into our annual strategy cycle.
Responsibility: As Aegon’s Executive Board, we bear ultimate responsibility for this report and its contents. This is our eighth integrated report – but the first time we’ve published a combined integrated and Annual Report. We’re happy to support the IIRC
Aegon's management carried out an evaluation, under the supervision and with the participation of its Chief
Exchange, Aegon is required to comply with the US Securities and
Management assessed the effectiveness of Aegon's internal control over financial reporting as of December 31, 2019.
In making its assessment management used the criteria established in 'Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Based on the assessment, management concluded that, in all material aspects, the internal control over financial reporting was effective as of December 31, 2019. They have reviewed the results of its work with the Audit Committee of the Supervisory Board.
Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Aegon N.V. and its subsidiaries (the “Company”) as of
Financial information 124 Selected financial data 126 Results of operations 127  Results 2019 worldwide 133  Results 2019 Americas 137  Results 2019 Europe 142  Results 2019 Asia 145  Results 2019 Aegon Asset Management
Notes to the financial statements 317 1 General information 317 2 Significant accounting policies 317 3 Investment income 317 4 Results from financial transactions 318 5 Commissions and expenses 318 6 Interest charges and related fees 318 7 Income tax 318 8 Shares in group companies 319 9 Loans to group companies 319 11 Other current assets 319 12 Share capital 321 13 Shareholders’ equity 324 14 Other equity instruments 325 15 Subordinated borrowings 326 16 Long-term borrowings 326 17 Current liabilities 326 18 Commitments and contingencies 326 19 Number of employees 326 20 Auditor's remuneration 326 21 Events after the reporting period 327 22 Proposal for profit appropriation 328 Independent auditor’s report
framework 420  EU Directive on Non-Financial Information 421  Task Force on Climate-related Financial Disclosures
Selected financial data The financial results in this Annual Report are based on Aegon’s consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS-EU).
1 Excluded from the income statements prepared in accordance with IFRS-EU are receipts related to investment-type annuity products and investment contracts.
Dividends Aegon declared interim and final dividends on common shares for the years 2015 through 2019 in the amounts set forth in the following table. The 2019 interim dividend amounted to EUR 0.15 per common share and EUR 0.00375 per common share B. The interim dividend was paid in cash or stock at the election of the shareholder. The interim dividend was payable as of September 20, 2019. At the General Meeting of Shareholders currently scheduled for May 15, 2020, the Executive Board will, in line with its earlier announcement and absent a further significant deterioration of market circumstances, propose a final dividend of EUR 0.16 per common share (at each shareholders option in cash or in stock), and EUR 0.004 per common share B, which has financial rights attached to it of 1/40th of a common share. This will bring the total dividend for 2019 to EUR 0.31 per common share and EUR 0.00775 per common share B. In case of a final dividend, this will be paid in cash or stock at the election of the shareholder. The value of the stock dividend will be approximately equal to the cash dividend. Dividends in US dollars are calculated based on the foreign exchange reference rate (WM/Reuters closing spot exchange rate fixed at 5.00 pm Central European Summer Time ('CEST'))
The information on the following tables also includes the non-IFRS-EU financial measure net underlying earnings.
This is the after-tax equivalent of underlying earnings before tax. The reconciliation of net underlying earnings to the most comparable IFRS-EU measure is presented in this section.
For the discussion on our operating results for the year ended
Income before tax (excluding income tax from certain proportionately consolidated joint ventures and associates)‍ 1,872 829 126 Income tax from certain proportionately consolidated joint ventures and associates included in income before tax 40 47 (15)
Income tax (344) (84) n.m. Of which Income tax from certain proportionately consolidated joint ventures and associates included in income before tax (40) (47) 15
Total net deposits excluding run-off businesses (24,551)‍ (4,421)‍ n.m. Run-off businesses (578) (234) (147)
Total life insurance gross premiums 7.004 1.632 7.509 622 9.763 779 - 2 17.548 (579) 16.969
Accident and health insurance premiums 1.571 219 29 102 351 94 - - 2.015 (36) 1.979
Results 2019 worldwide Aegon's net income in 2019 increased compared with 2018 to EUR 1,528 million. Underlying earnings before tax decreased by 5% compared with 2018 to EUR 1,973 million in 2019, due to lower underlying earnings before tax from Americas, Asset Management and Holding and other activities. These were partly offset by higher earnings from Europe and Asia. The increase in net income in 2019 compared with 2018 was driven by higher gains on investments and lower other charges.
Underlying earnings before tax Aegon's underlying earnings before tax decreased compared with 2018 to EUR 1,973 million in 2019. This was mainly driven by the Americas as a result of lower fee revenues in Variable Annuities, the negative impacts from lower rates and developments in portfolios on intangibles in the Life business, and investments in the US businesses to support growth. The other main contributor to the decrease in underlying earnings before tax was Holdings and other activities, primarily due to more interest expenses being recorded via the income statement instead of directly through equity. Europe was the main offsetting reporting segment, with a 4% increase of underlying earnings before tax in 2019 compared with 2018.  In the Americas, underlying earnings before tax in 2019 decreased by 8% compared with 2018 to EUR 1,124 million caused by lower fee revenues in Variable Annuities, negative impacts from lower interest rates, tighter credit spreads and portfolios on intangibles in the Life business, and investments in the business to support growth. These more than offset the effect of favorable currency movements.
 Underlying earnings before tax from Asset Management decreased by 8% in 2019 compared with 2018 to EUR 139 million. This decrease was mainly driven by Europe and the Americas, more than offsetting an increase of underlying earnings before tax in the Rest of World.  Total Holdings costs amounted to EUR 227 million in 2019 compared with EUR 188 million in 2018. This is mainly due to the refinancing of debt. Aegon redeemed perpetual securities, for which the interest expense was recorded directly through equity, and issued dated (Tier 2) instruments, for which the interest expense is recorded through the profit & loss statement.
showed a shortfall during 2019 which in turn was partly offset by gains on derivatives and the guarantee provision. The United
Kingdom also recorded fair value losses, mainly because of hedging results. Fair value gains in the Americas amounted to EUR 272 million in 2019, and mainly related to positive real estate revaluations and favorable equity markets leading to gains on the macro hedge, net of reserve movements.
Losses on fair value items in Asia and at the Holding totaled
Other charges Other charges amounted to EUR 281 million in 2019.
Run-off businesses The results of run-off businesses increased compared with 2018 to a gain of EUR 23 million in 2019, driven mainly by higher income from the retained individual life reinsurance business.
to EUR 144.7 billion in 2019, driven by higher Asset Management deposits, driven by Aegon’s Chinese joint venture Aegon Industrial
Capital management During 2019, shareholders' equity increased with EUR 2.9 billion to EUR 22.5 billion, mainly as a result of lower interest rates and tighter credit spreads and their impact on the revaluation reserve, in combination with retained earnings. These were partly offset by the impact of lower interest rates on the remeasurement of the defined benefit obligations. Aegon's shareholders' equity, excluding revaluation reserves, amounted to EUR 16.6 billion on December 31, 2019, or EUR 8.08 per common share.
ratio in the United States improved to 470% on December 31, 2019, up from 465% on December 31, 2018. This was mainly driven by retained capital generation and favorable one-time items. In the Netherlands, the estimated Solvency
II ratio at the end of 2019 amounted to 171%, down from 181% at the end of 2018. The ratio was impacted by adverse market impacts, notably credit spread movements, and adverse changes in required capital for illiquid investments, which more than offset normalized capital generation and the effect of management actions. The estimated Solvency
Aegon's estimates, are not final until filed with the regulator, and are subject to supervisory review.
Dividends from and capital contributions to business units Aegon’s business units remitted over EUR 1.2 billion to the Group during 2019, including EUR 809 million from the Americas and EUR 251 million from the United Kingdom. Aegon spent
Income before tax (excluding income tax from certain proportionately consolidated joint ventures and associates)‍ 1,569 (23)‍ n.m. 1,401 (20)‍ n.m.
Of which Income tax from certain proportionately consolidated joint ventures and associates included in income before tax (6) (2) (134) (5) (2) (147)
New premium production accident and health insurance 194 312 (38) 174 264 (34)
Income before tax from run-off businesses in 2019 was a profit of USD 26 million, which is in line with expectations following the divestment of the majority of the remainder of these businesses. Other charges of USD 174 million in 2019 mainly related to USD 164 million impacts from unfavorable model and assumption changes. These were related to charges for surrender, lapse, and mortality updates in Life, as well as expense assumption updates following changes of the organizational structure earlier in the year, and were partly offset by gains driven by updates to variable annuity and indexed universal life model and assumptions. Other charges of USD 34 million occurred in relation to the operations administration partnerships with TCS and LTCG, as well as following the decision to exit the Akaan Transamerica joint venture in Mexico. These were partly compensated by a USD 24 million gain resulting from the restructuring of financing agreements related to the merger of two reinsurance captives.
Underlying earnings before tax Underlying earnings before tax in 2019 decreased by 12%
to USD 186 million in 2019 compared with USD 263 million in 2018. This decrease was largely driven by a negative impact from economic and portfolio updates on intangibles in 2019, compared to 2018. In addition, operating expenses increased in part due to costs to support growth and to improve customer experience. Mortality experience in 2019 was similar to the prior year, while persistency was better compared to 2018.
Workplace experience.  Underlying earnings before tax from Mutual Funds declined from USD 45 million in 2018 to USD 37 million in 2019. This was caused by higher operating expenses, lower fee income following net outflows, and lower investment margin.  Underlying earnings before tax from Variable Annuities decreased by 10% to USD 423 million in 2019 compared with
compared with 2018 to USD 110 million in 2019, mainly due to the impact of lower interest rates.  Underlying earnings before tax from Stable Value Solutions amounted to USD 85 million in 2019 compared with
Akaan Transamerica joint venture in Mexico in the first half of 2019.
Commissions and expenses Commissions and expenses decreased by 10% compared with 2018 to USD 4.3 billion in 2019. Operating expenses decreased by 5% compared with 2018 to USD 1.8 billion in 2019 reflecting lower restructuring expenses associated with the operations administration partnerships, and lower employee expenses. This was partly offset by expenses for modernization initiatives focused on digital and architectural capabilities as well as contractual increases in fees from the operations administration partnerships.
Fixed Annuities, and from Latin America. Net outflows amounted to USD 32.9 billion, mainly caused by Retirement Plans due to a small number of large contract discontinuances and higher participant withdrawals. Variable Annuities and Fixed Annuities saw outflows as these books mature.
New life sales declined to USD 469 million in 2019 compared with USD 496 million in 2018 due to lower universal life and term life sales, while Indexed Universal Life sales were stable.
New premium production for accident & health insurance was down 38% compared with 2018 to USD 194 million in 2018, reflecting the strategic decision to exit travel insurance, affinity and stop loss insurance segments, partly offset by the onboarding of a larger disability contract.
Income before tax (excluding income tax from certain proportionately consolidated joint ventures and associates)‍ 625 909 (31)
Commissions and expenses 2,032 1,991 2 of which operating expenses 1,588 1,496 6
Results 2019 Europe Net income declined by 38% compared with 2018 to EUR 486 million in 2019, as higher underlying earnings before tax and lower other charges were more than offset by negative fair value items, reflecting the Liability Adequacy Test (LAT) shortfall in the Netherlands. Underlying earnings before tax in 2019 increased by 4% compared with 2018 to EUR 875 million due to increases in the Netherlands and the United Kingdom.
Net income for the United Kingdom Net income from Aegon's businesses in the United Kingdom amounted to a loss of EUR 34 million in 2019. The underlying result before tax of EUR 139 million was more than offset by negative fair value items of EUR 131 million and other charges of EUR 38 million. Losses from fair value items of EUR 131 million were mainly the result of losses on hedges as a result of higher equity markets and a lower inflation outlook. Realized gains amounted to EUR 3 million in 2019. Other charges amounted to EUR 38 million as EUR 109 million integration and restructuring charges were partly offset by income related to policyholder tax and a one-time provision release.
EUR 19 million divestment gain on assets backing insurance liabilities, which was fully offset by a similar amount on other charges due to a related transaction. Other income of EUR 33 million reflects a EUR 70 million gain on the sale of Aegon’s operations in the Czech
Republic and Slovakia, partly offset by the aforementioned transaction in Spain and a charge related to the divestment of non-core activities in Hungary.
 Underlying earnings before tax from the Service business increased by 64% compared with 2018 to EUR 18 million, driven by growth of the mortgage servicing business and lower funding expenses for mortgages that remain on balance for this business.
 Underlying earnings before tax from Digital Solutions improved from EUR 21 million in 2018 to EUR 41 million in 2019, was driven by higher fee income as a result of increased assets on the platform in combination with economies of scale. This was partly offset by investment in the Aegon
Underlying earnings before tax for Southern and Eastern Europe Underlying earnings before tax from Southern and Eastern
Excluding this impact, the underlying result before tax increased 11%, driven by an upswing in results from Spain, reflecting favorable claims experience and reduced expenses.
compared with 2018 to EUR 531 million in 2019 as expense savings were more than offset by investments in the Aegon
Commissions and expenses for Southern and Eastern Europe Commissions and expenses decreased compared with 2018 to EUR 442 million in 2019. Operating expenses decreased by 9% compared with 2018 to EUR 248 million in 2019, driven by the sale of Aegon’s Czech and Slovak operations and expense savings, partly offset by taxes on motor insurance.
Production Gross deposits decreased by 2% compared with 2018 to EUR 23.3 billion in 2019, primarily caused by lower platform flows in the United Kingdom, largely offset by higher bank and pension deposits in the Netherlands.
Production for the Netherlands Gross deposits increased by 30% compared with 2018 to EUR 13.2 billion in 2019. This was driven by continued momentum at online bank Knab and by sales of new-style defined contribution products at Aegon Cappital, so-called
Premium Pension Institute products. New life sales were up by 35% compared with 2018 to EUR 136 million in 2019 resulting from a pension buy-out as well as higher sales from a purchase of additional annual pension increases by an existing customer.
Of which Income tax from certain proportionately consolidated joint ventures and associates included in income before tax 1 (15) n.m. 1 (13) n.m.
 Results 2019 Asia  Results 2019 Asia Results of operations - Asia
Net deposits (on and off balance)‍ 2019 2018 % 2019 2018 %
New premium production accident and health insurance 10 9 5 9 8 11
Results 2019 Asia Net income increased by USD 24 million to USD 37 million in 2019 compared with 2018. This was mainly driven by lower taxes. Underlying earnings before tax improved by USD 4 million to USD 69 million in 2019 compared with 2018. New life sales increased by 2% to USD 146 million in 2019 compared with 2018, as higher sales in China were only partly offset by lower universal life sales from the High Net Worth business. Gross deposits decreased to USD 8 million in 2019 compared with USD 151 million in 2018 as gross deposits in Japan have no longer been reported since the signing of the agreement regarding the divestment of Aegon’s stake in its joint ventures with Sony Life in May 2019.
Net income Net income improved to USD 37 million in 2019 from
Underlying earnings before tax In Asia, underlying earnings before tax improved by 7% in 2019 to USD 69 million compared with 2018.
 Underlying earnings before tax from the High Net Worth businesses in Hong Kong and Singapore increased to USD 72 million in 2019, compared with USD 71 million in 2018. This increase was mainly the result of higher surrender charges, favorable claims experience and lower expenses, largely offset by the negative impact of intangible adjustments from lower interest rates.
USD 15 million in 2019 compared with 2018. Higher results from Aegon’s profitable joint venture in China, driven by a growing in-force book, were offset by investments in an eBroker initiative designed to expand the business from
Commissions and expenses Commissions and expenses increased to EUR 281 million in 2019 compared with EUR 273 million in 2018. Operating expenses increased by 4% to USD 195 million in 2019 compared with 2018. The increase in operating expenses was mainly caused by growth in China and investments in an eBroker initiative.
Production New life sales increased by 2% to USD 146 million in 2019 compared with 2018.  In the High Net Worth businesses in Hong Kong and
Singapore, new life sales were down 31% to USD 36 million in 2019, compared with USD 53 million in 2018. This decrease was mainly the result of continued pressure on the universal life business caused by macro uncertainties and the market shift towards whole life products.
to USD 110 million in 2019 compared with 2018, following strong sales in China through a large e-commerce partner.
Results 2019 Aegon Asset Management Amounts in EUR millions 2019 2018 %
Income tax from certain proportionately consolidated joint ventures and associates included in income before tax 21 22 (2)
Of which Income tax from certain proportionately consolidated joint ventures and associates included in income before tax (21) (22) 2
Commissions and expenses 493 488 of which operating expenses 445 439 1
Total net flows external third-party 6,841 7,526 (9) 1 Rest of world include intragroup eliminations from internal sub-advised agreements
Netherlands, primarily driven by higher management fees, when comparing with 2018.
 Rest of World underlying earnings before tax in 2019 improved by EUR 8 million compared with 2018 to a loss of EUR 2 million. The improvement was driven by performance fees in Southern & Eastern Europe, which more than offset higher expenses.
income ratio in 2019 went up by 1 percentage point compared with 2018 to 76%, as result from higher expenses and lower revenues in 2019 compared with 2018. Annualized operating expenses as a percentage of average assets under management improved to 13 basis points in 2019 compared with 14 basis points in 2018.
Production Gross inflows in external third-party increased by 36% in 2019 to EUR 80.9 billion compared with 2018. This was driven by increased inflows in AIFMC which were in turn supported by a new mandate, new equity funds launched and increased inflows in money market funds. These higher inflows offset lower inflows in 2019 in both the Americas and Europe compared with 2018.
Net external third-party inflows in 2019 decreased compared with 2018 to EUR 6.8 billion, as higher net flows in AIFMC were more than offset by lower net flows in Europe.
The latter was driven by the United Kingdom. Net flows for the Americas and Rest of World remained fairly stable in 2019 compared with 2018.
Share in profit / (loss) of associates 25 12 6 11
Earnings per share (EUR per share)‍ 19 Basic earnings per common share 0.70 0.31 1.08
Items that may be reclassified subsequently to profit or loss: Gains / (losses) on revaluation of available-for-sale investments 3,471 (2,142) 1,376
Movement in foreign currency translation and net foreign investment hedging reserves 314 602 (2,149)
Total comprehensive income/ (loss)‍ attributable to: Owners of Aegon N.V. 3,761 (364) 397
January 1, 2019. Refer to note 2.1.2 Voluntary changes in accounting policies for details about this change.
Issued capital and reserves attributable to owners of Aegon N.V. 25,028 22,838 24,344
Other comprehensive income: Items that will not be reclassified to profit or loss: Changes in revaluation reserve real estate held for own use - 32 (36) - - - (4) - (4)
Income tax relating to items that will not be reclassified - (7) 8 90 - - 92 - 92
Items that may be reclassified subsequently to profit or loss: Gains / (losses) on revaluation of available-for-sale investments - - 3,471 - - - 3,471 - 3,471
(Gains) / losses transferred to income statement on disposal and impairment of available-for-
Changes in cash flow hedging reserve - - (8) - - - (8) - (8)
Movements in foreign currency translation and net foreign investment hedging reserves - - 37 (25) 302 - 314 - 314
Equity movements of joint ventures - - - - 8 - 8 - 8
Total other comprehensive income / (loss)‍ - 40 2,433 (547)‍ 307 - 2,234 (2)‍ 2,232
Issuance and redemption of other equity instruments - (81) - - - (744) (825) - (825)
Income tax relating to items that may be reclassified - - 514 - (20) - 494 - 494
Total other comprehensive income / (loss)‍ - (3)‍ (1,462)‍ (182)‍ 539 - (1,108)‍ 1 (1,107)‍