The DB contract targets medium-sized and larger customers and is by default a 5-year contract. The DB contract offers more flexibility than the subscription product, for example with regard to the pension accrual rate and has fixed tariffs over a longer period.
All other products are not being sold anymore and include:  Separate account group contracts with individually-determined asset investment strategies, profit sharing and guarantees.  DB contracts with profit sharing based on a pre-determined interest rate.  Traditional variable unit-linked products.
Premiums are still being paid for non-selling products. These products are managed on a value basis, with Aegon trying to optimize the return on capital while the products are running off.
Endowment insurance Endowment insurance includes several products that accumulate a cash value. Premiums are paid at inception or over the term of the contract. These products pay benefits on the policy maturity date, subject to survival of the insured. Most policies also pay death benefits should the insured pass away during the term of the contract. Death benefits may be stipulated in the policy or depend on the gross premiums paid to date. Premiums and amounts insured are established at inception of the contract. The amount insured can be increased as a result of profit sharing, if provided for under the terms and conditions of the product.
Various profit-sharing mechanisms exist. Bonuses are either paid in cash (usually for a pension, as described below) or used to increase the sum insured. A common form of profit sharing is to set bonus levels by reference to external indexes based on pre-defined portfolios of Dutch government bonds. The bonds included in the portfolios have different remaining maturities and interest rates.
Annuity insurance Annuity insurance are products with both an accumulation and payout phase, The most active products in this category are simple payout annuities and variable annuities. These products are clearly linked to defined contribution schemes in which participants build up their capital, and purchase an annuity at the pension date. Participants can choose between a guaranteed annuity, where all risks
Non-life Accident and Health Aegon the Netherlands offers disability and sick leave products to employers that cover disability and sick leave payments for employees not covered by social security and for which employers bear the risk. In addition, for some forms of disability, employers can choose to use the social security system with related premiums or opt out and seek private insurance. Private insurance may lead to lower premiums and Aegon offers solutions for this.
Banking In 2019, Aegon Bank N.V. announced to integrate the Aegon Bank and Knab operations under the Knab brand. By integrating both operations and rationalizing product offerings costs will be reduced, operations will be more efficient and governance unified and simplified. The coming period will be used to migrate the Aegon bank label products and customers towards the Knab label.
Knab is a fully online digital bank that went live in 2012. Knab aims to be the most customer-oriented financial platform in the Netherlands, by informing customers about their personal financial situation and enabling them to achieve their financial goals. It’s therefore Knab’s mission to help people manage their money matters now and in the future. This reflects the core of Aegon's purpose, as an online bank, Knab offers payment accounts, savings and a basic investment product. The Aegon Bank label focuses on customers whose income and wealth is in the middle-market, in line with Aegon the Netherlands' target group. Aegon
Bank offers simple and high-quality products. These include both savings products focused on security, and investment products focused on a suitable risk/return profile that fits the customer's need and risk appetite. With these products Aegon Bank reinforces the Aegon Netherlands wide pension offering. Aegon Bank's activities among others focus on 'Banksparen' products'. 'Banksparen' is a tax-deferred savings product in which amounts are deposited in a 'locked' bank account. The amount saved is available after a certain period of time for specific purposes such as for a supplementary pension or paying off a mortgage. This product is predominantly sold via independent financial advisors who remain a very important distribution channel.
Knab Advies & Bemiddeling N.V. With the integration of the Aegon Bank and Knab, the strategic choice was made to phase out the non-bank (i.e. adviser and broker)
activities in Knab Advies en Bemiddeling N.V. (KAB), and therewith stop the online advice and comparison of car-insurance and homerelated insurances, as well as the mortgage broker business, effective from October 1, 2019. The KAB entity will be liquidated as soon as the remaining activities are sold to third parties or transferred to other Aegon entities.
Services Business Mortgage loans In 2019, Aegon the Netherlands mostly offered 'annuity mortgages'. Before 2013, Aegon the Netherlands also offered interest-only, unit-linked and savings mortgage loans, and is continuing to do so for existing mortgage loans that are being renegotiated. Mortgage loans are partly funded externally. Besides residential mortgage-backed securities in Saecure — Aegon's Dutch residential mortgagebacked securities program and private placements — the Aegon Mortgage fund is the main source of external funding. For this business, Aegon originates the mortgage loans fully for account of third parties and remains the service provider.
Aegon Cappital As of January 1, 2019, regulated pension premium institutions (PPIs) Aegon PPI and CAPPITAL merged to become Aegon Cappital.
Aegon Cappital is a low-cost provider of defined contribution pension schemes offered through intermediary advisors. It is the largest pension premium institution in the Netherlands and benefits considerably from economies of scale. The low interest rate environment is expected to result in a continued shift in customer preference for defined contribution schemes.
PPIs cannot bear any investment or insurance risks on their offerings due to regulatory requirements. The schemes include disability or life insurance which are offered by partners Aegon Levensverzekering N.V., Aegon Schadeverzekering N.V. and Elips Life AG, and an optional guaranteed interest rate during the accumulation phase offered by partner Aegon Levensverzekering N.V.. Apart from operational and regulatory risk, Aegon Cappital runs no risk.
Stap is a pension pooling vehicle that enables separate financial administration for multiple pension plans from multiple employers.
This vehicle enables smaller pension schemes to benefit from economies of scale and to comply with complex pension regulations, meaning that a greater percentage of the employees' pension premium is invested, and that employers and participants receive the same high quality of service as a traditional pension plan. The fiduciary investments for Stap are carried out by Aegon Investment
Aegon acquired Robidus from the investment company Avedon Capital Partners on September 11, 2018. Robidus advises corporations on the risks and associated costs under Dutch social security legislation, and provides corporations and insurance companies with claims management and outsourcing solutions as to how to manage these issues, including outsourcing services. It operates as an independent organization within Aegon, and the acquisition gives Robidus both more room to invest and access to the broad expertise within Aegon.
The company has been a key player in the total life market for many years, and was ranked third in 2018 based on gross premium income. The life insurance market in the Netherlands comprises pensions and life insurance. The top five life insurance companies in the Netherlands by gross premium income accounted for almost 85% of total premium (Individual Life and Pension) income in 2018.
Aegon the Netherlands is the second largest insurance company in the pensions market. Aegon the Netherlands is one of many insurers in the non-life market, where in 2018, ten companies accounted for 80% of the total premium income. In terms of premium income,
1 Vivat was sold to NN Group (non-life) and Athora (life) in 2019, subject to Regulatory approval.
In the pensions market, pension funds have faced pressure on their coverage ratios, in addition to increased regulatory and administrative requirements. In response, they have sought to reduce risks by insuring all or parts of their business. This represents an opportunity for pension insurers and providers of new style pension solutions and Aegon is one of the leading providers of these solutions.
Regulation and supervision General Regulation of the financial sector in the Netherlands is included in the Financial Supervision Act (Wet op het financieel toezicht or Wft).
The DNB is responsible for prudential supervision, while the AFM supervises the conduct of business of financial institutions, and the conduct of business on financial markets. The aim of the DNB's prudential supervision is to ensure the solidity of financial institutions and contribute to the stability of the financial sector. With regard to banks, the DNB undertakes its supervisory role, in particular with respect to prudential supervision, together with the European Central Bank (ECB).
Financial supervision of insurance companies The Solvency II framework consists of an EU Directive and has consequently been transposed into the Dutch Financial Supervision Act.
The following insurance entities of Aegon the Netherlands are subject to prudential supervision of the DNB:  Aegon Levensverzekering N.V.;  Aegon Schadeverzekering N.V.;  Aegon Spaarkas N.V..
(with the exception of reinsurance), nor to carry out both insurance and banking activities within the same legal entity. Within Aegon the Netherlands, Aegon Levensverzekering N.V. and Aegon Spaarkas N.V. conduct life insurance activities. Aegon Schadeverzekering
N.V. conducts non-life insurance activities. Prudential supervision is exercised by the home state supervisory authority (DNB
CRR include requirements with respect to the quality and quantity of capital, and introduce requirements with respect to increased capital against derivative positions, the introduction of two supplementary buffers (a capital conservation buffer and a countercyclical buffer), a new liquidity framework (liquidity coverage ratio and net stable funding ratio) and a leverage ratio. The leverage ratio is defined as Tier-1 capital divided by a measure of non-risk weighted assets. The leverage ratio requirement will be phased in gradually.
On June 7, 2019, a comprehensive package of banking reforms to CRD IV, the BRRD and the SRM Regulation (the 'EU Banking
Reforms'), including measures to increase the resilience of EU institutions and enhance financial stability entered into force, with most rules starting to apply in mid-2021. The EU Banking Reforms are wide-ranging and cover multiple areas.
On December 7, 2017, the Basel Committee published the finalized Basel III reforms as improvements to the global regulatory framework (the 'Basel III Reforms') (informally referred to as Basel IV), with a proposed implementation from January 2022 onwards.
Overview of United Kingdom Aegon in the United Kingdom (hereafter referred to as Aegon UK) is the marketleading investment platform in the UK, providing a broad range of investment, retirement solutions and protection products to individuals, advisers and employers.
Aegon UK accesses customers through wealth advisers and the workplace and has a market-leading position in each with 3.9 million customers and GBP 179 billion assets under administration (AUA) underpinned by a growing investment solutions capability.
Overview of business Lines Aegon UK organizes around two core business lines, the 'Digital Solutions' business and the 'Existing Business'. This supports the transformation of Aegon UK from a traditional ‘insurer,’ competing with the likes of Prudential and Royal London to a modern feebased investment management platform competing with businesses such as Transact and Willis Towers Watson.
Over the last five years the UK business has focused on transforming and scaling the Digital Solutions Business. Aegon UK has done so through organic growth and the acquisition of Cofunds retail savings platform, and BlackRock’s large employer workplace pension business, and by disposing of non-core business lines, such as the Annuity portfolio, whilst progressing the outsourcing of service and administration for Existing Business. This phase of transformation is largely complete.
The Existing Business is managed for value and is responsible for older products that are no longer actively marketed to new customers. However, new assets are accumulated as customers pay into existing policies, or as new employees join older workplace schemes. In July 2019, Aegon UK completed the outsourcing of service and operations tasks to Atos with a 15-year contract to service and administer the Existing Business, thereby improving the profitability of this business line. This builds on the existing relationship, which has seen Atos successfully administer over 400,000 Digital Solutions protection policies since 2016.
Aegon UK works with those advisers and employers to deliver an online experience for customers. The platform is designed to work for customers throughout their life as needs evolve providing a comprehensive range of products and funds, moving with them each time they change employer and allowing them to link in with different advisers.
Overview of United Kingdom Overview of United Kingdom Overview of United Kingdom Overview of United Kingdom
Financial Adviser channel The Financial Adviser channel provides financial advisers and other institutions access to long-term savings and retirement products, through an open architecture investment platform. Given the strong demand for advice, especially within the growing affluent population nearing and in retirement.
Aegon UK offers a comprehensive proposition allowing advisers to manage their client’s long-term investment through a wide range of tax wrappers (Self Invested Personal Pension, Individual Savings Account (ISA), General Investment Account (GIA)) investing in a choice of over 4,500 funds and equity trading. Aegon also offers its own investment solutions to advisers.
Aegon UK partners with in excess of 5,000 advisers across a wide range of business models. These range from the world’s largest building society, Nationwide, to leading wealth management firms such as Chase De Vere, financial services networks such as Quilter and Execution-Only Brokers.
An important dimension of the Nationwide partnership is the inclusion of Aegon Investment Limited funds. This model will be extended in 2020 with the launch of an equivalent range of funds for financial advisers as Aegon UK builds out its investment solutions capability.
Aegon UK works with leading employee benefits consultants and corporate advisers to provide a workplace savings platform to employers such as WH Smith, EasyJet and Skanska. This combines its core pension capabilities with ISA and GIA, allowing employees to maximize their savings whilst employed and then take the product with them when they leave or if they should choose to take regulated advice in the future.
It also links into the wider engagement activities such as seminars in the workplace, and online innovations such as the launch of digital personalized summaries that seek to encourage customers to consolidate monies held elsewhere and increase their savings.
Individual customer channel Aegon UK has a large and growing individual customer base, which is not attached to an adviser or employer. This base is over 1 million individuals, and is forecast to continue to grow. These individuals are provided with tools that enable them to manage their finances and with customer service support to help with guidance and referrals available to Aegon UK’s in-house financial adviser business,
The Aegon Master Trust is subject to regulatory oversight by the Pensions Regulator following industry changes to authorize Master
UK law, including those that derive from EU law and continue with implementation plans for legislation that is anticipated to come into effect. The FCA has acknowledged that the longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future.
Scottish Equitable PLC is authorized by the PRA and is subject to prudential regulation by the PRA and conduct regulation by the FCA.
actuarial information, and detailed information regarding the investments of the insurance company. The PRA's regulatory reporting is based on a single entity focus, and is designed to highlight risk assessment and risk management.
Solvency II Under Solvency II, life insurance companies are required to maintain certain levels of shareholder equity in accordance with
Following the sale of the majority of its annuity business in 2016, Aegon UK no longer uses the transitional measures on technical provisions.
Cofunds Ltd and Aegon Investment Solutions Ltd are regulated by the FCA and maintain a capital framework in line with CRD IV.
Aegon's activities in Spain have developed largely through distribution partnerships with Spanish banks. Aegon Spain Holding B.V.
(hereafter referred to as Aegon Spain) operates in Spain through Aegon España S.A.U. de Seguros y Reaseguros. In 2013, Aegon
Spain entered into a long-term partnership with Banco Santander S.A., offering both life and general insurance products through the bank’s branch network, both in Spain and Portugal. Similarly, Aegon Spain also entered into a long-term partnership with Liberbank,
In line with its strategic objective to optimize its portfolio and capital allocation across its businesses, Aegon sold its subsidiaries in the Czech Republic and Slovakia on January 8, 2019. It also expanded its partnership with Banco Santander in Spain and Portugal on the back of the acquisition of Banco Popular by Banco Santander.
Organizational structure Aegon's main subsidiaries and affiliates in Southern and Eastern Europe are:  Aegon España S.A.U. de Seguros y Reaseguros (Aegon España Insurance and Reinsurance);  Santander Generales Seguros y Reaseguros S.A. (Santander General Insurance and Reinsurance) (51%);  Santander Vida Seguros y Reaseguros S.A. (Santander Life Insurance and Reinsurance) (51%);  Liberbank Vida y Pensiones, Seguros y Reaseguros, S.A.(Liberbank Life and Pensions, Insurance and Reinsurance) (50%);  Aegon Santander Portugal Não Vida-Companhia de Seguros S.A. (Aegon Santander Portugal Non-Life Insurance Co.) (51%);  Aegon Santander Portugal Vida-Companhia de Seguros de Vida S.A. (Aegon Santander Portugal Life Insurance Co.) (51%);  Aegon Magyarország Általános Biztosító Zártkörűen Működő Részvénytársaság (Aegon Hungary Composite Insurance Co.);  Aegon Towarzystwo Ubezpieczeń na Życie Spółka Akcyjna (Aegon Poland Life);  Aegon Powszechne Towarzystwo Emerytalne Spółka Akcyjna (Aegon Poland Pension Fund Management Co.);  Aegon Emeklilik ve Hayat A.Ş. (Aegon Turkey); and  Aegon Pensii Societate de Administrare a Fondurilor de Pensii Private S.A (Aegon Romania Pension Administrator Co.).
In Central & Eastern Europe, the most important sales channels comprise tied agents and brokers, in addition to bancassurance.
España, being the subsidiary of Aegon Spain, and 49% by Santander Seguros y Reaseguros, Compañía Aseguradora, S.A. respectively.
Aegon Spain and Liberbank Liberbank, S.A. has a nationwide presence in Spain, with a special focus on retail markets in a number of regions (Asturias, Cantabria,
Castilla La Mancha and Extremadura). Liberbank Life and Pensions distributes its products through nearly 400 Liberbank, S.A. branches.
Liberbank Life and Pensions is a joint venture life insurance and pension fund management company, with Aegon España and Liberbank
Customers' saving needs are serviced by Aegon Spain through its Spanish insurance affiliates by means of its targeted offering of universal life and unit-linked products. Protection business, pursued both in Spain and Portugal, includes primarily life, accident and disability cover, and the products can be complemented with critical illness, income protection and other riders.
In Hungary, Aegon offers a wide range of life insurance products, including term life, whole life, accidental life and group life insurance.
Insurance Company, provided a saving product combined with a preferential loan option, subsidized by the state during the saving period. In accordance with Aegon’s strategy on October 1, 2018, Aegon Hungary Home Savings and Loan Association suspended its sales activities. The sale of the portfolio started in 2019 and is expected to be completed in 2020.
Pension In Spain, customers’ pension saving needs are serviced by Liberbank Life and Pensions as well as by Aegon España through their managed pension funds.
General insurance Aegon Spain has been offering general insurance products since 2013 through its joint ventures with Banco Santander. The offering focuses mainly on household protection and funeral insurance products.
In Hungary, in 2018, Aegon was the third largest life insurance provider, based on annual standardized premium income, and the third largest provider in the non-life insurance market. In the same year Aegon was the leading insurance company in the Hungarian household market1. In Turkey, Aegon was ranked ninth in the life insurance market based on written premium in December 20192.
In Romania, Aegon was ranked number eighth, based on the gross written premium, in September 2019. Aegon is a less significant life insurance market participant in Poland.
State supervision and oversight of the insurance industry is conducted by the following bodies and institutions:  General Directorate of Insurance and Pension Funds (DGSFP) (Spain);  The Insurance and Pension Funds Supervisory Authority (ASF) (Portugal);  The Central Bank of Hungary (MNB) (Hungary);  Financial Supervisory Authority (KNF) (Poland);  Authority for Financial Supervision (ASF) (Romania); and  Undersecretariat of Treasury (Turkey).
In the European Union, a single insurance company may only be licensed for and conduct either a life insurance business or a nonlife insurance business; not both. In Hungary, however, insurance companies established before 1995 are exempt from this rule. This exemption therefore applies to Aegon Hungary, which is a composite insurance company.
Act (XCVI. 1993). Activity in this area is also supervised by the MNB. The Credit Institutions and Financial Enterprises Act (2013)
stipulates the foundation, operation and reporting obligations of the country's financial institutions. Just like Aegon Hungary Composite
System Law No. 4632. In Spain the pension system is supervised by DGSFP.
Organizational structure Aegon's main operating companies in Asia (including Aegon's ownership percentages) are:  Aegon THTF Life Insurance Co., Ltd. (50%);  Aegon Life Insurance Company Limited (49%);  Transamerica Life (Bermuda) Ltd. (100%).
Joint ventures Aegon operates in China through a joint venture with Tsinghua Tongfang Co. Ltd. (THTF) called Aegon THTF Life Insurance Co., Ltd.
(Aegon THTF). Aegon THTF is licensed to sell both life insurance and accident and health products in China. Since 2003, the company has expanded its network of offices and business in China. Having established thirteen branches, its geographic presence has access to a potential market of over 650 million people, primarily in the coastal provinces of eastern China.
Overview of Asia Overview of Asia Overview of Asia Overview of Asia
estate planning by providing life protection, while also helping to preserve and accumulate wealth. In addition to the Universal Life products, Term Life products are also offered with financial protection at a guaranteed level rate for up to thirty years.
Other products, such as participating annuity and endowment (via agency), whole life insurance products (via brokers) and protection with return of premium (via direct marketing) are, however, also offered. Regular premium critical illness, whole-life insurance, traditional or participating annuity and single premium annuity are the key products offered in the bancassurance channel, while the digital channel is currently focused on offering protection products. Aegon THTF also offers non-life products (primarily consisting of short-term accident and short-term health products) through group, direct marketing and agency channels.
Hong Kong and Singapore: TLB TLB's main competitors in Hong Kong and Singapore have mainly been other global life insurance providers such as HSBC Life,
Manulife Bermuda, and Sun Life Bermuda. The local subsidiaries of both Sun Life and Manulife, in addition to domestic insurers such as AIA, Great Eastern Life, Singapore Life, Generali, AXA, and FWD, are however increasingly developing competitive offerings for this market segment.
China: Aegon THTF The insurance industry in China is regulated by the China Banking and Insurance Regulatory Commission (CBIRC). During 2019, the CBIRC’s main focus was on strengthening weak links, tightening supervision, deepening reforms, accelerating opening-up of the sector and joint supervision. Consequently, The CBIRC increased supervision on liquidity risks, solvency risks, product risks, sales practices and anti-money laundering. It also reformed regulations around foreign investment and selling insurance online.
The IRDAI is active in introducing new regulations that focus on protecting policyholders' interests and exploring avenues to support growth in the industry. Steps initiated by the IRDAI during 2019 included the issuance of guidelines with regards to registration of insurance marketing firms and product pricing. IRDAI has also issued 'circulars' that provide additional guidance on information to the insurance policyholders/claimants about various insurance policy services, grievance redressal mechanisms, group life insurance products, benefits illustration and market conduct. Aegon Life would discontinue products that no longer meet the regulations pertaining to product pricing in the month of November 2019 and launch / re-launch products in compliance with regulations.
is an integrated regulator that supervises all financial institutions including banks, insurers, capital market intermediaries and financial advisors in Singapore.
Asia: Aegon Insights A broad range of regulations apply to Aegon Insights' activities. Depending on the precise nature of the activities undertaken and the form of business entity used in the jurisdictions in which Aegon Insights operates, relevant regulations include: marketing/
In December 2019, it was decided to retire the Kames Capital and TKP Investments brand and move to the globally recognized Aegon
In December 2019, it was decided to establish a globally integrated structure, with a simplification of the operating model which featured regional executive committees and to create a global operational management board (Global Board). Strategic direction and global oversight of business performance is executed by the Global Board of Aegon Asset Management, which has both global and local roles and responsibilities. This board is supported by a number of sub committees. Members of the Global Board are appointed by Aegon N.V.. The Risk Advisory Committee and Remuneration Committee support Aegon's oversight of Aegon Asset Management.
The general account business consists of funds held on the balance sheet of Aegon insurance companies to meet policyholder liabilities typically when the insurer has given the policyholder a guarantee. These assets are managed to match the insurers' liabilities. As a rule, general account assets are managed in a closed architecture structure, and the main asset classes are fixed income and mortgage loans. Furthermore, Aegon Asset Management manages the general account derivatives book of Aegon the Netherlands.
Third-party business sourced through affiliates for the majority consists of funds sold by Aegon insurers through which the policyholder's return is determined by the investment return of the fund. These funds have various legal structures, and are usually managed against a benchmark or peer group target. The main asset classes include fixed income, equities, real estate, mortgage
Overview of Aegon Asset Management Overview of Aegon Asset Management Overview of Aegon Asset Management Overview of Aegon Asset Management
Competition Aegon Asset Management competes with other asset management companies to acquire business from open-architecture Aegon insurance units and third parties.
In the Netherlands, Aegon Asset Management provides a wide range of investment strategies and solutions to institutional and wholesale clients, and through its affiliated insurance company to retail clients. In the third-party institutional market, it competes with domestic and global asset managers as well as with fiduciary and balance sheet managers. Competition continues to be strong in the institutional market due to both the ongoing consolidation of pension funds and the growing service requirements of pension fund clients. Primary competitors in the Netherlands include BlackRock, JP Morgan, Nationale Nederlanden Investment Partners,
Aegon Asset Management Holding B.V., is authorized to hold substantial holdings in several EU investment firms and as such is a regulated holding company. Local operating entities are regulated by their local regulators, most notably the Dutch Authority for the Financial
Markets (AFM) (conduct of business supervision) and the DNB (prudential supervision) for Dutch-based entities, the Financial Conduct
Authority (FCA) for Kames Capital, and the Securities & Exchange Commission (SEC) and the Commodity Futures Trading Commission
Aegon faces numerous risks, some of which may arise from internal factors, such as inadequate compliance systems and operational change management. Others may arise from external factors, such as developments in financial markets, the business and/or political environment, economic trends, politics and regulations. These risks, whether internal or external, may materially and adversely affect the Company´s operations, its earnings, the value of its investments, the sale of certain products and services or its ability to fulfill its obligations in respect of securities issued or guaranteed by it. The market price of Aegon securities could decline due to any of the risks described in this section and investors could lose some or all of the value of their investments. Additional risks of which Aegon is not presently aware could also materially and adversely affect its operations and share price. The business of an international financial services group such as Aegon is inherently exposed to risks that may only become apparent with the benefit of hindsight.
The next sections group the risk factors into different categories based on the origin of the risk, while recognizing that the identified risk factor can have broader consequences, e.g. developments on financial markets (included under financial risks) can impact policyholder behavior (included under underwriting risk). The categories used are: 1) financial risks, 2) underwriting risks, 3) operational risks, 4) political, regulatory and supervisory risks, and 5) legal and compliance risks. Where possible the risk factors are presented in order of relevance. For instance financial risks and underwriting risks are of more significance than operational risks (in terms of required capital) and, within the category financial risks, fixed income risks and interest rate risks are of more significance than equity risk (due to composition of the general account of Aegon) and currency risk. However, the order should not be seen as more than indicative as the likelihood of occurrence or the potential magnitude of the consequences of the materialization of risks often cannot be determined by a degree of certainty. Furthermore, risks with a low likelihood can have a large impact should they materialize.
The described risk factors relate to Aegon’s businesses and to Aegon’s securities, including its common shares, of which Aegon is aware and that it considers material. Furthermore, described risk factors may affect Aegon’s businesses and operations in normal market circumstances, as well as in periods of significant economic uncertainty.
Additional risks to which Aegon is subject include, but are not limited to, the factors mentioned under 'Forward-looking statements', and the risks of Aegon’s businesses described elsewhere in this Annual Report.
Financial risks General economic uncertainty and financial crisis Disruptions in the global financial markets and general economic conditions may affect, and could have materially adverse affects on Aegon’s businesses, results of operations, cash flows and financial condition.
th er n o n -fin an cial in fo rm atio n partnership interests, are to some degree illiquid. In depressed markets, Aegon may be unable to sell or buy significant volumes of assets at quoted prices.
During periods of decreasing interest rates or sustained low interest rates, as experienced in recent years, Aegon may not be able to preserve margins due to the existence of minimum interest rate guarantees and minimum guaranteed crediting rates provided in policies. Also, investment earnings may be lower because the interest earnings on new fixed-income investments are likely to have declined with the market interest rates. A prolonged low interest rate environment may also result in a lengthening of maturities of the policyholder liabilities from initial estimates, due to lower policy lapses and longer duration of annuities.
Depending on economic developments, interest rates for securities with shorter maturities may remain at low or even negative levels for a prolonged period. In such an environment, an anchored expectation of low inflation or deflation could further push down the longer end of the interest rate curve which could have significant implications for Aegon’s operations and financial results.
These cash payments to policyholders also result in a decrease in total invested assets and net income. Early withdrawals may also require accelerated amortization of DPAC, which in turn reduces net income. Hedging against interest rate movements may change these effects significantly.
under IFRS-EU. This is inconsistent with the IFRS-EU accounting on much of Aegon’s liabilities, where corresponding economic gains from higher interest rates do not affect shareholders' equity or income in the shorter term. Over time, the short-term reduction in shareholders' equity and income due to rising interest rates would be offset in later years, all else being equal.
Increased withdrawals and the need to post margin in relation to interest rate swaps when rates rise rapidly will put a strain on Aegon’s available liquidity. Aegon takes this risk into account in its liquidity risk strategy and stress test.
A downturn in the real estate market may adversely impact valuations and cash flows.
th er n o n -fin an cial in fo rm atio n market can not only lead to lower valuation of assets and increased payment defaults, but also detrimentally affect the cash-flows of the company’s illiquid strategy including AMVEST, which is exposed to the Dutch residential rental market.
Such a failure may lead to a chain of defaults that may adversely affect Aegon and Aegon’s contract counterparties. In addition, such a failure may impact future product sales as a potential result of reduced confidence in the insurance industry. The default of one or more large international financial institutions, which may result in disruption or termination of their cash, custodial and/
or and administrative services, may also have a material adverse impact on Aegon’s ability to run effective treasury and asset management operations.
Aegon’s Annual Report 2019 for a table showing life insurance in force amounts and premiums on a direct, assumed and ceded basis.
A downgrade in Aegon’s ratings may increase policy surrenders and withdrawals, adversely affect relationships with distributors, and negatively affect Aegon’s results.
Aegon to establish reserves to fund these future guaranteed benefits when equity market returns do not meet or exceed these guarantee levels. Aegon’s reported results under International Financial Reporting Standards as adopted by the European Union (IFRS-
Kingdom, the principal sources of exposure from currency fluctuations are from the differences between the US dollar and the euro and between the UK pound and the euro. Aegon may experience significant changes in net income and shareholders’ equity because of these fluctuations.
The sensitivity of Aegon’s net income and shareholders’ equity to foreign exchange translation risk is provided in the notes to the financial statements, note 4 Financial risks, section ‘Currency exchange risks’ of Aegon’s Annual Report 2019.
Hedging risk Aegon may be unable to manage Aegon’s risks successfully through derivatives.
The price at which Aegon’s common shares trade is influenced by many factors, some of which are specific to Aegon and
An additional offering of common shares by Aegon, the restructuring of Aegon’s share capital, the sales of common shares by significant shareholders, or the public perception that an offering or such sales may occur, may have an adverse effect on the market price of Aegon’s common shares.
Vereniging Aegon holds 32.6% of the voting shares. For details on the shareholding of Vereniging Aegon its developments, the Amended 1983 Merger Agreement and the Voting Rights Agreement – please see the section Major shareholders on pages 338-340.
The Voting Rights Agreement between Aegon N.V. and Vereniging Aegon ensures that under normal circumstances, i.e. except in the event of a Special Cause, Vereniging Aegon will no longer be able 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 Vereniging Aegon will cast one vote for every common share it holds and one vote only for every 40 common shares B. It is at the sole discretion of Vereniging Aegon if a Special
Underwriting risks Pricing risk Underwriting risk relates to the products sold by Aegon insurance entities. The underwriting process requires, among others, the setting of assumptions. Aegon’s reported results of operations and financial condition may be affected by differences between actual claims experience and underwriting and reserve assumptions both due to incurred gains/losses and from potential changes in best estimate assumptions that are used to value insurance liabilities.
Aegon may be required to change its best estimate assumptions with respect to future experience, potentially increasing the technical provisions for insurance liabilities, which may reduce Aegon’s income and solvency ratio. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on the balance sheet and are
th er n o n -fin an cial in fo rm atio n being amortized into income over time. If the assumptions relating to the future profitability of these policies (such as future claims, investment income and expenses) are not realized, the amortization of these costs may be accelerated and may require write-offs should there be an expectation that the costs are not fully recoverable. This may have a materially adverse effect on Aegon’s results of operations and financial condition.
The sensitivity of Aegon’s net income and shareholders’ equity to changes in various underwriting risks is provided in the notes to the consolidated financial statements, note 34 ‘Insurance contracts’ of Aegon’s Annual Report 2019.
Valuation of Aegon’s investments, allowances and impairments is subjective, and discrepant valuations may adversely affect Aegon’s results of operations and financial condition.
The valuation of many of Aegon’s financial instruments is based on methodologies, estimations and assumptions that are subject to different interpretations. Changes to investment valuations may have a materially adverse effect on Aegon’s results of operations and financial condition. In addition, the determination of the amount of allowances and impairments taken on certain investments and other assets is subjective and based on assumptions, estimations and judgments that may not reflect or correspond to Aegon’s actual experience any of which may materially impact Aegon’s results of operations or financial position.
Restrictions on underwriting criteria and the use of data may affect Aegon’s ability to do business, its financial position or financial results.
Aegon may face law suits from customers and experience negative publicity if Aegon’s products result in losses or fail to result in expected gains, regardless of the suitability of products for customers or the adequacy of the disclosure provided to customers by Aegon and by the intermediaries who distribute Aegon’s products. New products that are less well understood and that have less of a historical performance track record may be more likely to be the subject of such litigations. Any such litigations may have a materially adverse effect on Aegon’s results of operations, corporate reputation and financial condition.
Reinsurance risk Reinsurance may not be available, affordable or adequate to protect Aegon against losses.
Aegon’s operating results and financial position may be adversely affected by volatile natural and man-made disasters such as hurricanes, windstorms, earthquakes, terrorism, riots, fires and explosions, and other catastrophes. Over the past several years, changing weather patterns and climatic conditions have added to the unpredictability and frequency of natural disasters in certain parts of the world and created additional uncertainty as to future trends and exposure. Aegon is also exposed to the risk of a pandemic
(such as Asian Flu, SARs or COVID-19) occurring in one of the countries in which Aegon operates or globally. Generally, Aegon seeks to reduce its exposure to these events through individual risk selection, monitoring risk accumulation, and purchasing reinsurance, as well as strong health and safety practices to protect employees. However, such events may lead to considerable financial losses to Aegon’s businesses. These catastrophic events may also lead to adverse market movements which increase the adverse impacts on Aegon’s financial position. Furthermore, natural disasters, pandemics, terrorism, civil unrest, military actions and fires may disrupt
Aegon’s operations and result in significant loss of property, key personnel and information about Aegon and its clients. If its business continuity plans have not included effective and sufficient contingencies for such events, Aegon may experience business disruption and damage to corporate reputation and financial condition for a substantial period of time.
Competition in Aegon’s business segments is based on service, product features, price, commission structure, financial strength, claims paying ability, ratings and name recognition. Aegon faces intense competition from a large number of other insurers, as well as noninsurance financial services companies such as banks, broker-dealers and asset managers, for individual customers, employers, other group customers, agents and other distributors of insurance and investment products. Consolidation in the global financial services industry can enhance the competitive position of some of Aegon’s competitors by broadening the range of their products and services, and increasing their distribution channels and their access to capital. In addition, development of alternative distribution channels for certain types of insurance and securities products, including using digital technologies and platforms, may result in increasing competition as well as pressure on margins for certain types of products. Traditional distribution channels are also challenged by the ban on sales- based commissions in some countries. These competitive pressures may result in increased pricing pressures on a number of products and services, particularly as competitors seek to win market share. This may harm Aegon’s ability to maintain or increase profitability.
Aegon may have difficulty managing its expanding operations, and Aegon may not be successful in acquiring new businesses or divesting existing operations.
Climate change is a long-term risk associated with high uncertainty regarding timing, scope and severity of potential impacts. Climate risks can be grouped into physical risks and transition risks. Physical risks relate to losses from overall climate changes (i.e. changing weather patterns and sea level rise) and acute climate events (i.e. extreme weather and natural disasters). These physical risks impact property & casualty (P&C) insurance, but also life insurance, for instance through higher than expected mortality rates. Losses can also follow from credit risk and collateral linked to the mortgage portfolio. Aegon is exposed to mortality risk and mortgage underwriting
risks and has limited exposure to P&C risk, including catastrophic risk. Beyond insured losses, climate change may have disrupting and cascading effects on the wider economy. Transition risks are those arising from the shift to a low-carbon economy. These risks are a function of policy and regulatory uncertainty, including political, social and market dynamics and technological innovations. Transition risks can affect the value of assets and investments portfolios. Furthermore, it cannot be ruled out that Aegon itself is unable to adjust to environmental and sustainability goals. Linked to both the physical and the transition risks, there could also be litigation and reputational risks following from not fully considering or responding to the impacts of climate change, or not providing appropriate disclosure of current and future risks. The risks can relate both to Aegon and the companies in which it invests.
More details on Aegon’s responsible investment and climate change activities can be found in the strategy and TCFD sections of this annual report.
Aegon has devoted significant resources to the implementation and maintenance of a comprehensive enterprise risk management framework in all aspects of the business. Nevertheless, its risk measurements make use of historic and public data that may be inaccurate or may not predict future exposures. Further, operational and legal risks involve high volumes of transactions and are affected by frequent changes in Aegon’s businesses and their environments, and the risk management framework may not evolve at the same pace. As a result, there is a chance that risks present in its business strategies and initiatives may not be fully identified, monitored and managed.
Any failure of or gap in the systems and processes necessary to support complex transactions and avoid systems failure, fraud, information security failures, processing errors, cyber intrusion, loss of data and breaches of regulation may lead to a materially adverse effect on Aegon’s results of operations and corporate reputation. In addition, Aegon must commit significant resources to maintain and enhance its existing systems in order to keep pace with applicable regulatory requirements, industry standards and customer preferences. If Aegon fails to maintain secure and well-functioning information systems, Aegon may not be able to rely on information for product pricing, compliance obligations, risk management and underwriting decisions. In addition, Aegon cannot assure investors or consumers that interruptions, failures or breaches in security of these processes and systems will not occur, or if they do occur, that they can be timely detected and remediated. The occurrence of any of these events may have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
Aegon relies heavily on computer and information systems and internet and network connectivity to conduct a large portion of its business operations. This includes the need to securely store, process, transmit and dispose of confidential information, including personal information, through a number of complex systems. In many cases this also includes transmission and processing to or through commercial customers, business partners and third-party service providers. The introduction of new technologies, computer system failures, cyber-crime attacks or security or data privacy breaches may materially disrupt Aegon’s business operations, damage
Large, global financial institutions such as Aegon have been, and will continue to be subject to information security attacks for the foreseeable future. The nature of these attacks will also continue to be unpredictable, and in many cases may arise from circumstances that are beyond Aegon’s control. If Aegon fails to adequately invest in defensive infrastructure, timely response capabilities, technology and processes or to effectively execute against its information security strategy, it may suffer material adverse consequences.
Modelling risk Inaccuracies in econometric, financial or actuarial models, or differing interpretations of underlying methodologies, assumptions and estimates, could have a significant adverse effect on Aegon’s business, results of operations and financial condition.
Aegon uses econometric, financial and actuarial models to measure and manage multiple types of risk, to price products and to establish and assess key valuations and report financial results. All these functions are critical to Aegon’s operations. Aegon has a model risk management framework in place to manage modelling risk. If, despite this framework, models, their underlying methodologies, assumptions and estimates, or their implementation and monitoring prove to be inaccurate, this could have a adverse effect on Aegon’s business, financial condition and results.
Many of Aegon’s business units offer investment products that utilize quantitative models, algorithms or calculations that could experience errors or prove to be incorrect, incomplete or unsuccessful resulting in losses for clients who have invested in such products and possible regulatory actions and/or litigation against Aegon and/or its affiliates.
Models can be predictive in nature. The use of predictive Models has inherent risks. For example, such Models may incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis. In addition, in unforeseen or certain low-probability scenarios (often involving a market disruption of some kind), such Models may produce unexpected results, which can result in losses for an investment product. Furthermore, the success of relying on or otherwise using Models depends on a
Third Party risk Issues with third party providers (outsourcing partners and suppliers)‍, including events such as bankruptcy, disruption of services, standards of service level agreements not upheld may adversely impact Aegon’s operational effectiveness and financial condition
th er n o n -fin an cial in fo rm atio n other confidential information that is accessible to, or in the possession of, Aegon, its systems, employees and business partners. It is possible that an Aegon employee, business partner or system could, intentionally or unintentionally, inappropriately disclose or misuse personal or confidential information. Aegon’s data or data in its possession could also be the subject of an unauthorized information security attack. If Aegon fails to maintain adequate processes and controls or if Aegon or its business partners fail to comply with relevant laws and regulations, policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of personal information or other confidential information could occur. Such control inadequacies or non-compliance could cause disrupted operations and misstated or unreliable financial data, materially damage Aegon’s reputation or lead to increased regulatory scrutiny or civil or criminal penalties or litigation, which, in turn, could have a material adverse effect on Aegon’s business, financial condition and results of operations. In addition, Aegon analyses personal information and customer data to better manage its business, subject to applicable laws and regulations and other restrictions. It is possible that additional regulatory or other restrictions regarding the use of such techniques may be imposed. Additional privacy and information security obligations have been imposed by various governments with jurisdiction over Aegon or its subsidiaries in recent years, and more such obligations are likely to be imposed in the near future across Aegon's operations. Such restrictions and obligations could have material impacts on Aegon’s business, financial conditions and/or results of operations.
Prudential regulatory requirements may not only apply to the individual entities in the Aegon Group but may additionally apply at Group level or apply to part of the Group. Consequently, those requirements may have different, and more or less meaningful, impact depending on their scope. Important examples of such requirements are Solvency II group supervision and consolidated requirements resulting from the Capital Requirements Directive (CRD) and the Capital Requirements Regulation (CRR), as applied to groups containing bank and/or asset management activities.
II group calculation, Aegon applies a specific methodology for its US insurance and reinsurance subsidiaries at Group level, in addition to the requirements to which these subsidiaries are subject under their local prudential regime. This methodology is approved by Aegon’s group supervisor, De Nederlandsche Bank N.V. (DNB), but remains subject to annual review. Changes to this methodology
Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), which may lead to regulations that could increase capital needs for Internationally Active Insurance Groups such as Aegon, and other requirements that would not be applicable to all (re)insurance companies and as a result distort a level playing field;  A further review of the Solvency II framework, referred to as the Solvency II 2020 review that has recently commenced. EIOPA has recently published an extensive draft technical advice on a broad range of topics within the Solvency II framework, for consultation among stakeholders. The impact on Aegon’s financial position and results depends on the final technical advice to the European
Group charged with constructing a US group capital calculation (GCC) using an RBC aggregation approach that would be used by regulators as a monitoring tool. The results of the GCC could impact the translation of RBC in the Group capital ratio for the
United States; and  US state insurance regulators’ perspectives on the use and value of captive insurance companies. Aegon utilizes affiliated captive insurance companies to manage risks of various insurance policies issued before the adoption of principle-based reserves, including universal life with secondary guarantees and level term life insurance. These structures have been utilized to finance certain regulatory reserves at a lower cost. To the extent that state insurance regulations restrict or require insurers to restate the valuation of the assets used to finance these structures, this could increase costs or reduce capital.
Changes in accounting standards may affect Aegon´s reported results, shareholders´ equity and dividend.
The Dutch Act on Recovery & Resolution for Insurers (‘R&R Act’) allows DNB to intervene in situations where a Dutch insurer or reinsurer is faced with financial difficulties. The powers under the R&R Act may also extend to the level of the Group and to entities, other than insurance or reinsurance entities in the Netherlands, which are part of the Group, such as Aegon N.V.
In addition, the R&R Act allows DNB to require a Dutch insurance or reinsurance company or a group to remove, ex ante, material 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 use of this tool may adversely affect Aegon’s business, results of operations and financial position.
Furthermore, to parts of the Aegon Group, in particular Aegon Bank N.V., the framework of the EU Directive on the recovery and resolution of credit institutions and investments firms (the ‘Bank Recovery and Resolution Directive’) is applicable. The Bank Recovery and Resolution Directive contains provisions that, in certain specific circumstances, where both Aegon Bank N.V. and Aegon N.V. fail or are likely to fail, could be applied to mixed financial holding companies such as Aegon N.V., including the right of bail-in of creditors.
Lastly, when the stability of the financial system is threatened by the situation of a financial institution the Dutch Minister of Finance may intervene immediately, in which case legal or statutory provisions, applicable to the financial institution, might be surpassed.
The intervention measures available to the Minister of Finance include, in particular, the right to expropriate assets of the financial institution, as well as securities and/or other financial instruments issued by or with the cooperation of the financial instruments.
The exercise of this power may significantly impact the rights of the owners or holders of these assets, securities and/or financial instruments.
The United Kingdom (UK)‍ leaving the European Union ('Brexit')‍ may affect Aegon’s results and financial condition.
should 'Brexit' result in the UK moving away from agreed and implemented EU legislation like, but not limited to, Solvency II regulations and financial services legislation.
Aegon faces significant risks of litigation as well as regulatory investigations and actions relating to its and its subsidiaries' businesses as well as Aegon’s compliance with regulations applicable to it as a corporate entity.
The existence of potential claims may remain unknown for long periods of time after the events giving rise to such claims. Determining the likelihood of exposure to Aegon and the extent of any such exposure may not be possible for long periods of time after Aegon becomes aware of such potential claims. Litigation exposure as well may develop over long periods of time; once litigation is initiated, it may be protracted and subject to multiple levels of appeal, which can lead to significant costs of defense, distraction, and other constraints.
This court decision has been appealed by both parties. Aegon expects the claims and litigation, whether collective or on an individual basis and in court or through alternative dispute resolution mechanisms, on unit linked products to continue for the foreseeable future.
Developments in similar cases against other Dutch insurers currently before regulators and courts may also affect Aegon.
Allegations include, among other things, a lack of a proper license of the brokers involved. In October 2017, the district court of The Hague ruled in favor of Aegon that the Sprintplan liability had been conclusively determined in earlier proceedings and there were no grounds to hold further collective proceedings. The plaintiff appealed. In February 2020, the Court of Appeal rejected all claims filed by platform Aandelenlease against Aegon Bank. Platform Aandelenlease may appeal in cassation against this ruling.
Financiële Dienstverlening’), with numerous cases having been initiated by Leaseproces B.V., a company that represents a large number of claimants.
Aegon is involved, refer to the notes to the consolidated financial statements, note 45 ‘Commitments and contingencies’
Aegon’s regulated businesses, such as insurance, banking and asset management, are subject to comprehensive regulation and supervision. The primary purpose of such regulation is to protect clients of these operating companies (e.g. policyholders), rather than holders of Aegon shares, capital securities and debt instruments. Changes in existing laws and regulations may affect the way in which Aegon conducts its businesses, the profitability of its businesses and the products it offers. Additionally, the laws or regulations adopted or amended from time to time may impose greater restrictions on Aegon’s financial flexibility and operations or may result in higher costs to operate than currently is the case, including but not limited to financial and accounting requirements; information security, data privacy, transfer, storage, and usage requirements; modeling and other actuarial requirements and standards; investments, reserves, and financial management.
Aegon may not be able to comply fully with, or obtain appropriate exemptions from, the wide variety of laws and regulations applicable to its businesses and legal entities. Failure to comply with or to obtain appropriate exemptions under any applicable laws and regulations may result in restrictions on Aegon’s ability to do business in one or more of the jurisdictions in which Aegon operates and may result in fines and other sanctions, which may have a materially adverse effect on Aegon’s businesses, financial position or results of operations.
Regulatory changes include preventive and corrective supervisory measures that aim to address macro-prudential concerns, referred to in the Holistic Framework for Systemic Risk in the Insurance Sector, as adopted by the IAIS in November 2019. Aegon was designated a Global Systemically Important Insurer (G-SII) by the FSB in 2015. The FSB, in consultation with the IAIS, has decided to suspend G-SII identification as from the beginning of 2020 and in November 2022 will, based on the initial years of implementation of the holistic framework, review the need either to discontinue or re-establish an annual identification of G-SIIs.
Aegon’s ability to pay dividends or repurchase its own shares. Furthermore, such requirements may constrain Aegon’s ability to provide guarantees and increase the cost to Aegon of offering certain products resulting in price increases, discontinuance of offering of certain products or reducing the amount of risk Aegon takes on. Aegon may consider structural and other business alternatives in light of requirements or standards applicable with respect to systemic entities or activities, of which the impact on shareholders cannot be predicted.
On June 5, 2019, the SEC adopted Regulation Best Interest (Regulation BI), a new rule requiring broker-dealers and investment advisers to only recommend financial products to their customers that are in their customers best interest, and to clearly identify any potential conflicts of interest and financial incentives the broker-dealer may have in connection with the sale of such products. In addition, since the Department of Labor (DOL) Fiduciary Rule was vacated in July 2018, several states have moved forward with developing their own similar rules and proposals, which in some instances substantially broaden the standard of care traditionally owed by broker-dealers and/or insurance agents to their clients.
The foregoing regulations and proposed regulations, along with any future regulations by the states that impose new, heightened, conflicting or differing standards of care or restrictions on broker-dealers, insurance agents, or advisers, could have a material impact on annuity sales and, as applicable, life insurance sales.
Aegon is subject to the substance and interpretation of tax laws in all countries in which Aegon operates or invests. The majority of tax risks relate to both Aegon's products and its businesses, that would materialise due to changes in (i) tax laws, (ii) interpretation of tax laws, (iii) later jurisprudence or case law, or (iv) the introduction of new taxes or tax laws. These tax risks include for example the risk of changes in tax rates, changes in loss carry-over rules and changes in customer taxation rules.
Most of Aegon’s insurance products enjoy certain policy holder tax advantages. This permits, for example, the build-up of earnings on gross premium amounts with deferred taxation, if any, when the accumulated earnings are actually paid to our customers.
Legislators have, from time to time, considered possible legislation that may make Aegon’s products less attractive to consumers, including legislation that would reduce or eliminate this deferral of taxation. This may have an impact on insurance products and sales.
Overall, tax risks may have a materially adverse effect on Aegon’s businesses, profits, capital and financial condition.
There is no treaty between the United States and the Netherlands providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Judgments of US courts, including those predicated on the civil liability provisions of the US federal securities laws, may not be enforceable in Dutch courts. Therefore, Aegon’s investors that obtain a judgment against Aegon in the United States may not be able to require Aegon to pay the amount of the judgment unless a competent court in the Netherlands gives binding effect to the judgment, or, if possible, the US investor has brought a successful original action in a Dutch court.
Aegon recognizes that the reform of IBORs (Interbank Offered Rates) and any transition to replacement rates entail risks for all our businesses across our assets and liabilities. These includes, but are not limited to:  Legal risks, as Aegon is required to make changes to documentation for new and existing transactions, such as funding instruments issued with an IBOR reference and derivatives held with an IBOR reference;  Financial risks, arising from any changes in the valuation of financial instruments linked to benchmark rates, such as derivatives and floating rate notes, issued by, or invested in by Aegon;  Pricing risks, as changes to benchmark indices could impact pricing mechanisms on some funding instruments or investments;  Operational risks, due to the potential requirement to adapt informational technology systems, trade reporting infrastructure and operational processes; and  Conduct risks, relating to communication with potential impact on Aegon’s customers, and engagement during the transition period.
Aegon’s ability to compete. As a result of any proceeding in which Aegon would have to defend itself against a claim of infringement of a third-party's intellectual property, Aegon may be required to pay damages and provide injunctive relief, which may have a materially adverse effect on Aegon’s businesses, results of operations and financial condition.
In the UK and the Netherlands, Aegon maintained a limited number of plans that are reportable under Section 219. The non-US based subsidiaries of Aegon N.V. do operate in compliance with applicable laws and regulations of the jurisdictions where they conduct business.
List (‘FSE List’) with Regard to Syria and is listed on the SDN and Blocked Persons List. The FSE List includes persons sanctioned pursuant to E.O. 13608 and are identified with the program tags [FSE-IR] and [FSE-SY]. The customer is not subject to sanctions in the Netherlands or EU.
Property, plant and equipment Aegon owns 10 offices located throughout the United States with a total square footage of 1.2 million. Aegon also leases space for various offices located throughout the United States under long-term leases with a total square footage of 1.3 million.
Aegon’s principal offices in the United States are located in Denver, CO; Cedar Rapids, IA; Atlanta, GA; Baltimore, MD; Harrison, NY, and Plano, TX.
The offer and listing The principal market for Aegon’s common shares is Euronext Amsterdam, where they are listed under the symbol ‘AGN’.
A break-down of the number of employees is provided below: Southern and Eastern Europe 2,853 2,837 2,947
Of which Aegon's share of employees in joint ventures and associates 5,162 6,854 6,497
Conditions under which meetings are held Annual General Meetings and Extraordinary General Meetings of Shareholders shall be convened by public notice. Notice must be given no later than 42 days prior to the date of the meeting. The notice must contain a summary agenda and indicate the place where the complete agenda together with the documents pertaining to the agenda may be obtained. The agenda is also sent to shareholders registered with the Company Register. New York Registry shareholders or their brokers receive a proxy solicitation notice.
Limitation on the right to own securities There are no limitations, either under the laws of the Netherlands or in Aegon’s Articles of Association, on the rights of non-residents of the Netherlands to hold or vote Aegon common shares or common shares B.
Taxation This chapter contains the following two sections: i Dutch tax consequences to holders of shares ii United States tax consequences to holders of shares i Dutch tax consequences to holders of shares The following section outlines certain material Dutch tax consequences of the acquisition, holding, redemption and disposal of Aegon common shares, but does not purport to be a comprehensive description of all Dutch tax considerations that may be relevant. This section is intended as general information only and each prospective investor should consult a professional tax advisor with respect to the tax consequences of an investment in Aegon common shares.
iii. Corporate holders of Aegon common shares, the shareholding of which qualifies for the participation exemption
v. Persons to whom the Aegon common shares and the income from the Aegon common shares are attributed based on the separated private assets (afgezonderd particulier vermogen) provisions of the Dutch Income Tax Act 2001 (Wet inkomstenbelasting 2001).
viii. Individuals to whom Aegon common shares or the income therefrom are attributable to employment activities which are taxed as employment income in the Netherlands.
Dividend withholding tax Withholding requirement Aegon is required to withhold 15% Dutch dividend withholding tax in respect of dividends paid on its common shares. Dutch dividend withholding tax will be withheld from the gross dividends paid on the Aegon common shares. In the Dutch Dividend Withholding Tax Act 1965 (Wet op de dividendbelasting 1965), dividends are defined as the proceeds from shares, which include: i. Direct or indirect distributions of profit, regardless of their name or form.
Residents of the Netherlands If a holder of Aegon common shares is a resident, or deemed to be a resident of the Netherlands for Dutch corporate or individual income tax purposes, Dutch dividend withholding tax which is withheld with respect to proceeds from Aegon common shares will generally be creditable for Dutch corporate income tax or Dutch income tax purposes.
Non-residents of the Netherlands If a holder of Aegon common shares is a resident of a country other than the Netherlands and if a treaty for the avoidance of double taxation with respect to taxes on income is in effect between the Netherlands and that country, and such holder is a resident for the purposes of such treaty, such holder may, depending on the specific terms of that particular treaty, qualify for full or partial relief at source or for a refund in whole or in part of the Dutch dividend withholding tax.
Furthermore, a similar refund of Dutch dividend withholding tax may be available to an entity resident in another country, under the additional conditions that:  The Aegon common shares are considered portfolio investments for purposes of article 63 (taking into account article 64) of the
Treaty on the functioning of the European Union; and  The Netherlands can exchange information with this other country in line with the international standards for the exchange of information.
A (partial) refund of Dutch dividend withholding tax is available to a holder of Aegon common shares resident in another EU member state, Norway, Iceland or Liechtenstein if:  This holder of Aegon common shares is not subject to Dutch individual income tax or Dutch corporate income tax with respect to the income from the Aegon common shares;  Such Dutch dividend withholding tax is higher than the Dutch individual income tax or Dutch corporate income tax would have been had this holder of Aegon common shares been tax resident in the Netherlands, after taking into account a possible refund based on the Dutch Dividend Withholding Tax Act 1965 or a refund based on a treaty for the avoidance of double taxation with respect to taxes on income;  No credit based on a treaty for the avoidance of double taxation with respect to taxes on income is granted in the state in which the holder of Aegon common shares is tax resident, for the full amount of Dutch dividend withholding tax withheld; and  This holder of Aegon common shares does not have a similar function as an investment institution (fiscale beleggingsinstelling) or exempt investment institution (vrijgestelde beleggingsinstelling).
Furthermore, a similar refund of Dutch dividend withholding tax may be available to a holder of Aegon common shares resident in another country, under the additional conditions that:  The Aegon common shares are considered portfolio investments for purposes of article 63 (taking into account article 64) of the
If an individual is a resident or deemed to be a resident of the Netherlands for Dutch individual income tax purposes, income derived from Aegon common shares and gains realized upon the redemption or disposal of Aegon common shares are taxable at progressive rates (at up to a maximum rate of 49.5%) under the Dutch Income Tax Act 2001if: i. The individual is an entrepreneur (ondernemer) and has an enterprise to which Aegon common shares are attributable or the individual has, other than as a shareholder, a co-entitlement to the net worth of an enterprise (medegerechtigde), to which enterprise Aegon common shares are attributable; or ii. Such income or gains qualify as income from miscellaneous activities (resultaat uit overige werkzaamheden), which includes but is not limited to activities with respect to Aegon common shares that exceed regular, active portfolio management (normaal, actief vermogensbeheer).
Non-residents of the Netherlands If a person is neither a resident nor is deemed to be a resident of the Netherlands for Dutch corporate income tax purposes, such person is not subject to Dutch corporate income tax in respect of income derived from Aegon common shares and gains realized upon the redemption or disposal of Aegon common shares, except if the person is not an individual and: 1 has an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands to which permanent establishment or a permanent representative Aegon common shares are attributable, or 2 other than by way of securities, is entitled to a share in the profits of an enterprise or a co-entitlement to the net worth of an enterprise, which is effectively managed in the Netherlands and to which enterprise Aegon common shares are attributable.
at the time of the gift or his or her death. A gift made under a condition precedent is for the purposes of the Dutch Gift and Inheritance
Tax Act 1956 deemed to be made at the time the condition precedent is fulfilled and is subject to gift tax if the donor is, or is deemed to be, a resident of the Netherlands at that time.
A holder of Dutch nationality is deemed to be a resident of the Netherlands for the purposes of the Dutch Gift and Inheritance Tax Act 1956 if he or she has been resident in the Netherlands and dies or makes a gift within ten years after leaving the Netherlands. A holder of any other nationality is deemed to be a resident of the Netherlands for the purposes of the Dutch Gift and Inheritance Tax Act 1956 if he or she has been resident in the Netherlands and makes a gift within a twelve-month period after leaving the Netherlands.
(including secondary market transactions) in certain circumstances. However, the FTT proposal remains subject to negotiation between participating Member States and is subject to legal challenge. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate. Prospective holders of Aegon common shares are advised to seek their own professional advice in relation to the FTT.
Further, this section does not address alternative minimum tax consequences or the indirect effects on the holders of equity interests in a holder of common shares. This section also does not describe any tax consequences arising under the laws of any taxation jurisdiction other than the Federal income tax laws of the US Federal government.
 A trust, if a court within the United States is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of the substantial decisions of such trust.
A non-US holder is a beneficial owner of common shares that is neither a US holder nor an entity treated as a partnership for
Distributions The gross amount of any distribution (including any amounts withheld in respect of Dutch withholding tax) actually or constructively received by a US holder with respect to common shares will be taxable to the US holder as a dividend. Such dividends will not qualify for the dividends received deduction otherwise allowable to corporations. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution.
In addition, US holders receiving dividends may be subject to a net investment income tax (NIIT). The NIIT is a 3.8% tax on the lesser of net investment income or the amount of modified adjusted gross income (MAGI) that is over a threshold amount based on filing status (USD 250,000 for married taxpayers filing jointly). Each US holder should consult their tax advisor regarding applicability of the NIIT.
Dividends received by a US holder with respect to common shares will be treated as foreign source income for foreign tax credit limitation purposes. Subject to certain conditions and limitations, any Dutch income tax withheld on dividends may be deducted from taxable income or credited against a US holder’s Federal income tax liability. The limitation on foreign taxes eligible for the US foreign tax credit is calculated separately with respect to 'passive category income' and 'general category income'. Dividends distributed by Aegon generally will constitute 'passive category income', or, in the case of certain US holders, 'financial services income', which is treated as general category income. Each US holder should consult their tax advisor regarding the availability of the foreign tax credit under their particular circumstances.
The amount of the qualified dividend income paid by Aegon to a US holder that is subject to the reduced dividend income tax rate and that is taken into account for purposes of calculating the US holder's US foreign tax credit limitation must be reduced by the 'rate differential portion' of such dividend. Each US holder should consult their tax advisor regarding the implications of the rules relating to qualified dividend income on the calculation of US foreign tax credits under their particular circumstances.
In addition, US holders with capital gains may be subject to a NIIT. The NIIT is a 3.8% tax on the lesser of net investment income or the amount that is over a threshold amount based on filing status (USD 250,000 for married taxpayers filing jointly). Each US holder should consult their tax advisor regarding applicability of the NIIT.
in the foreseeable future. The US Treasury Department recently issued proposed regulations (the Proposed Regulations) addressing several PFIC rules whereby a US shareholder in certain non-PFICs may be treated as an indirect shareholder of any PFICs owned by such a non-PFIC. Although the proposed regulations may not be finalized in their current form, a taxpayer is generally permitted to apply these proposed regulations as long as it does so consistently. Aegon does not believe that a US holder would be treated as an indirect shareholder of a PFIC, if any, in which Aegon owns equity. However, this belief would be subject to significant uncertainty if such US holder chose to apply these proposed regulations. Proposed US Treasury regulations in general are subject to substantial review, comment and changes, and it cannot be concluded at this time that the Proposed Regulations will become effective in the form proposed.
CONTENTSCONTENTS Additional information Purchases of equity securities by the issuer and affiliated purchasers
Audit fees consist of fees billed for the annual financial statement audit (including quarterly reviews), subsidiary audits, equity investment audits and other procedures required to be performed by the independent auditor to be able to form an opinion on Aegon’s consolidated financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit or quarterly review. They also include fees billed for other audit services, which are those services that only the external auditor reasonably can provide, and include statutory audits or financial audits for subsidiaries or affiliates of the Company and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
Under the Pre-approval Policy, proposed services either:  May be pre-approved by the Audit Committee without consideration of specific case-by-case services (general pre-approval); or  Require the specific pre-approval of the Audit Committee (specific pre-approval). Appendices to the Pre-approval Policy (that are adopted each year) set out the audit, audit-related, tax and other services that have received general pre-approval of the Audit
For the period 2017 to 2019, all services provided to Aegon by its independent public accountant were pre-approved by the Audit
Customers with two or more products (% of total customers)2) 19% 18% 1 pp NM
Digitally connected customers (% of total customers) 29% 27% 2 pp 25%
Total claims, benefits and plan withdrawals EUR 59.4 billion EUR 53.6 billion 10.7% EUR 48.1 billion
4 This coverage percentage is largely due to the fact that we are not (yet) measuring relation NPS with our customers in our growing joint venture businesses in Brazil, Spain and Portugal.
% of women in senior management 29% 33% (4 pp)‍ 28%
Commissions paid to brokers and other intermediaries EUR 2.4 billion EUR 2.4 billion (0.9%)‍ EUR 2.7 billion
NA – not applicable NM – not measured pp - percentage points
NM – not measured 1 Does not include impact of share buy-backs. Aegon’s final dividend for 2019 is subject to approval by the Company’s Annual General Meeting of Shareholders, due to take place in May 2020. Figures include both interim and final dividends for each year. Calculation reflects IFRS accounting of inventory effects of share repurchases relating dividends paid in stock.
Taxes borne by Aegon EUR 615 million EUR 620 million NA EUR 444 million
Corporate income tax4) EUR 42 million EUR 36 million NA (EUR 173 million)
The Netherlands EUR 32 million EUR 3 million NA EUR 70 million
UK (EUR 9 million) EUR 30 million NA EUR 33 million
NA – not applicable NM – not measured pp - percentage points 1 Figures based on average employee expenses across the Company.
2 Number of hours spent by Aegon employees volunteering on local community projects during the year. 3 Responsible Investment Solutions (RIS) are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending on investors’ strategic goals (Global Impact Investing Network (GIIN)). Two key aspects that differentiate impact investing from the rest of RI strategies: intentionality and measurement.
4 Please note, there is often no direct correlation between tax reported on earnings for any given year and amounts paid or received in tax. Part of the explanation for this is that certain tax-deductible items are not recognized in the Company’s profit & loss statement but directly in equity. Amount paid or received may in part relate to prior years. The US corporate income tax refund is related to refundable minimum tax credits generated in prior years. Furthermore, the 2019 US tax liability will be satisfied entirely by tax credits, including low income housing tax credits.
framework, we no longer use it as a basis of reporting. We are also integrating the Task force on Climate-related Financial
Content and approval All content is based on extensive reporting from Aegon businesses around the world. Content is reviewed by the Company’s Management and Supervisory Boards before publication. Aegon decided not to seek external assurance for the non-financial information in this report. This is to allow further time for improvement in the Company’s non-financial reporting and data collection processes.
Scope and reporting boundaries Non-financial data in this report covers the full-year 2019
(January-December), unless otherwise stated. All necessary notes, explanations and definitions are provided in the text or accompanying tables. The scope of our non-financial reporting is determined by two factors: a) the relative size of our businesses and b) the potential impact on overall Group performance or strategy. Consequently, we focus reporting on our four largest operating segments (Americas, the Netherlands,
Environment Scan’ (BES) process. This scan brings together the former emerging risk process and the materiality assessment as described in Aegon’s Integrated Annual Report 2018.
The aim is to identify topics, including opportunities and new and developing risks, which could have significant impact on value creation and Aegon’s financial strength, competitive position or reputation. The scan is meant to ensure ongoing appropriateness of the risk universe, to ensure completeness of Aegon’s risk assessment and to provide input for ongoing strategy development.
The business environment scan will be performed on a two-yearly basis with annual updates for significant changes.
Outcomes can be used for materiality reporting, as input for Aegon’s strategy process and for possible follow-up in terms of further analysis, tracking or as global project. For our 2019 assessment, the following nine topics were rated as most material: 1 Evolving regulations 2 Changing competitive landscape 3 Data protection and information security 4 Technological developments 5 Data analytics 6 Trade wars, de-globalisation and protectionism 7 Reputation 8 Genomics and underwriting 9 People skills
When Business Environment Scan was conducted in the third quarter of 2019, the risk of pandemic was perceived as remote.
New customers are those who acquired a product or service during the reporting period (and who were not previously customers of the Company). There may be some duplications in markets where we operate under more than one brand. Customers of our joint ventures are included on a 100% basis.
Life-cycle approach These are customers who hold two or more products or policies with the Company; examples include life insurance policies, savings accounts, mortgages, deposits in investment funds, or participation in a corporate pension plan etc. (divided by the total number of customers). There may be some duplications in markets where we operate under more than one brand. Customers of our joint ventures are included on a 100% basis.
Customer centricity (increased employee engagement leading to better customer service and higher customer retention)
Ratio of median to CEO salary ● ● ● ● ● ● ● ●
Commissions paid to brokers and other intermediaries ● ● ● ● ● ● ● ●
% of goods and services spend covered by a Supplier Sustainability Declaration
Greenhouse gas emissions ● ● ● ● ● ● ● ●
Guiding principles Strategic focus and future orientation Value creation (page 13) shows how Aegon’s business model creates value across the five material capitals
Active portfolio management (page 19) explains how Aegon allocates capital to create value in the short, medium and long term
Connectivity of information We identify our material topics (page 16) through our biennial Business Environment Scan; these topics are linked directly to risks and opportunities, both for Aegon’s strategy (page 19) and its stakeholders (page 30)
Conciseness Pages 4-35 are structured around our material topics, the risks, opportunities, strategy and performance associated with these; we have also applied the materiality principle to content (page 416)
Reliability and completeness Basis of preparation – Content and approval (page 416)
Consistency and comparability This Report is prepared in accordance with IFRS standards, as adopted by the European Union, as well as the IIRC framework. We have used the IIRC framework since 2014; this is Aegon's second fully combined Annual Report, but its ninth integrated report. For this Report, while we keep in spirit with the Global Reporting Initiative framework, we are no longer reporting against it. We are making the shift to integrating more material frameworks; like that of the Task force for Climate-related Financial Disclosures (page 421).
1 All page numbers in this table refer to Aegon's 2019 Annual Report, unless otherwise stated. Where there are several examples, we have included principal references only.
Reference tables Reference tables Reference tables  International Integrated Reporting Council (IIRC) framework Reference tables  International Integrated Reporting Council (IIRC) framework
EU Directive on Non-Financial Information The table below shows compliance with EU Directive 2014/95/
Outcome of these policies Non-financial policies, procedures and outcomes (page 86) Aegon: A partner to the world (page 30) includes an in-depth description of outcomes by stakeholder group.
Business Environment Scan (pages 16-18) Risk factors (pages 376-396) Risk management (page 109)
Performance highlights (page 5) Performance in 2019 (page 22) Non-financial policies, procedures and outcomes (page 86)
The present disclosure builds on earlier disclosures made for 2018 and 2017 which can be found in the corresponding
It is made in respect of Aegon N.V. in its multiple roles as: an asset servicer, an insurance provider, and an asset manager.
Governance In 2019, Aegon undertook a review of governance for responsible business and investment at a group level to ensure that the underl ying committees were efficient and effective.
The review identified a need for enhanced coordination and simplified decision making.
Investment Committee (RBIC). The RBIC unifies the function of previous committees to provide an integrated view of responsible business and investment that reports to the Management Board. It meets quarterly and is chaired by the CEO of Aegon Americas (who is also a member of Aegon’s Management Board).
Climate-related issues assessed as relevant or material by the CCWG are presented to the RBIC through regular reporting as well as potentially to Aegon’s Chief Risk Officer and Aegon’s Management Board through the quarterly risk management dashboard. The Management Board may then decide on management actions as appropriate.
investors, but also customers, employees, business partners, and the wider community. Our Responsible Business vision is to provide financial security and well-being for individuals, a thoughtful approach to secure retirement and healthy aging in our society, and make a lasting contribution to a healthy environment.
Risks Aegon undertakes a biennal Business Environment Scan to identify opportunities and risks expected to be of high impact and likelihood to our business.
It should also be noted that the relationship between mortality and morbidity and climate change is complex and the direction of the impact can also vary geographically. Furthermore, it is also expected that climate change will have a relatively lower impact on longevity and health of the insured population compared to the general population as this group is more affluent and expected to be able to better adapt to changing conditions.
 Task Force on Climate-related Financial Disclosures (TCFD)  Task Force on Climate-related Financial Disclosures (TCFD)
In contrast, our investments are exposed to both physical and transition risks. While we expect transition risks to be most salient in the near term, the value of our holdings can reasonably be expected to be influenced by both over time. However scenario analysis has shown that our relatively high allocation to fixed income, including government bonds, should limit our overall exposure.
As one of the largest mortgage providers in the Netherlands, a share of Aegon Netherlands’ assets are directly exposed to the physical consequences of a changing climate. In 2018 the Netherlands experienced record-levels of drought, and at least 1 million homes across 83 municipalities are expected to be at ever increasing risk of subsidence. Aegon’s Financial
Aegon worked with Ortec Finance to perform a systematic climate risk-aware assessment for the general account and insurance-linked assets of Aegon Netherlands.
both transition risks, as well as slow-onset physical risks – across all modelled climate scenarios. This is an important finding as it implies that whichever direction the real world is headed in terms of temperature increases, the Aegon Netherlands portfolio is relatively well positioned to ‘weather the storm’ and/or take advantage of arising opportunities. This is expected to be a result of the high allocation to fixed income, including government bonds
– which is a more robust asset class under a disorderly transition, especially compared to equities or real estate.
It is important to remember that these insights should be viewed within the broader context of climate scenarios and their implications. While the results provide an initial directional signal,
Average change in investment return against climate-uninformed baseline Average change in investment return against climate-uninformed baseline
if society is to achieve the objectives of the Paris Agreement
– while physical risks could onset at any time as global temperatures continue to rise. In this case, continuing to monitor developments in climate science, policy, technology and consumer sentiment is critical for understanding and adapting to the future.
(35 to 45 stocks) global mid-cap growth equity strategy. Detailed sustainability analysis is undertaken as part of the stock picking process which aims to identify and invest in beneficiaries of longterm disruptive sustainability trends. Although the strategy does not employ a thematic approach to investment selection, climate change is naturally an important factor for many of the companies considered; global emissions must peak in the next few years and quickly decline for the world to stay below its Paris Agreement limits which will create risks for some companies but opportunities for others. Current climate-related investments include companies involved in electric vehicle (EV)
manufacturing, battery manufacture and testing, sustainable manufacturing technologies, reverse-vending, building insulation and critical emergency mass communication.
The Aegon Asset Management (AAM) Sustainable Fixed Income strategy was launched in the US to create value by investing in issuers that contribute to a sustainable world and integrate sustainability into their business model. We believe issuers will be rewarded for developing sustainable products and services that help deliver better long term investment performance while improving the sustainability of the global economy and society at large. Organized around 5 themes – climate change, eco solutions, resource efficiency, health and wellbeing, and sustainable growth – green bonds are an innate component of the strategy and decisions are made by a centralized committee who review and discuss potential investments. When reviewing green bonds for potential inclusion in the strategy, we require a high burden of proof from issuers to demonstrate the alignment of proceeds with long term sustainability or climate change objectives.
Netherlands has duty of care. Based on the principals of good stewardship and active ownership, the policies lay out criteria for consideration when making investment decisions along four steps: ESG integration, engagement and voting, exclusion, and reporting. Attention is called to key responsible business topics of importance to Aegon, including climate change, biodiversity, human and labor rights, good governance, and health and wellbeing. Climate-related criteria for screening and engagement includes: measurement and reporting of climate impacts; consideration of transition and/or physical risks; plans and targets to reduce emissions; other sector- or situation-specific topics (e.g. lobbying). The policies also consolidate our approach to climate change-based exclusions. The Aegon N.V. policy considers companies involved in the extraction or promotion of thermal coal as well as those involved in oil sands production.
in a number of collaborative initiatives targeting climate action, including but not limited to: UN Principles for
Chevron. The resolutions called for the companies to disclose their carbon emissions and climate impacts, set goals for the reduction of emissions in line with the objectives of the Paris
Agreement, and to develop strategies to align their activities and investments with a low carbon future. Aegon had previously voted in favor of a similar resolution filed with Shell.
Engagement with policymakers Aegon acknowledges the importance and necessity of government action in addressing climate change. Engagement with policymakers is critical to shaping Aegon’s investment environment, and Aegon works independently and in collaboration with industry groups to engage on key climate issues.
(COP) climate negotiations in Madrid, it reiterated previous calls on governments to step up efforts to tackle the global climate crisis and achieve the goals of the Paris Agreement.
At the European level, Aegon supports the goals of the European
Commission’s Action Plan on Financing Sustainable Growth and recognizes the important role that financial actors play in the transition to a low-carbon economy. Both individually and through trade groups, Aegon’s Government and Policy
Affairs team and climate experts have engaged with officials and contributed to consultations on the corresponding sustainable taxonomy and ESG disclosure regulations, as well as on the incorporation of sustainability risks into the Solvency
Management joined other Dutch financial services groups in committing to help finance the transition to more sustainable and less polluting energy alternatives as part of the National
Climate Agreement (‘Klimaatakkoord’). As an asset owner and insurance company, the agreement commits us to aligning our activities with achieving a 49% reduction in greenhouse gas emissions by 2030 compared to 1990 levels. As an asset manager, the agreement commits us to contribute to meeting the climate goals by supporting our clients in achieving their ambitions and obligations with regard to the climate impact of their investment choices.
UK and Asset Management) have been carbon neutral since 2016 by reducing their facility-level emissions and supporting offset projects in cooperation with the NGO ClimateCare.
Aegon the Netherlands shared their action plan for halving the ecological footprint of the Netherlands-based employees by 2030. It involves five pillars – procurement, building, mobility, management and behavior – and is supported by the introduction of an internal carbon price. Details of the plan are expected to be communicated in 2020.
Investments and Holdings In 2018 we began to measure and report on the carbon footprint of our investments, with a focus on our proprietary investment portfolio in the Netherlands. New for 2019 is the first measurement of our Netherlands mortgage holdings.
Corporate fixed income Weighted average carbon intensity by sector (in %)
R is k e xp o su re s co re
Methodology For corporate equity, fixed income and mortgages, metrics were calculated using the methodology outlined by the Platform
recommendations. Carbon Risk for corporate issues is measured using Sustainalytics Carbon Risk Rating while climate vulnerability for sovereign issues is measured using the Notre
Next Steps Aegon will continue to improve its climate change strategy, governance, and approach to risk and opportunity measurement and implementation in the coming years.
As the Company’s experience with climate issues grows, Aegon will look to increase the breadth of disclosures and further incorporate climate considerations across our business. This is expected to include the extension of climate analysis to non-
1. We will embed in our decision-making environmental, social and governance (ESG) issues relevant to the insurance business.
ESG is integrated in how we operate. In 2019 Aegon set up the Responsible Business and Investment Committee, consisting of selected Management Board members, Chief Investment Officers and other senior managers. They discuss ESG matters related to the business and investing on a quarterly basis, and provide advice to Aegon’s Management Board.
Our public ESG policies and frameworks are available at www.aegon.com. In July 2019, Aegon announced the update of the Inclusion & Diversity statement. Aegon also conducts a biennial Business Environment Scan to identify material ESG topics and issues for our business. This scan brings together the expert driven emerging risk identification process conducted under the requirements of Solvency II and the materiality assessment.
2. We will work together with our clients and business partners to raise awareness of ESG issues, manage risk and develop solutions.
For more information, please see: Responsible business at Aegon - page 24.
This is where, as a company, we can best support the international sustainable development agenda. The choice of these targets is aligned with how we approach responsible business (see page 30). It takes into consideration the nature of our business (as a provider of financial services) and our geographical footprint (as the majority of our businesses are located in developed economies). The table below shows our positive impact on our strategically more relevant SDGs, while also recognizing the positive impact we have on the other twelve goals (at goal level rather than target level).
Contribution to target 1.2 • Products for low-income customers, including micro-insurance in Brazil and low-cost life insurance in Romania (page 24) • Working with customers in financial difficulty – budget coaches in the Netherlands /
cooperation with National Foundation for Credit Counseling in the US (page 24) • Strengthening financial literacy and empowerment through local initiatives and programs, e.g., Start-up Plus (page 26)
Contribution to target 7.2/7.3/7.a • Investments in renewable energy (page 26, 29) • Investments in green bonds (page 26, 29, 423)
• Inclusion of minimum labor standards in Aegon’s responsible investment and procurement policies (page 28, 33, 88, 423) • Inclusion & Diversity-related commitments and actions (page 4, 18, 32, 33, 34, 87) • Equal pay (page 32, 33)
Contribution to target 13.2 • Support for Paris Pledge for Action and Dutch National Climate Agreement, working to reduce carbon emissions (page 26, 426) • Engagement with investee companies on climate-related topic including encouragement to report following TCFD guidelines (page 26, 28) • Exclusion of oil sands extraction and transportation from new investment in the updated
• 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 (page 26, 415, 424)
 UN Sustainable Development Goals (SDG)  UN Sustainable Development Goals (SDG)
• Products to support women suffering from cervical and breast cancer (page 24) • Signatory to Talent to the Top initiative in the Netherlands (page 32) • Local diversity and inclusion initiatives aimed at promoting gender diversity (page 32, 33) • Reporting on gender pay gap in the UK and equal pay study in the Netherlands
• Investment in new, innovative technology companies through Transamerica Ventures and Aegon Growth Capital (page 17, 20)
• Local diversity and inclusion initiatives (page 4, 32-33) • Products for low-income customers (page 24) • Research into longevity, retirement and healthy aging (page 7, 25).
Sustainable cities and communities Make cities and human settlements inclusive, safe, resilient and sustainable
• Significant investments in social /affordable housing in US and Netherlands (page 29)
• Exclusion of controversial weapons from investment (page 88) • Internal policies and guidelines covering bribery, corruption and money laundering
• Signatories to UN Principles for both Responsible Investment and Sustainable Insurance (pages 7, 424, 427)
• Aegon has 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 Development (page 25, 427)
International Responsible Business Conduct Agreement (IRBC Agreement)‍ In July 2018, Alex Wynaendts signed a statement of intent for Aegon NV to promote and act on the values of the Dutch
In 2019 Aegon continued to support the intentions of the covenant by recognizing the importance of the international guidelines which are fundamental to it. Aegon’s updated
Aegon publicly expressed its views on climate change by, amongst others, calling upon policy and law makers to implement zero emissions targets. For further details on Aegon’s commitment to mitigating the impacts of climate change, please see our Task Force on Climate-related Financial
Alt-A mortgages relates to a type of US residential mortgage which are securitized home equity loans. Typical Alt-A borrower has a credit score high enough to obtain an: ‘A’ standing.
Aggregation is the methodology by which capital requirements are calculated across different risk groupings, allowing for diversification benefit between the groupings.
Asset-Backed Securities (ABS)‍ are securities whose value and income payments are derived from and collateralized (or ‘backed’)
Capitalization is the recognition of a cost as part of the cost of an asset on the statement of financial position.
Commercial Mortgage-Backed Securities (CMBS)‍ is a type of mortgage-backed security that is secured by the loan on a commercial property.
Deferred Policy Acquisition Cost (DPAC)‍ - are the variable costs related to the acquisition or renewal of insurance contracts and investment contracts with discretionary participation features.
Derivatives are financial instruments whose value changes in response to an underlying variable, that often require little or no net initial investment and are settled at a future date.
Excess cash in the holding, which is rather a measure of Holdings liquidity, can be defined as the sum of the Holding company assets, less capital investments, less matched short term assets, less other adjustments. Management of excess cash in the holding is based on a similar approach as the management of the Group and Local Unit capitalization, using a range approach and a ladder of intervention to trigger timely conversations and escalating management actions.
Financial liability is any liability that is:  A contractual obligation to deliver cash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the entity; or  A contract that will or may be settled in the entity’s own equity instruments; and is  A non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or  A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.
Guaranteed minimum death benefits are benefits that guarantee that the beneficiary, as named in the contract, will receive a death benefit if the annuitant dies. The benefit received differs among contracts and may be greater than the current account value.
Insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party
(the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.
Matching adjustment will adjust the discount rate applied in the valuation of predictable liabilities which are cash flow matched using fixed income assets. The predictability of the portfolio means that matching assets can be held to maturity and that the insurer is consequently not exposed to price movements, only to the risk of default.
Technical Provisions under Solvency II. This is the threshold of which below local regulators would intervene.
Qualifying insurance policies are a component of plan assets. These are insurance policies issued by an insurer that is not a related party of the reporting entity, if the proceeds of the policies:  Can be used only to pay or fund employee benefits under a defined benefit plan; and  Are not available to the reporting entity’s own creditors.
Recognition is the process of incorporating in the statement of financial position or income statement an item that meets the definition of an element and satisfies the following criteria for recognition:  It is probable that any future economic benefit associated with the item will flow to or from the entity; and  The item has a cost or value that can be measured with reliability.
Residential Mortgage Backed Security (RMBS)‍ is an assetbacked security that is secured by a residential mortgage or collection of residential mortgages.
Solvency II is the supervisory regime introduced per January 1, 2016 and consist of a programme of prudential regulations of European insurance legislation, which vary in severity depending on the riskiness and diversity of an insurer’s business.
The Solvency II programme is divided into three areas: Pillar 1 lays out quantitative requirements for the amount of capital an insurer should hold; Pillar 2 covers governance and risk management of insurers; and Pillar 3 addresses transparency, reporting and public disclosure.
II. The SCR incorporates risks such as non-life underwriting, life underwriting, health underwriting, market, credit, operational and counterparty risks, and must be recalculated at least once per year.
Trust Pass-Through securities (TRUPS)‍ are securities through which the holders participate in a trust. The assets of these trusts consist of debentures issued by an Aegon Group company.
II supervisory regime. The adjustment has the effect of stabilizing the capital resources of insurers and will be calculated by EIOPA.
Forward-looking statements The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private
Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:  Changes in general economic and/or governmental conditions, particularly in the United States, the Netherlands and the
Netherlands, the United Kingdom and emerging markets;  Catastrophic events, either manmade or by nature, including by way of example acts of God, acts of terrorism, acts of war and pandemics, could result in material losses and significantly interrupt Aegon’s business;  The frequency and severity of insured loss events;  Changes affecting longevity, mortality, morbidity, persistence and other factors that may impact the profitability of Aegon’s insurance products;  Aegon’s projected results are highly sensitive to complex mathematical models of financial markets, mortality, longevity, and other dynamic systems subject to shocks and unpredictable volatility. Should assumptions to these models later prove incorrect, or should errors in those models escape the controls in place to detect them, future performance will vary from projected results;  Reinsurers to whom Aegon has ceded significant underwriting risks may fail to meet their obligations;  Changes in customer behavior and public opinion in general related to, among other things, the type of products Aegon sells, including legal, regulatory or commercial necessity to meet changing customer expectations;  Customer responsiveness to both new products and distribution channels; Aegon Integrated Annual Report 2019
 As Aegon’s operations support complex transactions and are highly dependent on the proper functioning of information technology, operational risks such as system disruptions or failures, security or data privacy breaches, cyberattacks, human error, failure to safeguard personally identifiable information, changes in operational practices or inadequate controls including with respect to third parties with which we do business may disrupt Aegon’s business, damage its reputation and adversely affect its results of operations, financial condition and cash flows;  The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including
Aegon’s ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions;  Aegon’s failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving and excess cash and leverage ratio management initiatives;  Changes in the policies of central banks and/or governments;  Litigation or regulatory action that could require Aegon to pay significant damages or change the way Aegon does business;  Competitive, legal, regulatory, or tax changes that affect profitability, the distribution cost of or demand for
European monetary union in whole or in part, or the anticipated exit of the United Kingdom from the European
This document contains information that qualifies, or may qualify, as inside information within the meaning of Article 7(1)