December 31, 2019. Aegon’s aim in producing this report is to provide a clear, balanced overview of the Company’s operations, strategy and performance. In this report, we look at the trends and challenges our business is facing, at our strategy, at how we create and share value – and at how we safeguard this value through a responsible approach to our business. This report also contains the 2019 consolidated financial statements and
Council (IIRC) framework. This report also conforms to relevant reporting requirements under the Dutch Corporate Governance
Aegon: A global provider of financial solutions 10 Aegon today 11 Aegon’s markets 11 Aegon’s products and services 11 Diversified distribution channels 12 Sources of revenues and earnings 12 Ownership 12 Capital position
Aegon’s strategy 19 Aegon’s purpose 19 Active portfolio management 19 Focused on profitable growth 20 Investing in the future 20 Seeking meaningful customer relationships 20 Looking forward 22 Performance in 2019
Responsible business 24 Our approach 24 Individual 25 Society 26 Environment
Safeguarding value creation 36 Corporate governance 41 Composition of the Boards 46 Report of the Supervisory Board 54 Remuneration Report 86 Non-financial policies, procedures and outcomes 89 Code of Conduct 90 Regulation and supervision 96 Capital and liquidity management 105 Asset liability management 107 Reinsurance ceded 109 Risk management 116 In control statement 118 Controls and procedures
2019: A year of progress In 2019, Aegon continued its realignment for growth, launched new propositions, further improved customer service, and made important executive management appointments to guide us into our next phase of development. We set ambitious 3-year financial targets. Milestone moments included: February Aegon set new financial targets for 2019-2021 focused on growing capital generation and dividends.
March Transamerica announced agreement with LTCG for administration of long-term care insurance.
Maarten Edixhoven appointed to the Management Board as of October 2019.
Transamerica named one of the best 100 companies in the US for working mothers and enters Diversity Best
October Aegon the Netherlands reorganized itself to become a more agile company to improve effectiveness and efficiency of service delivery.
Wellauer will be proposed to join Aegon’s Supervisory Board at the AGM in May 2020.
December Aegon Asset Management announced realignment of its organization as a truly global asset manager set up for future growth.
Aegon reinsured about one quarter of its longevity exposure in the Netherlands with Canada Life Reinsurance.
CONTENTS 2019: A year of progress 2019 At a glance 2019: A year of progress 2019: A year of progress
Employee engagement score 1 % of normalized capital generation. 2 After holding expenses.
O th er n o n -fin an cial in fo rm atio n
Alex Wynaendts CEO Aegon 2019 was a special year in which we marked Aegon’s 175th anniversary. Throughout all of these years, and despite many changes inside and outside our organization, we have remained strongly committed to our purpose of helping people achieve a lifetime of financial security.
Looking back at 2019 Aegon operated in a challenging environment in 2019, with persistent low interest rates in our key markets negatively impacting underlying earnings. We also experienced net outflows in our US retirement and annuity businesses. As a result we achieved a return on equity of 9.5%, below our target of 10%.
However, we increased our normalized capital generation which, combined with a number of management actions we have taken, enabled us to maintain a strong capital position.
Aegon’s structure and adopting an even more proactive approach to managing our portfolio of businesses.
We announced in February 2019 that we were grouping our businesses into three strategic categories – Manage for Value,
Drive for Growth, and Scale-up for Future. The categories recognize the different maturities, varying growth dynamics and capital generation patterns of our businesses – and the need to manage them in distinct ways.
In this category, we have, for instance, accelerated the release of capital from our mature businesses in the Netherlands by reinsuring a quarter of our longevity risk. In the Netherlands we also moved from a defined benefit plan to a defined contribution plan for new pension accruals of Aegon’s own employees. This switch reduces volatility in Aegon’s pension expenses and helps to protect our capital position.
Accident & Health sales, as well as gross deposits. We also continued to make investments to improve our customer experience and increase retention rates, in particular in our
Eastern Europe. This new division is designed to accelerate growth and further leverage cross-border synergies by developing new business models and realizing operational efficiencies.
Investing in the future Looking ahead, the macroeconomic environment as a whole remains uncertain. And, at the time of writing this letter in March 2020, the full impact from the coronavirus outbreak is not yet clear. We are, however, seeing disruption to the global financial market as both stock markets and interest rates have declined significantly. We have taken the necessary measures aiming to provide for the safety and the wellbeing of our colleagues and customers around the world.
In order to keep Aegon future ready and be able to quickly adjust to changing circumstances, we keep transforming our organization and make investments to become increasingly innovative, customer-centric and data-driven. These investments contribute towards more of our employees becoming aware of digital opportunities, with training programs geared towards knowledge building in data and analytics. Over a thousand
Responsible business We take our responsibility to society seriously and it is a good sign that Aegon’s voice is increasingly being heard on issues subject to public debate. During 2019, we re-examined our approach to sustainability, and important social, environmental and economic aspects of our operations.
Goals and continue acting in the spirit of Principles for Responsible investment, to which Aegon Asset Management is a signatory. For example, our updated Responsible Investment Policy – finalized in December 2019 – expands the criteria for excluding companies with coal-related activities from our investments.
Longevity research Healthy aging is at the heart of our business, and Aegon has developed insights into longevity and retirement. These insights are crucial, as government-supported retirement schemes are coming under increasing strain as individuals face more responsibility to safeguard their financial futures. We believe that the solution is a combination of collective action and empowerment. I was honored to deliver this message to the Organization for Economic
Co-operation and Development Forum in May 2019 when presenting our annual Retirement Readiness report, The New Social
Conclusion This is my last contribution to the annual report after twelve years as CEO of Aegon. Looking back over this period, I am proud of what we have achieved together. We have transformed the company and ensured that we can continue to make good on our purpose of helping people achieve a lifetime of financial security long into the future.
I recognize that Aegon’s long-term transformation has at times asked a lot of our investors, as well as our employees. Mindful of everything we have experienced together over the last 12 years, I want to express sincere thanks, also on behalf of the Management Board, to everyone who has contributed to Aegon’s journey, serving millions of customers around the globe.
Societal trends The insurance and pensions industry is being changed fundamentally due to the societal trends and rapid-paced digital innovation impacting our daily lives. People are living longer and face challenges in maintaining their financial security at a time when national social security systems are under increasing strain.
Long-held expectations about well-funded retirement for all are under threat. At the same time, much of our daily transactions and activities now occur in digital form and in the cloud, and innovation is accelerating.
Now, more than ever, people need the right solutions and tools, coupled with an understanding of how to use them, to ensure their financial security.
EUR 2.1 billion in salaries and other benefits in 2019 and we delivered approximately EUR 899 million to investors in dividends and interest payments.
Aegon remain relevant to all our stakeholders and wider society, while growing sustainably. We perform this task by taking the long-term view. The members of the Supervisory Board, who come from a range of industries and disciplines, keep a close eye on today and tomorrow’s trends and have been engaging in productive and insightful dialogues with Aegon’s management.
We did not see the expected growth in earnings and sales in 2019.
Yet, the Supervisory Board was pleased to note that Aegon realized key elements of its transformation strategy to position the Company for long-term value creation. It is encouraging to see how Aegon is bringing innovative solutions to customers in large developing markets such as Turkey, India and China.
Transamerica to accelerate the enhancement of its digital capabilities and the modernization of its platforms to serve all customers. Similarly, the Supervisory Board went to Spain and the Netherlands to evaluate how transformation processes are being implemented in our businesses there and how they impact employees.
Letter from our Supervisory Board Chairman Letter from our Supervisory Board Chairman
Corporate governance The Supervisory Board, supported by its four committees –
Therefore, the Remuneration Committee was involved in a major consultation process with shareholders, proxy advisors and employee representatives in 2019 in regard to amending our remuneration policies for the Executive Board and the Supervisory Board. The amended policies, reflecting both the new Directive and the dialogue with our stakeholders, will be presented for approval at the Annual General Meeting of Shareholders (AGM) in May 2020.
The Remuneration Committee also oversaw the update of Aegon’s Group Global Remuneration Framework and the Remuneration Policy for Material Risk Takers which is designed to limit excessive risk-taking by key employees.
CEO succession An important responsibility for the Supervisory Board is CEO
In conclusion, I would like to compliment all Aegon staff for the commitment they have shown during 2019. I am also grateful to my Supervisory Board colleagues for their ongoing contributions and support. Finally, I invite you all to turn to page 46 of this Integrated Annual Report for a comprehensive report of the Supervisory Board’s priorities and activities during 2019.
Main brands Aegon Australia, China, Hong Kong, Hungary, Indonesia, Japan, the Netherlands, Poland, Romania, Spain, Thailand, Turkey, UK
Joint ventures and associates Brazil, China, France, Hong Kong, India, Indonesia, Japan1,
 Aegon Asset Management operates in the US, the Netherlands, Hungary, Spain, Germany, Hong Kong and Japan, Kames Capital brand in the UK and TKP Investments in the Netherlands will be re-branded to Aegon Asset Management in 2020.  We also operate under several other brands, including: Knab, TKP, Robidus, Cappital and Nedasco (Netherlands); World Financial
Aegon’s markets For 2019, we are continuing to report Aegon’s business by the following reporting segments:  Americas  Europe  Asia  Asset Management (Global)
International has been established to bring together our activities in Southern and Eastern Europe (SEE), and all our
These categories support our systematic and proactive approach of reallocating capital towards attractive and profitable market opportunities.
Company (AIFMC), an asset management joint venture based in Shanghai. We own 49% of the partnership. AIFMC
now has more than EUR 45 billion (at 100%) assets under management (AuM) in mutual funds, separately managed accounts and advisory accounts. Between 2012 and 2019,
Aegon also owns a 50% share of a life insurance JV with
Solutions development and pricing Development of our financial solutions begins with our customers. We assess their needs, and develop products and services to suit them. Then, we estimate and price the risk involved for us as a provider.
Through our businesses, we provide employment for local communities. We offer customers protection. And we act as a responsible investor, investing where we can to bring social benefits and contribute to a healthier environment.
Ownership Aegon N.V. is a Dutch public limited liability company. Its shares are listed in both Amsterdam (Euronext) and New York (NYSE).
Around three-quarters of our shareholders are from our three main markets: the US, the Netherlands and the UK. Shareholders meet at least once a year at our offices in The Hague.
II ratio – a measure of our capital strength – stood at 201%, above our 150%-200% target range. Meeting our capital targets increases our ability to deploy capital to pay attractive dividends and to invest in future-ready business opportunities.
Where our customers are (total number of customers by location, in millions, end-2019)
To our customers, we pay out pensions, benefits and insurance claims. From our profits, we offer sustainable, attractive returns for investors. We also provide financial support to local economies through tax payments and donations to charities and other good causes.
Explanatory note This chart is based on the International Integrated Reporting Council’s IR framework. Each capital represents a store of value, which companies use and transform through their business activities. In this process, value may be created or depleted. For the purposes of this value chain, we have chosen the capitals most relevant to our business (financial, human and intellectual, and social and relationship). In the chart, the process is shown from the perspective of Aegon’s business. Both natural and manufactured capital are also part of the IR framework. Neither, however, is directly relevant to Aegon’s core businesses (as a services company, we do not use natural or manufactured products in our business, though of course we may affect the value of both through our investments). For more information on the IR framework, see www.integratedreporting.org.
Global macroeconomic climate 2019 was another strong year for the global economy, where continued growth was driven by strong momentum in services, partially offset by selective weakness in manufacturing. However, political uncertainty remained elevated with Sino-US trade conflicts, uncertainties around Iran, and the outbreak of a novel coronavirus towards the end of the year.
While stock markets hit new highs, interest rates reached new lows in Europe and declined to 2016 levels in the US. Low interest rates make savings fundamentally less attractive and represent a major headwind to our businesses, particulary in the US and Europe. Low expectations of inflation persist, which, combined with an abundance of savings, means that
‘lower for longer’ interest rates are more likely and will shape our business strategies going forward.
Individuals may delay retirement and/or engage in part time or flexible contract work after reaching traditional retirement age. If well designed, this improves both the retirement outcome for individuals and improves the sustainability of governments’
The goals of the New Social Contract can only be achieved through a collaboration among all social partners including governments, employers, and individuals along with a broader group of stakeholders such as nonprofit organizations,
th er n o n -fin an cial in fo rm atio n academia, communities, and for-profit companies that share
On health The United Nations reports that the 2019 global population of people aged over 65 will more than double to 1.5 billion by 2050. It is our societal obligation to prepare our customers for longer lifespans and longer and healthier retirements.
(through initiatives such as European Capital Markets Union), or transition to a more sustainable world (e.g. through the European Sustainable Finance Action Plan).
Changes in regulation can have a profound effect on the way we manage our business, our profitability and the products and services that we offer. We work with regulators around the world to understand what changes are coming, to have a voice in what those changes will be, and to learn how to benefit from upcoming opportunities.
Key regulations for Aegon A significant change for our business was the introduction of new capital rules in Europe in 2016 with Solvency II, which is currently already subject to a fundamental review (so-called
Solvency II 2020 review). This review may potentially lead to some important changes in the way Aegon calculates its regulatory capital. At the international level, reference can be made to the initiatives of the International Association of Insurance Supervisors (IAIS), such as the initiative that may lead to International Capital Standards for Insurers, the Common
Insurance Groups and the Holistic Framework for Systemic Risk in the Insurance Sector. These three initiatives were recently adopted by the IAIS.
Regulation (GDPR) became effective. In 2017, new cyber security regulations went into effect in the US state of New York; and in 2020, new privacy legislation went into effect in the US state of California. In 2018 the fifth European Anti-Money Laundering
Distribution Directive – the IDD – became effective in the fourth quarter of 2018 replacing the Insurance Mediation Directive
Not only do we face competition from established companies, but also increasingly from technology-driven and digitally-enabled start-ups, fintechs and insurtechs. As a global business, we are increasingly learning from these innovative start-ups, investing in them, and collaborating with them. We have established two venture arms – Aegon Growth Capital and Transamerica Ventures – to capture this opportunity. Also, the competition amongst established companies remains intense. Industry consolidation might provide an oppurtunity for Aegon, particularly in mature markets. This could add up to economies of scale that allow for more profitable operations at less cost to customers.
If we are not deploying the latest technologies, we risk trailing our competitors in efficiency and may disappoint our business partners and customers, who increasingly expect a seamless digital experience for their financial matters. Since fragmented and complicated ‘legacy’ IT systems are costly and often do not provide required services, we seek strategic partnerships with technology firms like TCS and Atos to consolidate and update our systems where relevant.
Our ability to gather and analyze data to translate it into better customer offerings and improved service levels is an essential component of building our competitive edge. As part of our commitment to investing in technology, we are increasingly incorporating AI (including big data analysis and machine learning) into our businesses. To foster the use of AI, we are rapidly building our internal data analytics capabilities through our Analytics for All and Analytics for Leaders programs.
Though the forces behind trade wars and the slow rollback of globalization are beyond our control, our geographic diversity is an asset. It allows us to better access capital markets, diversify our earning streams geographically and across different types of business, and realize skill synergies and global economies of scope. At Aegon we invest in strong local management teams, business models that are geared towards local markets, and we act quickly and decisively as local situations change – for example, as demonstrated last year by the sale of our stake in the Japanese JVs to our partner, Sony Life.
Protectionism makes cross-border capital flows inherently more difficult, potentially restricting our ability to reallocate capital – either by impediments to investing in profitable opportunities or by restrictions on repatriating dividends from our business units. Our influence over the global political processes is limited, and so we could find our access to markets curtailed or made more expensive. For example, we are active in both the US and China markets which makes us potentially more vulnerable if trade disputes between both countries will escalate.
In a networked world, reputations can be easily and quickly damaged. To mitigate this risk, Aegon must vigilantly and proactively protect its reputation. For example our Dutch business unit has established a dedicated task force, the Reputational Board, to safeguard our brand value and to swiftly address challenges.
Failure to properly train and motivate our employees can result in high attrition of valuable talent and thereby materially affect Aegon’s competitiveness. Failure to embrace and practice inclusion and diversity can limit creativity, quality of decision making, and hurt our attractiveness as an employer of choice.
Aegon’s strategy Aegon’s purpose Aegon is a diversified financial services group that focuses on helping people achieve a lifetime of financial security by providing insurance, asset management, banking and pension services. We are highly attuned to the needs of a world where lifespans are increasing, careers and retirement are lengthening and becoming more flexible. Although healtcare is becoming more effective, it is also becoming expensive as public and corporate sources of lifelong pension and care are transferring risk to individuals in the face of financial pressure.
Scale-up for Future. The first category consists of at-scale businesses, which are mostly spread-based, and we manage these for value, optimizing capital generation. Most of our new investments will be directed to Drive for Growth businesses which are at the core of our strategy as they have the highest potential for future capital generation growth. The third part of our portfolio – Scale-up for Future businesses – is aimed at capturing meaningful new growth opportunities.
Drive for Growth Drive for Growth businesses are at-scale enterprises with leading market positions, deriving mostly fee-based revenues from products that offer strong elements of protection to our customers. Generally, they have multi-product relationships with customers and are digitally-enabled (e.g. platform-based).
Transamerica brand, is part of this category, next to UK Digital
Asian business, Transamerica Life Bermuda (TLB). Across these businesses, we continue working with partners to simultaneously improve the customer experience and to modernize our operations.
TCS. In 2019, we also announced that the administration and claims management for the long-term care insurance business line would be transferred to LTCG.
Scale-up for Future This is a portfolio of businesses that aims to capture meaningful new growth opportunities. Our joint ventures in India, China and
Brazil, digital banking and services business in the Netherlands, as well as the US Mutual Funds business all belong to this category.
These enterprises bring new business models into Aegon and allow us to increase our presence in rapidly growing markets and niches. We are reaching out to end-customers directly as we continue expanding the digital platforms that allow our customers to take more control in managing their investments and insurance coverages. For simpler products, we develop direct to-consumer access; in India and China, for instance, we provide multiple offerings through major e-commerce platforms.
Manage for Value Manage for Value businesses are at-scale enterprises that generally derive spread-based revenues from a single product.
In line with our strategy to accelerate the release of capital from the Manage for Value businesses, we entered into a transaction to reinsure approximately one quarter of our longevity exposure in the Netherlands.
Focused on profitable growth We have sought to emphasize fee-based and capital efficient spread-based businesses. As an example, we are offering tailored advice and solutions to corporate and individual retirement and pension plan customers in the US, the UK, the Netherlands.
platforms and relationships with business partners in markets around the world. We are also designing new investment capabilities, building on our long-established responsible investment capabilities to serve our customers’ long-term needs.
Last year, we invested in training programs to ensure that our employees are developing to become knowledgeable analysts and skilled stewards of Aegon’s data. Over a thousand Aegon employees have already participated in the Analytics for Leaders program and we believe their skills will drive our future growth.
We are also running initiatives at business unit level to streamline our operations. We are building a work environment that inspires and values new business ideas that can lead to better service for existing customers while opening new markets for Aegon. This approach enhances our processes, cuts costs, and benefits our customers in areas such as sales & distribution, pricing, claims management, fraud detection, risk analysis and service. We have built analytical teams in all major country units to ensure close alignment of this competency with the local businesses.
Seeking meaningful customer relationships We seek to forge lifelong, multi-product relationships with our customers. We believe that we can best help our customers achieve a lifetime of financial security if they are willing and eager to work with us through each phase of their personal and professional lives. We believe that the way to achieve this is by creating trust. We are hence committed to improving customer experience by nurturing a stronger emotional connection with our customers, and making it simple and convenient for them to work with us.
Looking forward Because we have built a diverse and efficient financial services business, we believe that we are able to utilize our capital efficiently, which allows us to invest back in the business in pursuit of sustainable growth:  Reach new customers: We utilize both intermediaries and our direct-to-customer distribution channels, where applicable, worldwide. We strive to expand every relationship so that
Aegon can continue to serve its customers with appropriate solutions during all phases of working and retired life.
The goal of these investments is to increase return on equity through our sustainable, organic growth strategy. Such higher earnings could be returned to shareholders through higher dividend payments going forward. We have increased dividends for shareholders in each of the past eight years, while reducing company leverage and further strengthening our financial position. Also going forward our ability to continue to pay an increasing dividend is tied closely to our ability to maintain a solid capital position and grow our capital generation, but also depends on the macroeconomic environment.
Across the markets where Aegon operates in the area of retirement and workplace solutions, Aegon has pursued a consistent workplace strategy based on retirement thought leadership and the ability to offer tailored solutions to large, medium and small enterprises.
GBP 179 billion in long-term savings of which GBP 33 billion unit-linked business, and GBP 146 billion assets under administration on the UK’s largest digital retail platform.
During the year, we paid more to investors – combined, our dividends and interest payments increased by over 4%.
Our aim is to maintain very strong financial strength ratings in our main operating units (for our current ratings, see page 100).
Financial targets and performance In 2019 Aegon introduced new three-year financial targets, covering the period 2019-2021. These targets focus on sustainable growth, capital generation and ensuring attractive returns for the Company’s shareholders. The Company is continuously monitoring the market and economic turbulence that has arisen as a consequence of the COVID-19 outbreak, and its impact on Aegon. It remains too early to quantify the potential impact on Aegon’s financial performance arising from COVID-19.
EUR 4.1 billion EUR 1.6 billion Normalized capital generation was strong and increased by 12% in 2019. This was in part due to positive experience variance and higher release of required capital.
Return on equity (annual target)1) >10% 9.5% Return on equity (RoE) was below target, mainly as a consequence of the impact of lower interest rates on net underlying earnings.
Aegon remained within or above its key target ranges as described by its capital framework.
EUR 1.2 billion Holding excess cash is in the middle of the target range per year end 2019, which provides financial flexibility.
Gross financial leverage ratio 26%-30% 28.5% The Gross financial leveragae ratio is within the target range and has improved over the year due to higher retained earnings and debt deleveraging.
Underlying earnings before tax 1,973 2,074 (4.9%) During the year, we had higher earnings from the Netherlands, the UK, Asia and Asset Management. This was offset, however, by the effects of lower interest rates, investments to support business growth in the US, and by a change in the recognition of interest expenses related to debt refinancing.
For further details on 2019 results, refer to Results 2019 worldwide starting from page 127.
Gross deposits 144,660 121,700 18.9% Gross deposits increased primarily because of the successful asset management joint venture in China which was supported by a new mandate, the launch of new equity funds and increased inflows in money market funds.
Non-financial performance Aegon has six global non-financial indicators; which are tied directly to specific aspects of our strategy. They also help us address material topics and measure progress toward our objectives as both an employer and a provider of financial services.
Metric 2019 2018 % change Aspect of strategy supported by indicator
Percentage of digitally connected customers 29% 27% 2 pp Digitization/customer centricity
1 NPS coverage includes businesses which use relation NPS (rNPS) for steering. 2 Percentage of total number of customers with two or more products for 2019 and 2018 does not include Aegon’s operations in UK.
For more information on these indicators, please refer to pages 31 (Customers) and 31 (Employees).
Responsible business Our approach Everybody deserves a healthy and financially secure future.
Aegon’s commitment to helping its customers achieve this requires a sustainable, long-term-oriented business that can fulfil our purpose and considers our obligations to individuals, society, and the environment. We believe that doing business in a responsible way will create sustainable positive financial, social and environmental results that serve all stakeholders.
Committee. The RBIC consists of selected Management Board members, Chief Investment Officers and other senior managers, who discuss matters related to responsible business, including responsible investing, on a quarterly basis. They review the progress Aegon is making against its responsible business vision and commitments, and provide advice to Aegon’s Executive
Individual For us, this encompasses smart financial planning, healthy lifestyles, and relevant solutions for every stage of our customers’ lives.
Lack of access to financial services, including banking, investment management and insurance, is a cause of wealth inequality and day-to-day stress for millions around the world. Within life insurance, certain populations have been deemed practically uninsurable by traditional underwriting standards. With new technology, however, we can gain clarity that can allow us to offer insurance to formerly uninsurable populations at a fair price.
– estimated to number 16-17 million – are regularly refused coverage.
Aegon’s Brazilian business Mongeral Aegon, draws on our global digital underwriting platform – highlighting the benefits of bringing a global knowledge network to bear on a local issue. “We validated the assumption after a few months that people with diabetes understand that it’s important to look after your health and to have life insurance for the benefit of family members should the worst happen,” says WinSocial director Rafael Rosas.
works in collaboration with nonprofits Transamerica Center for Retirement Studies and Instituto de Longevidade Mongeral
Aegon to conduct an annual survey of retirement readiness in 15 countries around the world. The survey is currently in its ninth year.
Policy advocacy Supported by findings from our multi-year research, we advocate worldwide for people to have access to insurance and financial services, for people to be aware of opportunities for flexible employment in old age and for governments to plan and provide for their citizens in an age of increasing longevity.
Green investing Environmentally-friendly investments are at the core of our responsible investing philosophy discussed separately in this report (see page 28). We promote active ownership by engaging on topics of climate risk. For example, we encourage the companies in which we invest to report following TCFD
In this policy, next to reiterating all our previous environmental commitments, we further limit any new coal-related investments.
We further detail our activities related to Responsible Business in the section ‘Aegon: A partner to the world’ (see page 30).
OK today’ app. The 82-year-old Dutchman received a check for EUR 10,000 as winner of Start-up Plus.
Han developed a self-learning app that connects to the electricity meter box and tracks user behavior.
In Poland, Aegon has become a partner of Silver Starters, a program similar to Start-up Plus. The Silver Starters final took place on November 28. The winning idea was
‘Virtual Experts’, a cooperative that would bring together seniors who, as freelancers, can provide services and assistance to businesses with some activities that can be outsourced, such as document organization, data entry, concierge services.
Contribution to the UN Sustainable Development Goals Aegon is committed to supporting the UN Sustainable
We focus on the SDGs most relevant to our business. Within these SDGs, we have selected specific goals and targets linked to our strategy. This is where we believe we can make a significant contribution to the international development agenda.
Sustainable Development Goal (selected)‍ Aegon contribution to relevant SDG targets (examples)‍
cooperation with National Foundation for Credit Counseling in the US. • Strengthening financial literacy and empowerment through local initiatives and programs, e.g., Start-up Plus.
Contribution to target 3.4 • Cover for customers facing chronic illnesses, including diabetes and cancer. • Investment in care homes for the elderly in UK and the Netherlands. • Support for research into chronic illnesses, including cancer, heart diseases and
Alzheimer’s. • Exclusion of tobacco from investments to help address health concerns over smoking.
Affordable and clean energy Ensure access to affordable, reliable, sustainable and modern energy for all
• Engagement with investee companies on climate-related topic including encouragement to report following TCFD guidelines.
• Exclusion of thermal coal production from investment, and further limit coal-related new investment.
Responsible investment Through our investments, we aim to contribute to general economic growth and a sustainable future for the world. We apply this ethos to our own proprietary investments and use our influence to encourage similar standards in accounts that we manage for customers. By taking an active approach to responsible investment, we seek to minimize risks and explore new opportunities to serve our customers’ interests and society at large.
We recognize several recurring topics that prompt questions from clients, employees and other stakeholders where we feel compelled to take a company position: climate change, biodiversity, human rights, labor rights, good health & well-being, corporate governance, weapons & arms trade, financial institutions, and animal welfare. In developing our company position on these topics we follow internationally recognized standards and norms where possible.
Aegon Asset Management is a signatory of the UN Principles for Responsible Investment (PRI). In 2019, Aegon Asset
Management scored the highest possible rating (A+) for strategy and governance of responsible investment activities for the third consecutive year.
Active ownership Our responsible investment framework encourages engagement with companies in an effort to advocate for positive change, mitigate ESG risks and promote best practices. Aegon Asset
We focus primarily on three main types of engagement with issuers: those based on minimum standards outlined in our
Solutions ESG integration and active ownership are principles we follow across all investments and portfolios. Furthermore, Aegon
These solutions are categorized into four types:  Exclusion-based strategies – Exclusion-based strategies utilize negative screening to avoid certain sectors, companies or practices based on specific criteria. Exclusions can also be applied in combination with the other types of responsible investment solutions.  ‘Best-in-class’ methodology – A best-in-class methodology seeks outperformance by emphasizing positive selection of issuers with better or improving ESG profiles, based primarily on the sustainability of their operations. One example of this is our US High-Yield ESG strategy, which incorporates positive screening based on our proprietary ESG
Responsible investment solutions by type, AuM As of December 31, 2019 (in EUR)
To meet the expectations of our stakeholders, we are committed to building a strong ESG foundation which we see as a license to operate. For us, this foundation encompasses, amongst others, investing and paying taxes in a responsible way, safeguarding data privacy and information security, respecting human rights, living up to the principles of sustainable procurement, and promoting inclusion and diversity.
Our business partners, including brokers and financial advisors, reinsurance companies, as well as service providers throughout our supply chain, can sustain their own businesses by working with Aegon. We support them not only through creating revenue streams but by sharing intelligence and perspective from markets around the world. In turn, we learn from our partners and optimize our business so that we can work together better.
Our investors similarly benefit. Our bondholders have received timely coupon payments and principal repayment at maturity.
Society is supported by dependable insurance solutions that help individuals protect their assets and aspirations. When we enable people to save for their own retirements, we also help reducing future burdens on public pension systems. We also support the communities where we do business through our tax payments, charitable donations, and volunteer work.
In 2019, the value we have delivered includes:  EUR 59.4 billion to our customers in claims, benefits and plan withdrawals  EUR 6.4 billion in commision, fees and other payments to intermediaries, suppliers and reinsurers  EUR 2.1 billion to our employees in salaries, benefits and training  EUR 899 million to our investors in dividends and interest payments  EUR 615 million in tax payments across the globe  EUR 9.0 million in support for local communities  19,500 hours of volunteer work  EUR 235 billion of investments in responsible investment solutions.
Employees Full-time and parttime employees, tied agents, trade unions and other employee representative groups
We help customers plan and build for the future by providing financial benefits such as pensions, (mortgage) loans, insurance claims, and returns on savings and investments. In 2019, we administered EUR 898 billion on behalf of our customers and paid out EUR 59 billion in claims, benefits, and plan withdrawals.
Effective and empathetic interactions Customers make use of our services at the most important moments of their lives. Therefore, effective and empathetic communication with our customers is essential to us, and we continuously improve the quality of interactions with our customers to build real connections, and, as a result, trust.
For example, we have designed and rolled out a program to improve the quality and relevance of our customer interactions in our contact centers across the globe. We incorporate customer feedback to improve how we communicate with our customers.
Where relevant, we use technology and artificial intelligence to make customer interactions more flexible and effective.
In 2019, relational NPS increased further in many of our markets including the Netherlands, UK, Brazil, India, and Turkey.
Employees Salaries and benefits While we have emphasized the need to improve efficiency gains throughout Aegon’s organization, we are aware that we must pay competitive salaries if we are to attract and retain talented staff in a highly competitive industry. Aegon’s Global
Remuneration Framework stresses ‘pay for performance,’ where compensation is tied directly to regular performance appraisals.
To assess performance, we use both financial and non-financial metrics, with the mix between the two depending on an individual’s position and seniority.
We offer benefits, including flexible working arrangements, regular health checks, parental leave and company retirement plans. We also provide paid time-off for employees who wish to volunteer on local community projects. We work to keep absenteeism to a minimum. Most of our businesses have health programs; these include fitness programs and screening for serious illnesses like cancer and heart disease, as well as programs to reduce workplace stress.
Culture and values Aegon aims to create an environment where employees can bring their authentic selves to work to realize their full potential.
Aegon recognizes that this promise can only be delivered in an environment where our employees and other stakeholders share personal accountability for building an inclusive and diverse organization.
The vitality of our mission feeds our culture. Aegon’s employees know that they are performing important work that can improve lives around the world. To help our employees accomplish
These principles, integrated across the Company and administered at the local level, help us evaluate employees and determine compensation. They are also essential to our recruitment and retention programs for all employees.
Aegon’s Code of Conduct sets out rules and guidelines that provide a mandatory framework to shape and govern the actions of all our employees. The aim is to ingrain the principles of the protection of personal data and fair, non-discriminatory treatment of our employees, customers and other stakeholders in everything we do. The Code of Conduct also commits us to comply with all legal and regulatory requirements and the prevention of insider dealing, corruption and bribery. Aegon has a 24-hour Global Ethics Line to enable employees and other stakeholders to report in confidence suspected violations of the Code of Conduct.
Employee engagement Our goal is that all Aegon employees will form a worldwide community of talented and driven individuals who are deeply engaged with our purpose to help people achieve a lifetime of financial security. We measure employee engagement annually, and our latest survey was carried out in the fourth quarter of 2019 with the company-wide employee engagement score being 67, slightly up from 2018.
In 2019, our employee turnover rate improved to 32%, down from 33% in 2018. Elevated turnover rates include the transfer of selected operational activities to our strategic partners TCS,
Women in Finance Charter, wherein we committed to a gender target of 33% female representation in our CEO-2 population by the end of 2021. On top of this, we made an additional commitment that all candidate shortlists for appointments to the Board and CEO-2 population will contain at least 33%
In the US, we have a dedicated team focusing on creating more diversity in terms of both ethnic backgrounds and genders. In
Practices Inclusion Index by Diversity Best Practices. Transamerica was one of only 80 organizations that earned a score of 60% or higher.
Aegon has mentoring programs and supports company-wide groups like Aegon Proud and Young Aegon. We are also members of external organizations, like Women in Financial Services and Workplace Pride. Aegon was awarded the Workplace Pride
‘Ambassador’ certificate in November 2019 for our ongoing efforts to set the tone for the financial services industry.
Aegon is also a member of the Agora Network, a foundation that convenes talents with roots from all over the world. Agora facilitates the exchange of knowledge, experiences and networks.
Inclusion & Diversity targets in the objectives of all senior leaders for 2020.
We seek long-term strategic supplier partnerships where we believe a third-party possesses superior capabilities or can deliver better quality of service to our customers at a lower cost.
Across our major business units, we recently entered a number of multi-year strategic partnership agreements with TCS, Atos,
Supplier Sustainability Declaration. We monitor our key partners regularly using a state-of-the-art procurement risk management system, and our procurement function measures the value we create via long-term relationships with our suppliers.
Last year, Aegon was the first company in the Netherlands to make agreements with the trade unions in its collective labor agreement on equal pay for men and women.
Solvency II 2020 review, potentially impacting insurers with longer dated liabilities. Our total shareholder return for the year came to 8% (this measure considers payment of dividends as well as share price performance).
Society Community investment We support local communities through charitable donations and volunteer work. The goals of our charitable and community investment programs are to:  Serve and strengthen the communities where we do business;  Engage and motivate employees;  Promote Aegon’s Responsible Business vision to all stakeholders.
This brings us closer to our customers and gives our employees an opportunity to share their knowledge and expertise. In 2019, we donated a total of EUR 9.0 million mostly covering our key themes of financial security and education, and well-being and longevity. In the Netherlands for instance, we are part of a From debt to opportunity program; that works with 7,000 in-debt families across the country.
of its assets each year. In the UK, local donation decisions are taken by our employee Charity Committee.
Human rights Aegon is committed to the UN Universal Declaration of
Labor Organization. This is explicitly incorporated in numerous policies, such as the Code of Conduct (applicable to all Aegon employees across the globe), the Statement on Inclusion &
Risk Taxonomy. Aegon faces the most potential risks in indirect business relationships, which is why human rights are core to the
Responsible tax We are firmly committed to making a valuable economic and social contribution to the communities in which we operate, both through our own tax payments and through collection and payments of third-party taxes. We seek to pay ‘fair taxes’, which for us means paying the right amounts of tax in the right places.
It is our policy to allocate profits where value is created through our commercial business activities. For us, tax follows business, which means that our decisions are taken for business reasons and not for tax advantages.
Aegon Global Tax focusses on tax technology in setting its strategic targets. We believe that technology could be an effective means of achieving process efficiency and automated control. In the Netherlands, a proof of concept for a tax data management system and automated tax reporting is in
Disclosures are provided in our financial statements and cover tax payments in our main markets. We provide country-by-country tax reporting in a transparent and accurate manner to the tax authorities. We also provide details of our total tax contribution company-wide and by region in the charts above. Taxes borne are a cost of business and affect our financial results. Taxes collected are not a direct cost of business but are collected on behalf of governments from others. The reported numbers are on cash payment or accrual basis.
Oversight Committee has been established to have a final say on dilemmas that have been escalated to it.
Aegon’s tax function reports regularly to the Executive Board and Management Board on day-to-day operations and the status and effectiveness of the function. At least once a year, the tax function reports to the Supervisory Board’s Audit Committee.
Aegon also has a Management Board. This works in unison with the Executive Board, and helps to oversee operational issues and the implementation of Aegon's strategy. Aegon's corporate governance structure is the responsibility of both the Supervisory
Board and the Executive Board. Any substantive change to this structure is submitted to the General Meeting of Shareholders for discussion.
The shareholders Listing and shareholder base Aegon's common shares are listed on Euronext Amsterdam and the New York Stock Exchange. Aegon has institutional and retail shareholders around the world. More than three-quarters of shareholders are located in Aegon's three main markets, the Netherlands, United States and the United Kingdom.
of Aegon's issued capital or a block of shares worth at least
Aegon's Articles of Association, such a request will be granted if it is received in writing at least 60 days before the meeting, and if there are no important interests of the Company that dictate otherwise.
A profile, which is published on aegon.com, has been established that outlines the required qualifications of its members.
Subsequently, a Supervisory Board member can be reappointed again for a period of two years, and then extended by two 36 37CONTENTS
Committees The Supervisory Board also oversees the activities of its committees. These committees are composed exclusively of Supervisory Board members and deal with specific issues related to Aegon's financial accounts, risk management, executive remuneration and appointments. These committees are the:  Audit Committee;  Risk Committee;  Remuneration Committee; and  Nomination and Governance Committee.
Aegon's aims and developing the strategy and its associated risk profile, in addition to overseeing any relevant sustainability issues and the development of the Company's earnings. Each member has duties related to his or her specific area of expertise.
Composition of the Executive Board Aegon's Executive Board consists of Alexander R. Wynaendts, who is Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matthew J. Rider, who is Chief
During the Annual General Meeting of Shareholders on May 15, 2020, it will be proposed to the shareholders to appoint
Meeting of Shareholders for a four-year term, following nomination by the Supervisory Board.
Williams will be appointed to the Management Board, and succeed Adrian Grace who will retire from the company on March 31, 2020.
Aegon's Management Board works in unison with the Executive Board, and helps oversee operational issues and the implementation of Aegon's strategy. Members are drawn from Aegon's business units and from Aegon's global functions.
B, each with a nominal value of EUR 0.12. As of December 31, 2019, a total of 2,105,138,885 common shares and 585,022,160 common shares B had been issued.
Aegon, the Company's largest shareholder. The nominal value of the common shares B is equal to the nominal value of a common share. This means that common shares B also carry one vote per share. However, the voting rights attached to common shares B are subject to restrictions as laid down in the Voting
Rights Agreement, under which Vereniging Aegon may cast one vote for every 40 common shares B it holds in the absence of a
The financial rights attached to a common share B are onefortieth (1/40th) of the financial rights attached to a common share. The rights attached to the shares of both classes are otherwise identical. For the purpose of the issuance of shares, reduction of issued capital, the sale and transfer of common shares B or otherwise, the value or the price of a common share B is determined as one-fortieth (1/40th ) of the value of a common share. For such purposes, no account is taken of the difference between common shares and common shares
Aegon N.V. and Vereniging Aegon. All requirements determined by Best Practice 2.7.5 of the Dutch Corporate Governance Code were complied with in the execution of these transactions.
B was executed to align the aggregate holding of voting shares by Vereniging Aegon in Aegon N.V. with its special cause voting rights of 32.6%.
B at fair value (1/40th of the market value of a common share in the capital of the Company at the time of issuance) to mitigate dilution caused by Aegon's issuance of shares on May 17, 2019 in connection with the Long Term Incentive Plans for senior management.
'capital issued' and 'votes' are used as defined in the Wet op het
Fund stated to hold 131,792,024 common shares, which represent 4.9% of the issued capital as at December 31, 2019.
Markten as at November 14, 2019, BlackRock, Inc. stated to hold 116,325,180 shares, representing 4.3% of the issued capital as at December 31, 2019 and 136,885,389 voting rights, representing 5.1% of the issued capital as at
On February 5, 2020, BlackRock, Inc.’s filing with the US Securities and Exchange Commission (SEC) shows that
BlackRock holds 149,073,955 common shares, representing 5.7% of the issued and outstanding capital as at December 31, 2019, and has voting rights for 129,834,767 shares, representing 5.0% of the votes as at December 31, 2019.
A Special Cause may include:  The acquisition by a third party of an interest in Aegon N.V.
Share plan Senior executives at Aegon companies and some other employees are entitled to variable compensation of which part is granted in the form of shares. For further details, please see the Remuneration Report on page 54 and note 50 of the notes to Aegon´s consolidated financial statements of this Annual Report. Under the terms of existing share plans the vesting of granted rights is predefined. The shares shall vest as soon as possible in accordance with payroll requirements of the relevant subsidiary after the adoption of the Company's Annual Report at the Annual General Meetings of Shareholders in the year of vesting of these shares.
Meeting of Shareholders may cancel the binding nature of these nominations with a majority of two-thirds of votes cast, representing at least one half of Aegon's issued capital.
Such a resolution also requires a two-thirds majority of votes cast, representing at least one half of Aegon's issued capital.
Members of Aegon's Supervisory and Executive Boards may be suspended or dismissed by the General Meeting of Shareholders with a two-thirds majority of votes cast, representing at least one half of Aegon's issued capital, unless the suspension or dismissal has first been proposed by the Company's Supervisory Board. A member of the Executive
Board may also be suspended by the Supervisory Board, although the General Meeting of Shareholders has the power to annul this suspension.
Aegon's position on Best Practice 4.3.3 Aegon's Articles of Association provide for a larger majority and a higher quorum than those advocated by the Code. Given that the Company has no specific anti-takeover measures, the current system is deemed appropriate within the context of the 1983
Differences between Dutch and US company laws Dutch company law is different from US law in the following respects: Aegon, like most large Dutch public companies, has a two-tier governance system comprising an Executive
Board and a Supervisory Board. The Executive Board is the executive body. Its members are not Aegon employees and have an engagement agreement with the Company.
Meeting of Shareholders. The number of the Executive Board members and the terms of their engagement are determined by the Supervisory Board within the scope of the adopted
The Supervisory Board performs supervisory and advisory functions only, and its members are outsiders that are not employed by the Company. The Supervisory Board has the duty to supervise the performance of the Executive
Board, the Company's general course of affairs and the business connected with it. The Supervisory Board also assists the Executive Board by giving advice. Other powers of the Supervisory Board include the prior approval of certain important resolutions of the Executive Board. Members of the Supervisory Board are appointed for a four-year term and may be dismissed by the General Meeting of Shareholders.
The remuneration of Supervisory Board members is fixed by the General Meeting of Shareholders. Resolutions entailing a significant change in the identity or character of the Company or its business require the approval of the General Meeting of Shareholders.
Members of the Management Board Alexander R. Wynaendts: see above Matthew J. Rider: see above
Mark Bloom (1964, American)‍ Global Chief Technology Officer and member of the Management
As Global Chief Technology Officer at Aegon, Mr. Bloom is responsible for leading the Company's technology and innovation activities, including leveraging technology to drive efficiency and enhancing the customer experience. Mr. Bloom was appointed as a member of Aegon's Management Board in August 2016. Mr. Bloom is a member of the Board of Directors of Freddie
Mr. Edixhoven was appointed CEO of Dutch life insurance company Zwitserleven in 2010 and held that position prior to joining Aegon the Netherlands as a board member in 2014.
He is also a board member at both the Dutch Association of Insurers and the Confederation of Netherlands Industry and Employers.
Allegra van Hövell-Patrizi (1974, Italian and Belgian)‍ Chief Risk Officer of Aegon N.V. and member of the Management
& Company, specializing in financial institutions. After several years as a partner there, she joined F&C Asset Management in 2007 as a member of the Management Committee. In 2009, she joined Prudential plc where she was part of the CEO Office and then later became Group Risk Director, and a member of the Group Executive Risk Committee, as well as the PUSL
Marco Keim (1962, Dutch)‍ CEO Aegon International and member of the Management Board of Aegon N.V.
Board in June 2008. From 2017 to 2020, Mr. Keim headed
Onno van Klinken (1969, Dutch)‍ General Counsel and member of the Management Board of
Ms. Mahieu has been a member of the Supervisory Board of the Royal BAM Group since 2011, and the Supervisory Board of VodafoneZiggo Group B.V. since 2017.
Bas NieuweWeme (1972, Dutch)‍ Global CEO of Aegon Asset Management and member of the
and an Executive MBA in 2007, Mr. NieuweWeme has worked in global investment management for 20 years.
The majority of this time was spent in various management positions within ING Investment Management Americas and Voya
Investment Management. In 2016, he was named Global Head of the Client Advisory Group and a member of the management team at PGIM Fixed Income and Global Head of the Institutional
Relationship Group at PGIM, Prudential Financial's global investment management business. He serves as vice-chairman of the supervisory board of La Banque Postal Asset Management.
Mr. Connelly started his career at Chase Manhattan Bank, fulfilling senior roles in commercial and investment banking in France, the Netherlands, Spain, the United Kingdom and the United States. He was appointed to Aegon's Supervisory
Board in 2017 and became Chairman in May 2018 and his current term ends in 2021.
Remuneration Committee. Mr. Connelly is also an independent director at the Board of Directors of Société Générale, an independent non-executive director at the Board of Directors of Self Trade Bank SA (not listed) and an independent director at Amadeus IT Group S.A..
Merrill Lynch, he held various roles in the US insurance industry.
US financial institutions, where he was engaged in M&A advice and transactions, together with equity and debt raisings for insurance companies. He was a founding partner of Barrett
Board Risk Committee. Mr. Ellman was a non-executive director of Aegon USA from 2012 to 2017.
He started his career in 1982 at Zurel as management assistant. He was appointed to Aegon´s Supervisory Board in May 2015, and his current term ends in 2023. He is Chairman of the Supervisory Board Remuneration Committee and a member of the Supervisory Board Risk Committee.
Board of Royal Vopak N.V. In addition, Mr. Noteboom is a member of the Board of Directors of VUmc Cancer Center Amsterdam and the Chairman of Stichting Prioriteit Ordina Groep. Mr. Noteboom is a former member of the Supervisory Board of Wolters
Ben van der Veer is former Chairman of the Board of Management of KPMG N.V. Mr. Van der Veer retired from KPMG on September 30, 2008, and was appointed to Aegon's Supervisory Board in October 2008. Mr. Van der Veer was re-appointed as a member of the Supervisory Board during the 2016 Annual
Vopak N.V. and member of the Board of the Stichting Continuiteit
Heijmans (not listed). Mr. Van der Veer is a former member of the Supervisory Board of Royal Imtech N.V., TomTom N.V.,
Aegon Integrated Annual Report 2019 44 45 Composition of the Boards
Pensioenfonds ABP, the Dutch public sector collective pension fund. Ms. Wortmann-Kool is a former Member of the European
Parliament and Vice President on Financial, Economic and Environmental affairs for the EPP Group (European
People's Party). She was appointed to Aegon's Supervisory Board in May 2014, and her current term ends in 2022.
She is Vice Chairman of the Supervisory Board, and a member of the Supervisory Board Audit Committee and the Supervisory
Ms. Young is member and Lead Director of the Board of Directors of Foot Locker, Inc.. Furthermore, Ms. Young is a member of the Audit Committee of the Board of Trustees of Save the Children US (not listed), and member of the Board of Save the Children International and Save the Children Association and serves as an independent member of the Advisory Board of Spahn and Rose (not listed). Ms. Young is a member of the Board of the National Association of Corporate Directors.
Oversight and advice The Supervisory Board is a separate independent corporate body, consisting of six members on December 31, 2019.
Remuneration Policy adopted at the Company's General Meeting of Shareholders. Overall accountability for Aegon's remuneration governance also resides with the Supervisory Board, which is advised by its Remuneration Committee. This includes the responsibility for designing, approving and maintaining the Aegon Group Global Remuneration Framework, including the remuneration policies for the Executive Board and Heads of Group Control functions.
Corporate governance Details of Aegon's corporate governance structure and a summary of how the Company complies with the Dutch
Governance Committee. An overview of the composition of the Supervisory Board in 2019 can be found on pages 44-45. All members of the Supervisory Board are considered independent under the terms of best practice provisions 2.1.7, 2.1.8 and 2.1.9 of the Dutch Corporate Governance Code.
Ms. Caroline Ramsay as members to the Supervisory Board for a four-year term.
In compliance with the Dutch Corporate Governance Code, members of the Supervisory Board are appointed by shareholders for a term of four years. The option exists to reappoint members for one additional four-year term. A Supervisory Board member can then subsequently be reappointed again for a period of two years, which reappointment may be extended by at most two years. For a reappointment after an eight-year period, reasons will be provided in the report of the Supervisory Board.
Executive Board The Executive Board consists of Alexander R. Wynaendts, Chief
Members of the Executive Board are appointed by shareholders for a term of four years, with the option of reappointment for additional four-year terms. The appointment schedule and other information about members of the Executive Board are available on aegon.com.
Mr Wynaendts will resign as member of the Executive Board and
Board meetings Attendance In 2019, the Supervisory Board had seven regular (face-toface ) meetings: four related to the quarterly results; one to the annual report; and two to strategy (including the budget and Medium Term Plan). Supervisory Board Committee meetings were usually held the day before the meetings of the full
Board members' attendance by meeting is provided in the table below.
Dona Young 7/7 5/5 4/4 1/1 - 6/6 4/4 3/3 1 Where a Supervisory Board member retired from the SB, stepped down from a Committee or was appointed throughout the year, only meetings during his / her tenure are taken into account.
Management Board attended the Supervisory Board meetings held in 2019. Also, at the request of the Supervisory Board, other Company executives attended the meetings to provide reports and updates on specific topics. Representatives from
also attended all 2019 Audit Committee meetings in full except for the combined Supervisory Board Audit and Risk Committee in December. Regular Board meetings were preceded or followed by meetings attended only by the members of the Supervisory
Board and the Chief Executive Officer. Furthermore, the Supervisory Board held meetings without the presence of Executive Board or Management Board members.
Highlights and activities Key topics discussed during the 2019 Supervisory Board meetings were Aegon's quarterly results and semi-annual and annual reporting, Aegon's strategy, the main business risks, IT, regulatory developments, acquisitions and divestments and human resources items.
Board supports the active management of the business portfolio with add-on acquisitions, the sale of underperforming businesses and the disposals of entities no longer consistent with
Aegon Integrated Annual Report 2019 47 Report of the Supervisory Board
 Human resources, including talent development, results of the global employee survey and cultural change and behavior;  Annual and quarterly results, dividends and the
Company’s Medium Term Plan, including the 2020 budget, capital and funding plan;  Capital generation and Solvency II capital position, including regulatory capital reports and actions following the 2019 market and interest rate developments;  Enterprise risk management, cybersecurity and information security risks, and the risks related to the execution of the strategy within the Company;  Investor relations, including shareholder listing, market analysis and roadshow feedback;  Legal, regulatory and compliance issues, including
Results and budget In February 2019, the Supervisory Board convened to discuss the fourth quarter 2018 results. In March 2019, the Supervisory
Board reviewed the Company's Medium Term Plan, including the budget and capital plan for 2020. The Boards took note of the uncertainties and challenges in the coming years as described in the Plan. These included, among others: increased regulatory requirements, lower interest rates and lower equity markets, market volatility, digital developments, and project risk. The Board discussed Aegon's capital generation and capital projections, together with the continued focus on cost efficiency. The Supervisory Board supported the Medium Term
Plan and approved the budget for 2020. The Board also approved the 2020 funding plan and authorized the Executive Board to execute on the funding plan in 2020.
Legal, compliance and regulatory affairs In 2019, the Supervisory Board and the Audit Committee discussed a number of compliance, regulatory and legal topics relating to the Americas, Europe, Asia, and Asset Management with management, the Global Head of Group Legal & Regulatory
Regulation developments, Compliance risks, Fraud and Financial crime including know your customer and ultimate beneficial owner requirements, and whistle-blower reports. An overview of the topics discussed in the field of Risk Management can be found in the Audit Committee and Risk Committee sections below.
In addition to these updates and presentations provided by the Company, the members of the Supervisory Board gathered general information on industry developments by participating in networks, reading independent reports and sharing knowledge with other Board members within and outside
Board review The Supervisory Board undertakes a Board effectiveness review on an annual basis and an external assessment takes place at least once every three years. In the first quarter of 2019, such external assessment of the Supervisory Board was conducted. The assessment was based on document analyses, a survey completed by Supervisory Board members,
Supervisory Board Committees The Supervisory Board has four Committees that discuss specific issues in depth and prepare items about which the full
Board makes decisions. The Committees report verbally about their discussions, and they are discussed in full at Supervisory 48 49CONTENTS
Board meetings. Supervisory Board members receive all minutes of the Committee meetings. These meetings are open to all members of the Board, regardless of membership of the Committees. All Committee reports were prepared by the respective Committees and approved by the Supervisory
The Audit Committee Composition On December 31, 2019, the composition of the Audit Committee was as follows:  Ben van der Veer (chair);  Mark A. Ellman;  Corien M. Wortmann-Kool; and  Dona D. Young.
The members of the Audit Committee meet all relevant independence and experience requirements of financial administration and accounting for listed companies.
Role and responsibilities As Aegon has both an Audit Committee and a Risk Committee, the risk management responsibilities stated in the Dutch
Board members participate in both committees and a combined meeting of the Audit and Risk Committees is scheduled on an annual basis.
The main role and responsibilities of the Audit Committee are to assist and advise the Supervisory Board in fulfilling its oversight responsibilities regarding:  The integrity of the consolidated interim and full-year financial statements and financial reporting processes;  Internal control systems and the effectiveness of the internal audit process; and  The performance of the external auditors and the effectiveness of the external audit process, including monitoring the independence and objectivity of PwC.
Committee meetings. Aside from the Audit Committee meetings, additional sessions were held with internal and external auditors, without members of the Executive Board or senior management present.
Financial Reporting In discharging their responsibilities with regards to the 2019 interim and full year financial statements, the Audit Committee:  Reviewed and discussed the management letter and follow up actions with the Executive and the Management Board,
Internal Audit and PwC;  Discussed PwC's interim reports leading to a review opinion on the interim financial statements;  Received presentations on various topics by local business unit managers and chief financial officers; and  Reviewed and discussed areas of significant judgments in the preparation of the financial statements, including, in particular: Solvency II, investment valuation and impairments, economic and actuarial assumption setting, and model validations.
Committee agenda in 2019 were Solvency II developments, controls, capital and liquidity, legal and compliance updates, 49 CONTENTS
Aegon Integrated Annual Report 2019 49 Report of the Supervisory Board
and preparations for IFRS 9 and IFRS 17. Other items included the capital and funding plans and the performance review of the internal audit function.
Committee) the Audit Committee:  Reviewed and approved the internal and external audit plans for 2019 and monitored execution, including progress in respect of recommendations made;  Discussed quarterly updates on the activities of the internal audit function, together with details of progress on internal audits with the internal auditor. Areas of focus in 2019 included the Internal Audit strategy, audit planning process,
Role and responsibilities The main role and responsibilities of the Risk Committee are to assist and advise the Supervisory Board in fulfilling its oversight responsibilities regarding the effectiveness of the design, operation and appropriateness of both the Enterprise Risk
Furthermore, the Risk Committee regularly reviews risk exposures as they relate to capital, earnings, liquidity and compliance with risk policies. The Company's risk management is an important topic for the Supervisory Board.
Committee meetings The Risk Committee works closely together with the Audit
Committee and has an annual combined meeting, which in 2019 was held in December. This combined meeting focused on the Global Risk development plan, third party & affiliate management, model validations, Cloud developments and the market risk impact on the budget plan.
The Risk Committee convened five times in 2019, including the combined meeting with the Audit Committee.
The Company's Chief Executive Officer and Chief Risk Officer attend all the Committee meetings. The Chief Financial Officer had a standing invitation to attend the Committee meetings.
Committee assessed the effectiveness of the design and operation of the ERM framework and internal control systems in 2019 by:  Discussing the quarterly risk dashboard, including all material group level risks, with the Executive Board, Chief Risk Officer and relevant senior managers. The material group level risks consisted of financial, actuarial and operational risks, including cybersecurity and information security risks and controls; 50 51CONTENTS
Resolution regulation. The Risk Committee furthermore spent time on an outside in risk perception of the Risk function, reinsurance developments, Model Risk management, the strategic human resources program Future Fit and on risks and approaches in dealing with third party relations of the Company. In addition, the Risk Committee dedicated time to wider developments in the geopolitical environment, including risks associated with Brexit and financial markets in 2019, and to a number of important asset and liability management and hedging topics across the Group.
The Nomination and Governance Committee Composition On December 31, 2019, the composition of the Nomination and
Governance Committee was as follows:  William L. Connelly (chair);  Ben van der Veer;  Corien M. Wortmann-Kool; and  Dona D. Young.
Committee meetings Aegon's Nomination and Governance Committee held ten meetings, including four conference call meetings, in 2019.
Supervisory Board related activities The Nomination and Governance Committee discussed the composition of the Supervisory Board and its Committees.
The profile of Supervisory Board members, as well as their capabilities in terms of working collectively with other members of the Supervisory Board, were debated by the Committee.
The Nomination and Governance Committee furthermore reviewed the composition of the Management Board and was informed - and consulted on - the succession of Management
The purpose of the diversity policy is to have a more balanced and diverse composition of the Supervisory Board, the Executive
The Committee strives to have at least 30% female or male representation in the Supervisory Board, the Executive Board and the Management Board.
(Diversity) of the Corporate Governance Statement - as published on aegon.com.
The Remuneration Committee Composition On December 31, 2019, the composition of the Remuneration
 Up until October 11, 2019, Mr. Dineen was also a member of the Remuneration Committee.
Role and responsibilities The main role and responsibilities of the Remuneration
Committee are to advise the Supervisory Board and prepare decisions to be taken by the Board. The Committee is designated to safeguard sound remuneration policies and practices within the Company by overseeing the development and execution of these policies and practices. In order to ensure that the remuneration policies and practices take all types of risks properly into account, in addition to liquidity and capital levels, the Remuneration Committee assesses in particular the remuneration governance processes, procedures and methodologies adopted. Furthermore, the Committee ensures that the overall remuneration policy is consistent with the longer-term strategy of the Company and the longer-term interest of its shareholders, investors and other stakeholders.
Act (and to be submitted for adoption by the shareholders to the Annual General Meeting on May 15, 2020). In this context, and to make further improvements to align the incentives of the Executive Board with those of Aegon’s shareholders, the Chair of the Remuneration Committee headed a consultation process involving major shareholders, shareholder representatives, proxy advisors and employee representatives, in order to receive feedback on the proposed changes to the remuneration policies.
The Remuneration Committee also oversaw the further application, implementation and approval of Aegon's Group
Material Risk Takers (Identified Staff). This included:  Allocating variable compensation related to 2018;  Setting the 2019 Individual Performance Indicators for
Executive Board members;  Setting the 2019 Group performance indicators and targets for remuneration purposes;  Preparing the 2020 Group performance indicators for remuneration purposes;  Overseeing the scenario analysis of pay-out levels under the
Executive Board remuneration policy;  Reviewing and/or approving the ex-ante risk assessments and ex-post assessments, any exemption requests under the remuneration policies and changes to the list of Material Risk
Aegon Integrated Annual Report 2019 52 53 Report of the Supervisory Board
We would like to thank Aegon's employees for all they do to serve Aegon's millions of customers, and furthermore we would like to express our thanks to Aegon's business partners and loyal customers for their continued confidence in the Company.
Committee of the Supervisory Board, which was led by the Committee’s Chairman Ben J. Noteboom and was approved by the Supervisory Board. The Remuneration Committee restructured this report for 2019 in order to further increase its transparency and to comply with the latest rules, regulations and guidance on the (standardized) presentation of the remuneration report, including the Shareholder Rights Directive and related
In the first chapter the Remuneration Committee presents an overview of the business and remuneration highlights in 2019 and what is expected in 2020 in relation to remuneration.
1. Business and remuneration highlights This chapter presents an overview of the business and remuneration highlights in 2019 and what is expected in 2020 in relation to remuneration.
2019 Business highlights In 2019, Aegon continued its realignment for growth, launched new propositions, further improved customer service, and made important executive management appointments to guide
Aegon’s underlying earnings were impacted by low interest rates while Aegon experienced net outflows in the US retirement and annuity businesses. As a result the return on equity of 9.5%
Business performance highlights 2019 2018 Net Deposits (in EUR million) (25,130) (4,656)
Market Consistent Value of New Business (in EUR million) 465 539
In 2019 Aegon’s Supervisory Board consisted of seven members: William L. Connelly (Chairman), Corien M. Wortmann-Kool (Vice
Ben van der Veer and Robert W. Dineen. At the Annual General
Meeting of Shareholders on May 17, 2019 shareholders approved the re-appointment of Mr. Noteboom. On October 11, 2019 Aegon announced that Mr. Dineen stepped down from
Supervisory Board. Aegon subsequently announced it would nominate Thomas Wellauer and Caroline Ramsay for appointment to the Supervisory Board at the at the Annual General Meeting of Shareholders on May 15, 2020.
1 Changing the Executive Board vesting schedule requires shareholder approval. The Supervisory Board intends to ask shareholders to adopt this change at the Annual General Meeting of Shareholders on May 15, 2020. The proposal will be to apply the Management Board vesting schedule to the Executive Board as well, but with an additional holding period on the shares of 2 years after pay-out. In the meantime, the 2019 Executive Board vesting schedule remained 40% upfront and 60% deferred, tranche-vesting during 3 years. Each upfront and deferred portion was paid 50% in cash and 50% in shares, with the shares subject to an additional holding period of 3 years.
2019 Remuneration highlights On November 14, 2018, the Supervisory Board approved the change to the Solvency II remuneration principles as regulatory framework for remuneration per 2019. Up to 2019,
Capital Requirements Directive. However, Solvency II is an European Directive for insurance companies. Therefore the Dutch regulator allowed insurance companies the option to switch from Dutch Regulation on Sound Remuneration
II remuneration rules are sector specific. However, as this regulatory change was too close to the start of 2018, Aegon delayed this switch to 2019.
Requirements Directive (banking) selection criteria, in which these positions were called Identified Staff.
deferred shares, cliff-vesting after 3 years.  Other Material Risk Takers: 50% upfront cash / 50% deferred shares, cliff-vesting after 3 years.
EUR 3,000 to EUR 4,000.  A Continental Travel fee was introduced and set at EUR 2,000.
European Union’s Shareholder Rights Directive came into force. As a result Aegon has revised the structure and content of this 2019 Remuneration Report compared to earlier versions in accordance with the Act’s remuneration report requirements.
The 2019 CEO pay-ratio was 32.8 (2018: 42.2, 2017: 41.7). This ratio has been based on the IFRS-EU CEO remuneration expenses and employee expenses in 2019, which have been audited. The expenses for the CEO’s total compensation were EUR 3.8 mln
(2018: EUR 4.4 mln; 2017: EUR 4.3 mln). The average expenses for the employees’ total compensation were EUR 115,371 (2018: EUR 104,459; 2017: EUR 102,188), which were calculated by:  The total IFRS-EU remuneration expenses for all employees, which are the total employee expenses (see Note 14)
EUR 3.8 mln = EUR 2,145 mln.  Divided by the number of employees in scope, which are the total number of employee minus employees in joint ventures and associates (as their expenses are not included in Note 14)
and minus the CEO: 23,757 – 5,162 – 1 = 18,594 employees.
The Remuneration Committee took note that certain factors have influenced the CEO pay-ratio, such as the significant difference in the geographical footprint of the Company's employee population, the way the Company was affected by restructuring and other organizational changes (e.g. the 2019 divestments in the Czech Republic and Slovakia) and the changes to the CEO’s remuneration package per June 2019.
1 Given the two-tier Board structure, Aegon’s Supervisory Board members are not in scope of the GRF. They are only eligible for certain fixed fees and cost reimbursements (see Supervisory Board Remuneration below).
Policy (see chapter 4 in this report);  Approve the proposed 2020 Executive Board Remuneration
Policy (see chapter 6 in this report);  Approve the appointment of Mr. Friese to the Executive Board.
Compensation of 80% of his Fixed Salary and a gross Pension contribution of 40% of his Fixed Salary. This means Mr. Friese will receive a higher Fixed Salary and therefore a higher Variable
The sign-on is paid in cash and Aegon N.V. shares, of which a part is deferred. The pay-out of the deferred part is subject to continued employment.
EIOPA opinion on the supervision of remuneration principles in the insurance and reinsurance sector and the draft Dutch
Aegon's remuneration policies are derived from the GRF, which includes the Executive Board Remuneration Policy and local business Remuneration Policies. These policies define specific terms and conditions for the employment of our employee across the various countries and local businesses.
Risk Management and Compliance are involved in all steps of the process.
Human Resources Strategy In order to support the Aegon Strategy and local business objectives, the Aegon Group Human Resources Strategy contains the following remuneration related goals:  Attract, retain, motivate and reward a highly-qualified and diverse workforce;  Align the interests of executives, managers and all other employees with the business strategy and risk tolerance, the values and the long-term interests of Aegon;  Provide a well-balanced and performance-related compensation package to all employees, taking into account shareholder and other stakeholder interests, relevant regulations, the corporate responsibilities and Future Fit values (‘Acting as one, Customer centricity, Agility and
Total Compensation Following from the Remuneration Principles, Aegon aims to offer experienced and competent employees a total compensation level which is consistent with the market in which Aegon operates and competes for similar employees. Total compensation typically consists of fixed compensation, variable compensation
The Dutch Financial Supervision Act has a provision that makes it possible to offer employees up to a maximum variable compensation opportunity that is equal to the European CRD
In line with the Dutch Financial Supervision Act, Aegon has obtained shareholder approval at the Annual General Meeting of Shareholders of May 20, 2016 to offer a maximum variable compensation opportunity up to 200% of fixed compensation to selected senior employees outside Europe in positions that, based on local market practice, could receive variable compensation that exceeds 100% of fixed compensation. Within this mandate, Aegon offered selected senior employees outside
Risk Management in relation to Remuneration Variable compensation may have an impact on risk-taking behaviors and, as such, may undermine effective risk management. The opportunity to receive high variable compensation can lead to excessive risk taking, which can 57 CONTENTS
The GRF includes additional remuneration requirements for three specific employee categories, as their roles and responsibilities require tailored risk mitigating measures and governance processes. These remuneration requirements are for: (i) the Executive Board; (ii) Material Risk Takers; and (iii) Control
Risk Takers. Furthermore, where exceptions to the policies are requested to reflect local practices or regulations, Risk
Management and Compliance are involved in order to ensure such exceptions do not undermine effective risk management and that sufficient mitigating measures are undertaken.
Remuneration of Material Risk Takers Aegon selects Material Risk Takers for the Aegon N.V. legal entity
(i.e. the holding company) based on the Solvency II selection criteria. These positions are defined as ‘the administrative, management or supervisory body, persons who effectively run the undertaking or have other key functions and other categories of staff whose professional activities have a material impact on the undertaking’s risk profile’.
Board Remuneration Policy which applied to 2019 and the Supervisory Board remuneration over the recent years.
The Supervisory Board members are entitled to the following:  A base fee for membership of the Supervisory Board.
Under the current policy, as endorsed by shareholders at the Annual General Meeting of Shareholders on May 17, 2019, the Supervisory Board members are entitled to the following payments: In order for the Remuneration Committee to assess the competitiveness of the Supervisory Board fee levels, they gather benchmark data on compensation levels at comparable companies, in accordance with the applicable rules and regulations. These comparable companies form a peer group and have been selected by the following criteria:  Industry: preferably Life Insurance;  Size: companies with similar number of employees, assets, revenue and market capitalization;  Geographic scope: preferably the majority of revenues generated outside of the country of origin; and  Location: companies based in Europe, excluding UK where the non-executive directors typically have different responsibilities compared to their continental European counterparts.
Based on these criteria the current peer group consists of the following 12 European Insurance companies: Ageas,
In addition, the following reference group of 12 companies with a two-tier board is used in order to monitor alignment with the General Industry in the Netherlands: ABN AMRO,
The Remuneration Committee and the Supervisory Board regularly review the composition of both groups in order to ensure that they continue to provide a reliable and suitable basis for comparison. The previous update to both groups was in 2018.
The Remuneration Committee may recommend changes to the fee levels of the Supervisory Board members, based on the results of a competitiveness review. These recommendations are discussed by the Supervisory Board, which can support, revise or reject them. Subsequently shareholders will be asked to adopt the proposed fee changes at the Annual
Information on members of the Supervisory Board and the composition of its four committees can be found on pages 44-53.
Supervisory Board remuneration in recent years The table below show the fees that have been allocated and paid to the Supervisory Board members in the calendar years 2017, 2018 and 2019 in accordance with the applicable Supervisory
The general increase of 2019 fees is a result of the new fee structure and levels which were approved by shareholders at the Annual General Meeting of Shareholders on May 17, 2019.
The fee increase of Mr. Connelly in 2019 is the result of being the Chairman of the Supervisory Board during the full calendar year (appointed in per May 2018), attending more committee
Base fee for Supervisory Board membership EUR / year Chairman 80,000
Fee for Supervisory Board committee membership EUR / year Chairman of the Audit or Risk Committee 13,000
fees per 2019 and receiving a continental travel fee which was not offered before 2019. Most other Supervisory Board members received more attendance fees in 2019, mainly because of a combination of attending more committee meetings and the higher committee attendance fees per 2019.
In EUR thousand Year Base fees Attendance fees Travel fees Total fees
Robert W. Dineen (up to Oct 11, 2019) 2019 40 27 12 79
Robert J. Routs (up to May 18, 2018) 2018 36 12 - 48
Shemaya Levy (up to May 19, 2017) 2017 24 16 - 40
The table below presents the total fees that have been paid in the last five calendar years on an annualized basis and the year-on-year annual change in total fees. Additionally the table shows the Aegon net income, a proxy of the financial and non-financial business performance, the inflation in the Netherlands and the average employee compensation over the same period.
Irving W. Bailey (up to May 20, 2016) Fees 135 139 - - -
Aegon net income In EUR million (523) 586 2,361 744 1,528
Average employee compensation 2) Total compensation 95 97 102 104 115 1 The weighted average Aegon financial and non-financial business performance, expressed as a percentage on a performance scale with 50% as threshold, 100% as target and 150% as maximum, as used for the allocation of variable compensation in the applicable year. 2 Consistent with the CEO pay ratio calculation, the average employee compensation is based on the audited total IFRS-EU remuneration expenses for all employees divided by the number of employees in scope for these expenses.
Board Remuneration fees retroactively per January 1, 2019 at the Annual General Meeting of Shareholders on May 17, 2019.
Remuneration in fixed fees contributed to Aegon’s long term performance, as it did not depend on Aegon’s results and therefore protected the Supervisory Board member’s independence when supervising the manner in which the
outlines the terms and conditions for the remuneration of the members of the Supervisory Board of Aegon N.V. (the
N.V. (the “Remuneration Committee”) prepared the changes to this Policy, which were endorsed by the Supervisory Board on March 17, 2020. At the date of approval, the Policy complies with the applicable rules and regulations such as the Dutch
A.2 Policy Term This Policy will take effect from January 1, 2020.
The Policy remains in place until a new or revised Policy has been adopted by the Shareholders in accordance with the applicable requirements from the Dutch Civil Code. The Supervisory
Board will submit a proposal to the Shareholders to adopt a Policy at a Meeting of Shareholders (the “Shareholders’
Meeting, even if this would be four years after the approval of this Policy. Subsequently, the Supervisory Board is required to submit a new proposal to the Shareholders to adopt a Policy at the next Shareholders’ Meeting (and if rejected again, the next
 Adding the option for the Supervisory Board to annually index the Supervisory Board fees (as defined in C.1 – C.5) based on economic developments in the Netherlands without requiring additional Shareholder approval.
Directive and (optionally) allow reasonable annual adjustment of the fees without requesting Shareholder approval each year.
Committees and optionally the position of (Vice) Chairman of the Supervisory Board and/or its Committees. The certainty of the fixed compensation also allows SB members in their supervisory role to focus on the long-term interest and sustainability of Aegon.
 The SB members receive fixed remuneration for their activities, such as attending Committee meetings and additional Supervisory Board meetings, in order to regularly discuss the Aegon strategy, the implementation of the strategy and the principal risks associated with it, while taking into account the broader long-term interests and sustainability of Aegon.
 SB members are only allowed to privately own Aegon N.V.
Shares if this is a long-term investment, aligning their interests with Aegon’s long-term interests.
Netherlands, and the UK, while there is also significant presence in Southern and Eastern Europe, Asia, and Latin
Committee, together with the Investor Relations and the Compensation & Benefits team, consulted Aegon’s main
Council in the Netherlands. All feedback was shared with the Supervisory Board. They took note that not all Stakeholder feedback was aligned, but that there were no significant conflicts either. On a more ongoing basis, the Supervisory Board and the Executives regularly discuss remuneration related topics with the supervisory authorities, legislators, and politicians.
Policy is only allowed under exceptional circumstances and for a limited time period under the following conditions:  The derogation can be from any remuneration element and/
or provision in this Policy, as long as it continues to stay:  In line with the general spirit of this Policy as described in A.3;  In line with the internal and external references as defined in this Policy (see C.1), and;  Compliant with the applicable legislation and regulations.  The Supervisory Board will adopt a derogation, which includes at least the following details:  An explanation why the derogation is required in order to serve the long-term interest and sustainability of Aegon as a whole or to assure its viability;  Which remuneration element or provision is derogated from and how it affects the Supervisory Board member’s compensation levels;  An assessment which confirms that the Policy allows the proposed derogation and that it complies with the applicable rules and regulations;  The period of derogation. This period is limited to the moment the Shareholders have adopted a revised or new policy at a Shareholders’ Meeting.
 The derogation and the abovementioned Supervisory Board approval details are disclosed in the next
B. Appointment The Shareholders appoint a Supervisory Board member in accordance with the Articles of Association of Aegon N.V. and the Dutch Corporate Governance Code.
an attendance fee for extra Supervisory Board meetings, be it attended in person or by video and/or telephone conference
(see the C.4) and (iii) an attendance fee for Committee meetings, be it attended in person or by video and/or telephone conference (see C.5).
The current fees were approved by the Shareholders at the 2019
The Supervisory Board regularly reviews the fees to ensure the structure remains competitive, taking into account external reference information such as economic developments
(e.g. inflation) as well as a quantitative assessments of the competitiveness against a peer group of Insurance companies in Europe and a peer group of companies based in the Netherlands (see the Annex for the peer group selection).
The Supervisory Board is allowed to annually index the fees based on economic developments in the Netherlands without
For any other change to the fees or the fee structure, such as, but not limited to, a higher fee increase versus indexation, changing the scope for a fee, or introducing a new fee, the Supervisory
C.2 Supervisory Board membership fee Base fee for Supervisory Board membership per year:  Chairman: EUR 80,000;  Vice-Chairman: EUR 50,000;  Member: EUR 40,000.
C.4 Supervisory Board attendance fee Attendance fees per extra Supervisory Board meeting: EUR 3,000.
C.5 Supervisory Board Committee attendance fee Attendance fees per Committee meeting: EUR 3,000.
D. Other Conditions Additionally, a Supervisory Board member is entitled to travel fees (see the D.1) and cost reimbursement (see the D.2).
D.2 Cost reimbursement Aegon N.V. pays or reimburses all reasonable costs related to the attendance of Supervisory Board meetings, Supervisory
Policy are verified by the independent external auditor and the Supervisory Board’s Remuneration Committee.
For this purpose, the Supervisory Board selected a primary set of peer group companies according to the following criteria:  Industry: Insurance, with a preference for Life Insurance;  Size: Average Market Capitalization, Employees, Revenue and
UK peer companies are excluded as the non-executive directors typically have different responsibilities compared to their continental European counterparts.
Zurich Insurance Group. This peer group partially differs from the European peer group for the Executive Board, as a result of excluding the UK companies.
ArcelorMittal, RELX Group, Royal Dutch Shell, Unibail-Rodamco, and Unilever. This peer group is equal to the Dutch peer group for the Executive Board.
5. 2019 Executive Board Remuneration Report The 2019 Executive Board Remuneration Report has been prepared by the Remuneration Committee of the Supervisory
Executive Board Remuneration Policy in 2019 The Supervisory Board has the overall responsibility for
Remuneration Policy. The Supervisory Board established the Remuneration Committee from among its members.
The current Policy contributes to Aegon’s strategy, long-term interests and sustainability through the remuneration of the
Executives for the long-term. Having motivated, competent and experienced Executives on board is essential for executing
 Aegon is committed to doing business responsibly and in a sustainable way. The Policy makes the risk-adjusted financial performance indicators mandatory for the Executive.
Aegon’s Executive Board remuneration is subject to various rules and regulations, which include the Dutch Financial Supervision
Act, the Dutch Civil Code, the Dutch Corporate Governance Code and the Solvency II Legal Framework. The most prominent requirements thereof are:  The total variable compensation amount which is allocated to an Executive Board member for a performance year cannot exceed 100% of the fixed compensation level.  Variable compensation should be based on a mix of company and personal performance, with at least 50% weight on non-financial performance.
 A substantial portion of any variable compensation award should be paid in a non-cash instrument (e.g. Aegon N.V.
With a 3-year vesting period, this requires an additional holding period of 2-years.
 Aegon can claw-back any variable compensation which has been paid (cash and shares) in specific circumstances such as a material financial restatement or individual gross misconduct.
The Remuneration Committee may recommend Policy changes to the Supervisory Board. In that case, the Remuneration
Total compensation Total compensation for Executive Board members is defined in the Executive Board Remuneration Policy as a combination of fixed compensation, variable compensation, pension and other benefits.
In line with this policy, the Supervisory Board has determined a maximum total compensation level for each Executive Board member, reflecting the specific roles, responsibilities, qualifications, experience and expertise of the individual. Each year, the Remuneration Committee reviews these total compensation levels of the Executive Board members to ensure they remain competitive and provide incentives in line with the
Company’s risk appetite. This review takes the specific role, 65 CONTENTS
Based on these criteria the current peer group consists of the following 16 European Insurance companies: Ageas,
Zurich Insurance Group. This peer group is slightly different from the European peer group for the Supervisory Board, because the UK companies are excluded from the latter as the UK nonexecutive directors typically have different responsibilities compared to their continental European counterparts.
The Remuneration Committee may recommend changes to the compensation levels of the Executive Board members, based on the results of this annual total compensation review and discussions with the Executive Board members regarding their remuneration level and structure. These recommendations are subsequently discussed by the Supervisory Board, which can approve, revise or reject them.
The Supervisory Board, based on the Remuneration Committee review, discussed and approved the 2019 total compensation for the Executive Board.
Fixed compensation The fixed compensation for the Executive Board members is paid in monthly installments.
 In case the performance of an indicator exceeds the target, the contribution of this indicators is capped once it reaches a predefined maximum level. This means that strongly exceeding performance on one specific indicator can only contribute up to a certain level to the overall performance result (i.e. a contribution cap).
 These performance indicators are regularly evaluated by experts in the company's Finance, Risk Management, Business
Committee recommends a selection of performance indicators for each Executive Board member, including its weights, threshold, target and maximum levels. This recommendation is subsequently reviewed by the Company’s Risk Management team (i.e the first ex-ante risk assessment) before it is sent to the Supervisory
Board, to ensure that:  The performance indicators and weights are in line with the Policy;  The financial performance indicators are consistent with the risk tolerance statements; 66 67CONTENTS
The Supervisory Board can approve, revise or reject the recommended performance indicator selection, taking the results of the risk assessment into account.
Once the Supervisory Board has approved the performance indicators for each Executive Board member, the Executive
Board members are also granted their conditionally variable compensation award for that performance year. This conditional award is equal to their at target variable compensation level, which consists of 50% cash and 50% Aegon shares. The grant price for the shares is equal to the volume weighted average price on the Euronext Amsterdam stock exchange for the period
December 15 to January 15 at the start of the performance year.
which were not take into account yet, such as:  Significant risk or compliance incident(s);  Insufficient response to risk incident(s), compliance incident(s), regulatory fine(s) and/or insufficient execution of risk mitigating measures in response to these incidents;  Breaches of laws and regulations; 1 With the exception of shares withheld to cover for the payment of any applicable taxes, social security premiums and possible other deductions by the government due for which the company holds a withholding obligation in connection with the pay-out of the shares.
 Insufficient evidence of embedding good standards of practice;  Significant deficiencies or material weaknesses relating to the
In this assessment possible risk mitigating behaviors are also taken into account, such as remaining within risk limits, risk reduction, risk avoidance, risk transfer and risk response by the Executive.
Management team executes an ex-post risk assessment which looks into whether there are reasons for a downward adjustment of the original variable compensation award (malus) which were not taken into account yet. The outstanding deferred portion can be used for correcting the originally award amount accordingly.
This risk assessment takes the same criteria into consideration as the second ex-ante risk assessment (above). Based on this assessment, the Remuneration Committee subsequently prepares a pay-out recommendation of the deferred portion (i.e.
Management team which looks into whether in hindsight the paid amount should have been lower or nill. Examples of misconduct are, but not limited to, significant breach of laws and/or regulations, use of violence, either verbally or physically, involvement with fraud, corruption or bribery, significant issues due to evident dereliction of duty and/or discrimination of any kind (for example age or gender). For practical reasons the clawback amount can be set-off or settled by any current or future obligations as permitted by law.
Pension arrangements The Executive Board members are offered pension arrangements and retirement benefits in line with the Executive Board
Wynaendts continued to be entitled to an annual gross payment of 28% of his fixed compensation in 2019, which is part of a grandfathered pension arrangement.
Other benefits Other benefits include non-monetary benefits (e.g. company car), social security contributions by the employer, and tax expenses borne by Aegon.
Terms of Engagement Members of the Executive Board are appointed for four years, and may then be re-appointed for successive mandates also for a period of four years.
The arrangements with the current Executive Board members contain provisions for severance payments in the event that their agreement is terminated as a result of a merger or takeover. These arrangements do not exceed one year’s fixed remuneration. The Supervisory Board has taken appropriate steps to ensure the arrangements of Executive Board members are in line with the Executive Board Remuneration Policy. However,
Mr. Wynaendts will not be entitled to a termination payment when his Board Agreement is terminated by the Company on September 30, 2020.
1,313,751 in 2019. Mr. Rider’s annual fixed compensation increased with 2.5% from EUR 918,000 to EUR 940,950 per
June 2019, which resulted in a total fixed compensation payout of EUR 931,388 in 2019. The 2017 fixed compensation for Mr. Rider has been for the period as Executive Board member (per May 19, 2017). His annualized 2017 fixed compensation was EUR 900,000. The IFRS-EU expenses for these fixed compensation amounts are equal to the amounts in the table below.
B. Conditional variable compensation 2019 In 2019, Mr. Wynaendts and Mr. Rider both had an at target variable compensation opportunity of 80% of their annualized fixed compensation level at year-end. The variable compensation award was based on the results on the Aegon and their personal performance indicators and related target levels, which had been approved by the Supervisory Board at the start of 2019.
As a result they would receive the following if the performance indicator results reached the threshold (50%), target (80%)
and maximum level (100%), taking into account the grant price of EUR 4.162 for the shares: Variable compensation opportunity 2019 Threshold (50%)‍ Target (80%)‍ Maximum (100%)‍ Alex Wynaendts Total (EUR thousand)‍ 664 1,062 1,327 in cash (EUR thousand) 332 531 664
Mr. Rider (i.e. with 80% for the target level) the 2019 Aegon performance result was 67%. For the absolute results on each of the Aegon performance indicators, see the table with the business performance highlights in the first chapter of this
Aegon – Performance indicator results 2019 (in % on 50-100-150% scale)
Alex Wynaendts – Performance indicator results 2019 (in % on 50-80-100% scale)
Matt Rider – Performance indicator results 2019 (in % on 50-80-100% scale)
Normalized Capital Generation The movement in our capital position (on a Solvency II basis) during a period in the normal course of business net of market impacts (e.g. changes to interest rates, credit spreads, equity returns) and one-time effects. Impacts from dividends and capital injections that do not generate capital but do affect Own Fund are excluded from capital generation.
Solvency II ratio The Solvency II ratio measures the solvency of an EU insurance company. The Solvency ratio is calculated by dividing eligible Own Funds by the Solvency Capital Requirement (SCR) – the amount of capital insurers must hold under the Solvency II regime.
Return on equity The return on equity (ROE) measures the rate of return that the owners of common stock of a company receive on their shareholdings. Return on equity signifies how good the company is in generating returns on the investment it received from its shareholders. Aegon’s ROE is calculated by dividing underlying earnings after tax and after cost of leverage by average shareholders' equity excluding revaluation reserve.
New life sales New Life Sales reflect the premiums for new life insurance policies sold during the year. Aegon’s new life sales is calculated as a total of recurring premiums and 1/10 of single premiums.
Digitally connected customers The total number of customers who have registered, created an online account with Aegon and have logged in to this account at least once.
Alex Wynaendts Control environment Measures the effectiveness of Aegon’s Control Environment in relation to IT CF implementation, Control Excellence and Solvency II/Solvency Capital reporting controls deficiency rectification.
Strategy execution Consists of five personal milestones which were key for the strategy execution in 2019.
Matt Rider Control environment Measures the effectiveness of Aegon’s Control Environment in relation to IT CF implementation, Control Excellence and Solvency II/Solvency Capital reporting controls deficiency rectification.
Cultural transformation Measures the personal contribution to embedding the Future Fit values in the Finance function (‘Acting as one, Customer centricity, Agility and Accountability’).
Board member (per May 19, 2017). His annualized 2017 variable compensation was EUR 802,008. The second table contains the expenses for the conditional variable compensation awards, as recognized under the IFRS-EU accounting treatment in the income statement.
Shares by plan year Grant Price 2) Allocated 2017 2018 2019 2020 2021 2022 2023 Alex Wynaendts
Jan Nooitgedagt 1 In line with the Aegon Group Global Remuneration Framework, it was agreed to adjust Mr Wynaendt’s 2014 variable compensation award downwards by 3,388 shares and EUR 22,832 to reflect the outcome of a regulatory matter relating to the company. 2 This is the volume weighted average price (VWAP) of Aegon on the Euronext Amsterdam stock exchange for the period December 15 to January 15. For instance for the 2019 plan year, this is the VWAP for the period December 15, 2018 to January 15, 2019.
Cash by plan year (in EUR)‍ Allocated 2017 2018 2019 2020 2021 2022 2023 Alex Wynaendts
Jan Nooitgedagt 1 The increase Mr. Wynaendts’ fixed compensation in 2016 and 2018 resulted in a back service liability of EUR 1,361 thousand and EUR 340 thousand respectively. The 2016 back service liability was expensed over the 2016-2019 period.
From June 2019 onwards, Mr. Wynaendts became eligible for the same pension arrangement as Mr. Rider. In this arrangement both receive pension contributions which are equal to 40%
G. Benefits 2017-2019 Other benefits include non-monetary benefits (e.g. company car), social security contributions by the employer, and tax expenses borne by the Company. The 2017 benefits for Mr.
H. Total Compensation in recent years The Total Compensation for Mr. Wynaendts related to 2019 was
EUR 3.9 million (2018: EUR 5.0 million 2017: EUR 4.6 million)
and for Mr. Rider EUR 2.1 million (2018: EUR 2.1 million; 2017: EUR 1.3 million). The total remuneration for the members of the Executive Board over 2019 was EUR 6.0 million (2018: EUR 7.1 million; 2017: EUR 6.0 million).
The total expenses recognized under IFRS-EU accounting treatment in the income statement for Mr. Wynaendts related to 2019 were EUR 3.8 million (2018: EUR 4.4 million; 2017: EUR 4.3 million) and for Mr. Rider EUR 2.0 million (2018: EUR 1.9 million; 2017: 1.1 million). Total IFRS-EU expenses for the members of the Executive Board over 2019 were
In line with the European guidelines on the standardized presentation of the remuneration report, you find the remuneration which was awarded and due to the Executives in 2019 and 2018 in the table below. The Variable Compensation amounts differ from the amounts disclosed in the tables above, as it includes the pay-out of variable compensation in cash and shares in the 2019 and 2018 calendar years. These have been awarded for previous performance years. Also the shares are included at the value when they were paid (i.e. vested), which might differ from the initial grant price. Please note that therefore the parts of Mr. Rider’s 2017 variable compensation award, which have been paid in 2018 as ‘upfront’ and in 2019 as ‘deferred’, are pro-rated for the period as Executive Board member (per May 19, 2017). The Fixed Compensation and
Pension amounts are equal to the amounts which are included in the tables above.
Matt Rider 1 The upfront cash and share payments of the variable compensation of the previous year. The shares are valued at their price at vesting. For example, the upfront cash and shares of the 2018 variable compensation award which were paid in 2019.
2 The deferred cash and share payments of the variable compensation of the years before the previous year. The shares are valued at their price at vesting. For example, the deferred cash and shares of the 2015-2017 variable compensation awards which were paid in 2019. 3 There were no extraordinary (non-recurring) payments or other benefits in 2019 and 2018. 4 Fixed is the sum of Salary, Benefits and Pension divided by the Total. Variable is the sum of Upfront, Deferred and One-off divided by the Total.
Matt Rider (as of May 19, 2017) Awarded and due - - 1,357 1,670 1,799
Vesting price Aegon shares In EUR 7.243 4.502 4.423 5.848 4.287
Aegon Non-financial 10% Relational NPS 1 year 20% Strategy Execution 1 year
Matt Rider Weight Performance indicators Performance period Aegon financial 10% Normalized Capital Generation 2 years (2019-2020) 1)
10% Fees and Premium Based Revenues 1 year 10% Normalized Consistent Value of New Business 1 year 10% Return on Equity 1 year
1 Will become a 3-year performance period from 2021 onwards. This is phased in with a 2-year performance period (2019-2020) for the 2020 plan year. The 2019-2020 target is equal to the first two years of the 3-year target for the 2019-2021 period which was disclosed last year.
2 Will become a 3-year performance period from 2022 onwards. It is phased in with a 1-year performance period (2020) for the 2020 plan year and a 2-year performance period (2020-2021) for the 2021 plan year.
Fees and Premium Based Revenues represent the income from Aegon’s fee businesses as well as the fees charged and the actual premium collected less the benefit premium, expense loadings and profit margins included in premiums for its life insurance and pensions business. The target is part of the approved 2020 budget.
Financial Strategy Execution Consists of five personal milestones which are key for the strategy execution within the Finance function in 2020.
6. Proposed 2020 Executive Board Remuneration Policy A. Policy A.1 Remuneration Policy This Executive Board Remuneration Policy (the “Policy”)
Remuneration of all employees of Aegon N.V. and its direct and indirect subsidiaries (“Aegon”) and the Executives is governed by the Aegon Group Global Remuneration Framework (the
“Remuneration Framework”). This Policy is aligned with the current version of this Remuneration Framework, which was adopted by the Supervisory Board of Aegon N.V. (the “Supervisory
N.V. (the “Remuneration Committee”) prepared the changes to this Policy, which were endorsed by the Supervisory Board on March 17, 2020. At the date of approval, the Policy complies with the applicable rules and regulations such as the Dutch 76 77CONTENTS
A.2 Policy Term This Policy will take effect retroactively from January 1, 2020.
The Policy remains in place until a new or revised Policy has been adopted by the Shareholders in accordance with the applicable requirements from the Dutch Civil Code. The Supervisory Board will submit a proposal to the Shareholders to adopt a Policy at an Annual Meeting of Shareholders (the “Shareholders’
Meeting”) at least every four years. The Policy will subsist if Shareholders reject a new or revised Policy at a Shareholders’
Policy compared to the previous version in order to comply with the new Dutch Act which implements the Shareholder
Rights Directive and to incorporate Shareholder feedback on the previous Executive Board Remuneration Policy of 2011.
The defined performance indicator categories are mandatory to ensure that Stakeholder interests are represented.  At least 20% of the performance indicators will be measured over a retrospective 3-year performance period. Since 2011 indicators were measured on a 1-year performance period only, in response to regulatory changes at that time. By re-introducing 3-year performance indicators, the
to 66 2/3%, while the Cash portion is decreased from 50%
 The vesting schedule of the Variable Compensation award is changed into one upfront Cash part of 33 1/3% and one deferred Share part of 66 2/3%. The Shares cliff-vest after 3 years and are subject to an additional holding period of 2 years. Previously the vesting schedule paid the Variable
Shareholders. This change also simplifies the remuneration structure of the Executive and increased its transparency.
A.4 Policy Considerations The Policy contributes to Aegon’s strategy, long-term interests and sustainability through the remuneration of the Executives in various ways:  The Policy provides the Supervisory Board with the means to attract, motivate and retain competent and experienced
 Our strategy is about building life-time relationships with customers, to create financial security and well-being throughout their lives. To pursue this strategy our focus is on sustainable growth through expanding our customer base, increasing efficiency, capitalizing on the advantages of being a global group and investing more in growth businesses. The leading performance indicator categories for successful execution of this strategy are Capital, Growth and Strategy
Policy makes these performance indicator categories mandatory for the Executive.  Aegon believes it must create long-term value for its
Stakeholders and the societies in which it operates. Because of the nature of our business, value created is often financial, but it may also be social, economic or environmental. The
sustainable way. Variable Compensation of the Executive can be adjusted downwards (i.e. malus) or clawed-back in case certain performance has not been achieved in a sustainable way, such as but not limited to: significant risk and compliance incidents, insufficient response to such incidents and/or insufficient evidence of embedding of good standards of practice, such as sound and responsible business practices and integrity of products and services delivered. Additionally, the Policy makes the performance indicator category
Environmental, Social and Governance (“ESG”) mandatory for the Executive to support this approach of doing business (see
The Supervisory Board took Aegon’s identity, purpose and values into account when developing the Policy and its changes:  Aegon is an international financial services group based in the
Netherlands and the UK, while there is also significant presence in Southern and Eastern Europe, Asia and Latin
America. The Policy provides the Supervisory Board with the means to attract, motivate and retain Executives who are competent and experienced to run Aegon in this specific context. As the Executives are based in the Netherlands, the
Policy considers the European Insurance peers as well as Dutch General Industry peers to be the relevant external reference for Executive Remuneration. The Policy is also strongly influenced by the European and Dutch rules and regulations on (Executive) remuneration which apply to Aegon.  Aegon’s purpose is to help people achieve a lifetime of financial security. In order to fulfill this purpose, Aegon has a strategy to which this Policy actively contributes (see above).  The four Future Fit values ‘Acting as one, Customer centricity,
Agility and Accountability’ aim to create a company that is fit for the future: one that meets customers’ expectations, is right for our digitally-connected, data-driven world and can adapt quickly to changing market conditions. These values have most prominently been reflected in the Policy as follows:  Acting as one: At least 50% of the Executive’s variable compensation is determined by Aegon’s Group performance, in addition to the Executive’s personal performance, stressing the importance of working together.
Executive in order to focus on (sustainable) sales to customers and Aegon’s relationship with its customers respectively.
Supervisory Board the flexibility to agree to those performance indicators which are most relevant for the execution of the strategy at that moment.
 Accountability: The Policy establishes a clear link between pay and performance by offering the Executive a Variable
Compensation opportunity which is based on the results of pre-defined performance indicators, target levels and calculation rules. This is combined with allowing the
Supervisory Board to adjust the Variable Compensation award before pay-out (malus) or claw back (part of) the paid award, if there are reasons discovered that would in hindsight justify a lower (or no) Variable Compensation award.
The Executive participates in collective compensation and benefit plans. The target and maximum Variable Compensation levels as well as the Pension Contribution level for the Executive are equal to that of some of the Management Board members in the Netherlands. The Executive is also subject to several collective Aegon employee plan rules, such as the Aegon
Vereniging Aegon, proxy advisory bodies and Shareholder interest groups on the draft changes. The Chairman of the Remuneration
Compensation is partially based on a performance indicator related to Shareholders interests, for example relative Total
Shareholder Return which looks at the change Share price (and dividend payments) compared to peer companies (see also D.1).
The Remuneration Committee conducted a scenario analysis in relation to these Policy changes to determine the longterm effect on the remuneration structure and level of each
Board, who took note of these conclusions when they endorsed the Policy on March 17, 2020.
C. Remuneration Structure C.1 Remuneration package and level The details of the Executive remuneration package are laid down in the Board Agreement. This remuneration package consists of four categories: Fixed Compensation, Variable Compensation,
(maximum) remuneration level for the Executive to ensure the structure remains competitive and provides proper and risk-based incentives in line with Aegon’s risk appetite: The Fixed and
N.V. and the annual compensation changes of the general employee population and senior managers within Europe and the Netherlands specifically.
market, economic developments (e.g. inflation) as well as quantitative assessments of the competitiveness against a peer group of insurance companies in Europe and a peer group of companies based in the Netherlands (see the Annex for details of the peer group selection).
C.2 Fixed Compensation Executives receive a gross monthly Cash Base Fee as Fixed
The Supervisory Board may entitle Executives to other forms of Fixed Compensation:  A gross monthly payment of Shares as Base Fee in accordance with the Aegon Group Plan Rules for the Share Component of the Fixed Salary, which is the collective policy for all eligible
As of the effective date of the Policy, the Executives receive:  Mr. Wynaendts (CEO): An annual gross Cash Base Fee of EUR
1,327,239 and a permanent Fixed Allowance of 2% of the annual gross Cash Base Fee. This Fixed Allowance was permanently added to the remuneration package as alternative for an indexation of the Cash Base, which was at that moment in time the preferred choice.  Mr. Rider (CFO): An annual gross Cash Base Fee of EUR 940,950.
 Mr. Friese, when appointed to the Executive Board at the
C.3.3 Variable Compensation allocation The Variable Compensation award is allocated by the Supervisory
Board after the completion of the performance year, based on the results of pre-defined performance indicators, target levels and calculation rules (see D.1 - D.3 for more details), while also taking the behavior and development of the Executive into account. The Supervisory Board can adjust the calculated award downwards before allocation, based on the findings of the mandatory Ex-Ante Malus risk assessment. The Ex-Ante
Guaranteed Variable Compensation can only be allocated by the Supervisory Board in accordance with the applicable rules of the Dutch Financial Supervision Act. This currently means that the Supervisory Board can only allocate a guaranteed Variable Compensation award within the first year of the appointment of an external candidate as Executive, provided that Aegon’s financial position is considered sound by the applicable standards.
C.3.4 Vesting Schedule Once allocated, 33 1/3% of the Variable Compensation award will be paid for upfront in Cash as soon as reasonably practical after the completed performance year. The remaining 66 2/3%
Annual Report in the year of vesting. The number of deferred
Risk Taker Variable Compensation Plan (i.e. based on the grant price as defined in this plan).
C.3.5 Shareholding requirement The Shares that have been allocated to the Executive as Variable
Compensation will be held for a total period of 5 years after allocation, before they are released to the Executive. This period consists of a 3-year vesting period and an additional 2-year holding period.
of the Executive’s gross annual Base Fee is structurally held in net Shares, assuming five years of at target Share allocation, the current income tax rate and no or moderate changes in the Annual Base Fee and Share price level.
C.3.6 Claw Back The Supervisory Board has the authority to re-claim (i.e. claw back) any paid and vested Variable Compensation, in Cash or in
Shares, in accordance with Dutch Financial Supervision Act and the Material Risk Taker Variable Compensation Plan, in case of but not limited to a material financial restatement or individual gross misconduct.
Netherlands during the period December 15 preceding the plan year and January 15 of the plan year.  In this context, the employment of the Executive is considered to be continued uninterruptedly in the case where the
Executive’s Board Agreement is terminated due to long-term ill health, disability, (early) retirement, death or reduction of work force or redundancy of the job or position of the
 In the event of termination of the Board Agreement of a Good
Compensation that will be paid-out (including the number of conditionally granted Shares that will Vest) will be pro-rated to reflect the period of active service from the grant date until the termination date, subject to the final approval of the Supervisory board.
 Except in the event an Executive is considered a Good Leaver, the Variable Compensation that is conditionally granted will lapse on the date that the Board Agreement of the Executive is terminated prior to a vesting date.
 No dividend or interest will accrue on any part of the Variable
C.3.5), will accrue regular dividends (if any) as from the vesting date.
The Executive is enrolled in the applicable local employee pension plan(s). In the Netherlands this is a mandatory Individual
C.5 Other Benefits & Arrangements C.5.1 Sign-on and buy-out The Supervisory Board may agree to a sign-on and/or buy-out arrangement in order to attract an external candidate to be appointed to the Executive Board. The arrangement can only be offered on an exceptional basis within the first year of joining the company, when this is in the long-term interest of Aegon and there are circumstances that justify such an arrangement.
Any sign-on or buy-out arrangement will be disclosed in the Remuneration Report.
Policy approval, these rules require that a retention bonus:  Is necessary in the context of a structural organization change such as a merger, divestiture, a take-over or a major organizational internal restructuring, and;  Solely serves to retain the Executive; and  Together with the allocated Variable Compensation award do not exceed the bonus cap of 100% of the Executive’s Fixed
C.5.3 Other benefits The Supervisory Board may, but not limited to, offer the
(local) Aegon employees, such as but not limited to the collective disability arrangement, collective health insurance and the Expat Policy.
C.5.4 Grandfathered arrangements The Supervisory Board may respect any arrangements between
Aegon and the Executive, if the terms were agreed prior to the effective date of this Policy or if the terms were agreed before the individual was appointed to the Executive Board.
However, there a Termination Fee is not allowed in case of:  Early termination of the Executive on the initiative of the
Executive, unless due to imputable acts or omissions of Aegon;  Imputable acts or omissions by the Executive; or  Failure of Aegon during the appointment term of the
D. Performance indicators for Variable Compensation D.1 Performance Indicators Each year Variable Compensation is allocated based on performance against a set of performance indicators, weights and target levels that have been agreed by the Executive with the
Supervisory Board at the start of the performance year. Aegon allocates one Variable Compensation award, which is paid partially in upfront Cash and partially in deferred Shares (see also
Framework. At the time of the Policy approval, this maximum is 45% of the total indicator weight (of financial and non-financial indicators combined);  A mix of Aegon and personal performance indicators, which can range in weight between 50-80% and 20-50%
Earnings Return on Equity, Net Underlying Earnings, Underlying Earnings Before Tax, Earnings per Share
Aegon or personal non-financial ESG Environment: CO2 footprint Social: Employee Engagement, Employee Diversity Governance: Risk Management
The Executive is incentivized by this Policy to contribute to the
Aegon strategy also through the following mandatory performance indicator categories (see also A.4):  Capital: In order to execute its strategy, Aegon needs strong and stable Capital adequacy levels for its current businesses and for investing in growth businesses. Sustainable capital generation allows Aegon to return capital to its shareholders, including in the form of dividends, and provides it with financial flexibility.
 Growth: Measures the expansion of our customer base expressed in financial results, which is one of the key strategic focus areas.
 Earnings: Positive earnings are a prerequisite for Aegon to continue operate and create value for its Stakeholders and societies in the long-term.
 Other Stakeholders: Alongside the Shareholders, Aegon has a range of important Stakeholders, such as customers and employees. For Aegon’s customers long-term value creation means offering protection through our products and services, paying claims and benefits, providing returns on savings and investments and helping to build long-term financial security.
For Aegon’s employees long-term value is created by paying salaries and other social benefits, providing a safe, fulfilling environment in which to work and offering training and career opportunities.
Target levels for financial indicators are directly derived from the annual Budget / MTP numbers. Other target levels should be chosen such that they are attainable and realistic, yet at the same time challenging.
The minimum and maximum levels around target are based on:  The inherent sensitivity of the metric to economic assumptions;  Prior year experience in reaching threshold /maximum target levels;  Deviation from current year’s plan to prior year’s plan and  Absolute level of the target.
E.3 Non-compete and non-solicit The Supervisory Board may include a non-compete and a nonsolicit clause in the Executive’s Board Agreement.
For these scenarios, the Board Agreement will include a clause on the subsequent termination of the Board Agreement, which may include a notice period clause and a Termination Fee clause.
F.2 Termination by Executive The Executive may terminate the Board Agreement with a three month notice period during the appointment.
Annex One of the sources against which the Supervisory Board assesses the competitiveness of the Executive’s remuneration structure and levels are the peer companies.
For this purpose the Supervisory Board selected a primary set of peer group companies according to the following criteria:  Industry: Insurance, with a preference for Life Insurance;  Size: Average Market Capitalization, Employees, Revenue and
Assets). This peer group partially differs from the European peer group for the Supervisory Board, as a result of excluding the UK companies where non-executive directors typically have different responsibilities compared to their continental European counterparts.
Akzo Nobel, ASML, DSM, KPN and Wolters Kluwer. The last update of this peer group was in 2019, when ING, NN Group,
ArcelorMittal, RELX Group, Royal Dutch Shell, Unibail-Rodamco and Unilever. This peer group is equal to the Dutch peer group for the Supervisory Board.
The Supervisory Board will annually review both peer groups and can amend these, within the above-mentioned selection criteria, to ensure they continue to provide a reliable basis for comparison. Any change to the peer group will be disclosed in the Remuneration Report.
Non-financial policies, procedures and outcomes As a company, Aegon is committed to doing business responsibly.
Code of Conduct • Applies to all employees worldwide. • Covers topics such as data protection, environmental responsibility, human rights and money laundering.
• Also contains provisions for reporting suspected illegal and unethical behavior.
• Total number of incidents of fraud involving employees, intermediaries and third parties
• Significant fines amounted to EUR 0.3 million; in the Americas, Transamerica had two fines related to the sale of insurance products. One fine was received following a market conduct examination and another was due to a failure to supervise a distribution partner selling products outside its permissions.
• Policy attestation for bribery and corruption risk (Conflict of Interest and Gift & Entertainment policies)
• 95% of employees completed mandatory Code of Conduct training (down from 97% the previous year).
• 89% compliance with Aegon bribery and corruption policies (up from 88% the previous year). This figure reflects business units’ compliance with specific requirements within our Conflict of Interest and Gift & Entertainment policies; where there is not full compliance, this does not indicate a breach of the policy, but areas where units have requested time to further strengthen internal governance.
• In 2019, we donated a total of EUR 9.0 million, down from EUR 10.1 million the previous year. Cash donations decreased to EUR 8.1 million; value of volunteering was higher, however, at EUR 0.9 million. Community investment represented 0.6% of net income, down from 1.4% in 2018; the decrease was due mainly to the substantial increase in net income in 2019.
Area Policy or guideline Indicators (used to monitor compliance and/or outcomes)
Global Information Security Policy • Sets out Company’s approach to cyber threats and data protection.
• Applies to all Aegon businesses. • Supported by mandatory training in data and cyber security.
• Maintenance of an internal IT Control Framework, and action items to address gaps in performance are documented and monitored
• The internal IT Control Framework is regularly mapped and updated to embed new and updated market standards
• Periodic attestation to the internal IT Control Framework, with certain exceptions as applicable by country unit, for among other reasons adequate implementation timelines
• Institutions like Aegon will continue to remain subject to information security attacks.
Statement on Inclusion & Diversity • Applies to all Aegon businesses worldwide. • Diversity also included in the Code of
• Total number of women in workforce. • Percentage of women in senior management and at Supervisory, Executive or Management Board level
Environment Environmental Policy • Emphasizes importance of minimizing damage to the environment through the Company’s use of energy and other resources.
• Business air travel amounted to 89.4 million km (down 17%).
• Consumption of renewable energy (as % of overall energy use)
• Electricity consumption was 5.1% lower at 88.9 GWh; gas consumption, decreased 6.7% to 25.4 GWh.
• Renewable electricity comprised 97% of our total electricity consumption (down from 99% in 2018). The contribution of renewable energy to our overall energy consumption decreased to 75% (from 77% the previous year).
Rights, core standards of the International Labor Organization and the principles of the UN Global Compact.
• Consideration for human rights is built into Aegon’s Sustainable Procurement and Responsible Investment policies. Other policies cover aspects of human rights; these include the Company's Conflict of Interest, Employee Screening, Anti-money laundering, Anti-fraud and Gift & Entertainment policies. Aegon UK also issues a modern slavery statement (in line with the UK government's 2015 Modern Slavery Act).
• Aegon conducts a Human Rights risk assessment every two years and will be conducting this assessment again in 2020.
Our 2018 assessment identified four ‘Aegon’ countries where the operating environment presents a meaningful human rights risk: China, Indonesia, India and Turkey. These risks relate essentially to local political factors. In the US, the Netherlands and the UK, Aegon faces little or no significant human rights risk. In Southern and Eastern Europe, the environment is potentially more difficult, particularly with regard to corruption. In the Americas, risk is concentrated in Brazil and Mexico; again, this relates mainly to corruption. For those countries with highest risk, Aegon has recommended preventative or remedial measures for local management3. These focus on issues where there is greatest risk and where Aegon has most influence (corruption, corporate governance, discrimination in the workplace, working conditions, freedom of association and collective bargaining). The aim, with these measures, is to ensure Aegon’s overall human rights risk remains low.
• Companies engaged with as part of Aegon’s approach to responsible investment
• Almost three-quarters of our engagements addressed corporate governance matters, including corruption, remuneration and board structure. Social issues addressed included health & wellbeing (opioids, drug price increases and meat sourcing), human rights (UN Global Compact principles 1 & 2). Climate change (carbon emission reduction) and pollution were the most common themes discussed in engagements concerning the environment.
Global Health & Safety Statement • Commits Aegon to upholding high health and safety standards in its offices. • Aim is to limit work-related injuries and illnesses (including stress) to an absolute minimum.
Procurement Sustainable Procurement Policy • Sets out business conduct, social and environmental standards for suppliers of goods and other services.
• Percentage spend on goods and services covered by a Supplier Sustainability Declaration.
• In 2019, 41% of our spend on goods and services was covered by a Supplier Sustainability Declaration, up from 25% in 2018.
Pricing and Product Development Policy • Sets out market conduct principles, aimed at ensuring fair treatment of customers and reasonable distribution of returns between customers, intermediaries and shareholders.
• Percentage compliance with terms of Pricing and Product Development Policy
• 94% compliance with requirements of Pricing & Product Development Policy (up from 90% the previous year).
Remuneration3 Global Remuneration Framework • Details Company’s approach to pay, based on principle of ‘pay for performance’.
• Total taxes borne by Aegon (US, Netherlands, UK, Asia and Others).
• EUR 615 million paid by Aegon in tax down from EUR 620 million in 2018); another EUR 2.45 billion in taxes collected on behalf of others, up from EUR 2.16 billion (increase was due to higher wage and insurance premium taxes).
Transparency International, UN Development Program and World Health organization. 3 These measures include effective access to Aegon’s Global Ethics Line, raising employees’ awareness of human rights risk, ensuring basic healthcare and financial services for employees, suggesting alternative employee representation where there is no independent trade union, ensuring neutrality at times of regime change and enforcing a zero tolerance approach to corruption and discrimination in the workplace.
4 The assessment of compliance against the Global Remuneration Framework was limited to our largest business units only (Aegon NL, Aegon UK and Transamerica).
Code of Conduct Aegon’s Code of Conduct embodies the Company’s values and helps ensure that all employees act ethically and responsibly and is available at www.aegon.com.
Every Aegon employee has to certify that they have read and understood the Code of Conduct, and agree to abide by it.
Reporting misconduct Employees are often the first people to witness any wrongdoing within the company. It is important that such incidents, which include incidents of internal fraud, are quickly identified and resolved to prevent or reduce any adverse effects, such as financial loss and reputational harm. Aegon is committed to creating and maintaining an open and supportive culture in which employees feel safe to raise concerns or report suspected or actual violations. Employees are encouraged to use the available reporting channels to report concerns of poor practice, inappropriate, unethical, fraudulent or illegal behavior.
Aegon has contracted an independent third party to provide an anonymous and confidential method to report potential misconduct. Reports can be submitted online or via tollfree telephone lines in all of the countries in which Aegon conducts business (24 hours a day, seven days a week). All reports are investigated and results are reported to the Audit
Regulation and supervision Individual regulated Aegon companies are each subject to prudential supervision in their respective home countries.
Solvency II Introduction The Solvency II framework imposes prudential requirements at group level as well as on the individual EU insurance and reinsurance companies in the Aegon Group. Insurance supervision is exercised by local supervisors on the individual insurance and reinsurance companies in the Aegon Group, and by the group supervisor at group level. The Dutch Central
The value of the technical provisions is equal to the sum of a best estimate and a risk margin. The discount rate at which technical provisions are calculated is an important element in order to determine the technical provisions. This and other parameters to determine the technical provisions may have an important effect on the amount and volatility of the own funds that insurance and reinsurance undertakings are required to maintain. The Solvency II framework contains several measures
(insurance or reinsurance company's balance sheet ability to withstand a 1-in-200-year event). The buffer that insurance and reinsurance companies are required to hold is the Solvency
(the rules for which are set out in detail in the Solvency II rules and guidelines); (b) use an internal model (for which the approval of the supervisory authorities is required); or (c) use a partial internal model (PIM) (which is a combination of the standard formula and an internal model, and requires approval of the supervisory authorities). An internal model is developed by the insurance or reinsurance company in question, and should better reflect the actual risk profile of the insurance or reinsurance company than the standard formula. Aegon (as a group) uses a PIM.
th er n o n -fin an cial in fo rm atio n into three tiers in accordance with the quality of the own funds.
The lower tiers of own funds (tiers 2 and 3) represent a limited part of the eligible own funds, as excess lower tier capital is disregarded for purposes of calculating SCR. Furthermore, the SCR may consist of limited amounts of off-balance sheet own funds ('ancillary own funds' such as letters of credit or guarantees). The MCR must be covered entirely by tier 1 and tier 2 on-balance sheet items ('basic own funds').
authorizes the commissioner of the state of domicile to take actions necessary to place the company under regulatory control
Aegon considers the Authorized Control Level RBC to be a level similar to the Solvency II MCR.
Aegon considers the Company Action Level RBC to be similar to the Solvency II SCR. At 100% Solvency SCR, insurance regulators in the European Union will require management to submit a regulatory recovery plan.
(for instance in the event that the risk profile of the undertaking deviates from the SCR calculation or if there are weaknesses in the system of governance); the requirement to submit and execute a recovery plan (in the event of a (potential) breach of the SCR or a short term financing plan (in the event of a
Pillar 3 Solvency II included detailed reporting and disclosure requirements. These requirements include non-public supervisory reporting on a regular (usually tri-annual) basis through regular supervisory reports (RSR), complemented by detailed quantitative reporting templates (QRTs) reported on a quarterly basis, which contain detailed financial data.
II requirements, these entities may be affected indirectly by the Solvency II group requirements. Entities in other financial sectors are, in most cases, taken into account in the group solvency calculation, applying the capital requirements of that specific financial sector (such as Basel III requirements for banks and certain investment firms) and using the Deduction and
Consolidation method the group is essentially treated as one economic unit whereas the Deduction Aggregation method requires the group to aggregate entities, rather than fully consolidate entities for the purpose of the group capital requirements.
Solvency ratio. As required by the DNB, Aegon deducts its participation in Aegon Bank N.V. from Aegon’s group solvency.
States, Aegon uses the Deduction and Aggregation method, with local regulatory requirements to translate these into the Group
section of this Annual Report. Solvency II group supervision is exercised by a combination of the supervisory authorities of the local insurance and reinsurance entities and the group supervisor. An important role in the cooperation between the supervisory authorities in the context of group supervision is played by the college of supervisors, in which the local and group supervisors are represented. This college is chaired by the group supervisor.
Solvency II 2020 review In addition to the 2018 review of the Solvency II Delegated
II, insurance guarantee schemes and resolution funding. A formal legislative proposal of the European Commission on the Solvency
II 2020 review will be published later in 2020. Due to the fact that the final technical advice has not yet been published and it is not clear to what extent the European Commission will take into account the advice in its proposals, the potential impact of the review is uncertain.
Commission had requested EIOPA’s views on the integration of sustainability, in particular climate-related developments, into the Solvency II framework for the valuation of assets and liabilities, investment and underwriting practices, the calibration of market and natural catastrophe risks and the use of internal models, i.e. focusing on Pillar 1 requirements. The European
Conglomerate Directive includes supplementary capital adequacy requirements for financial conglomerates and supplementary supervision on risk concentrations and intra-group transactions in the financial conglomerate. Due to the introduction of the Solvency II group supervisory requirements – which include similar, and to a large extent overlapping, requirements to those covered by Financial Conglomerates Directive – the relevance of supplemental group supervision pursuant to the Financial
However, the FSB, in consultation with the IAIS and national authorities, decided not to publish a new list of G-SIIs for 2017 or 2018. In November 2019, in recognition of the fact that the Holistic Framework (see below), consistently implemented, provides an enhanced approach to assessing and mitigating systemic risk in the global insurance sector, the FSB decided to suspend the identification of global systemically important insurers (G-SIIs). In November 2022, the FSB will, based on the initial years of implementation of the Holistic Framework, review the need to either discontinue or re-establish an annual identification of G-SIIs.
Due to its G-SII status, Aegon has been subject to an additional layer of direct supervision at group level. In accordance with these requirements, Aegon submitted a liquidity risk management plan, a systemic risk management plan, and an ex ante recovery plan to DNB and to the G-SII crisis management group
(CMG) that was established. Aegon has updated these plans on an annual basis. In addition, the Aegon Group’s Resolution
Authority (the Dutch Central Bank) was made responsible for the development of Aegon’s resolution plan.
Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector and ComFrame In November 2019, the IAIS adopted the Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector. Some of the provisions of the Holistic Framework are included in the IAIS Insurance Core Principles (that apply to all insurers), while others are included in ComFrame (the Common
Framework in November 2022 or, alternatively, Aegon would not be identified as a G-SII, Aegon would still be subject to ComFrame and ICS, to the extent these would be implemented in local legislation.
The R&R Act introduces a requirement for Dutch insurance companies and reinsurance companies, such as the Dutch insurance and reinsurance subsidiaries in the Aegon Group, to draw up and maintain an ex ante recovery plan, that should allow these entities, when faced with financial problems, to take measures to recover their solvency ratio and continue to operate in going concern. In addition, the Dutch Central
or liabilities. In addition, a bail-in tool is introduced, that allows for the write-off or conversion of rights of creditors, including policyholders and beneficiaries, while respecting the principle that they should not be worse off through resolution, including the application of the bail-in tool, than they would in ordinary insolvency proceedings.
Group’s Resolution Authority (the Dutch Central Bank) remains responsible for the development of Aegon’s resolution plan, pursuant to the Dutch Act on Recovery & Resolution of Insurers and as expected for IAIGs under the Holistic Framework.
Bank N.V., the framework of the EU Directive on the recovery and resolution of credit institutions and investments firms (the
Intervention by the Dutch Minister of Finance Lastly, under Part 6 of the Dutch Financial Supervision Act, the Dutch Minister of Finance may intervene immediately, when the stability of the financial system is threatened by the situation of a financial institution, 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.
th er n o n -fin an cial in fo rm atio n covered by ComFrame. IAIS standards are not self-executing and must be adopted by local jurisdictions to be formally applicable.
Capital and liquidity management Guiding principles The management of capital and liquidity is of vital importance for Aegon Group, for its customers, investors in Aegon securities and for Aegon's other stakeholders. In line with its risk tolerance, the goal of Aegon's capital and liquidity management is to promote strong and stable capital adequacy levels for its businesses, in addition to maintaining adequate liquidity to ensure that the Company is able to meet its obligations.
Capital adequacy Aegon's goal for both its operating units and for the Group as a whole is to maintain a strong financial position and to be able to sustain losses resulting from adverse business and market conditions. The Own Funds levels of Aegon and its operating units is managed in accordance with the most stringent of local regulatory requirements, rating agency requirements and selfimposed criteria.
Japan, Mexico and Brazil), the capital requirement is based on local capital requirements.
Consolidation method. Local requirements are used for insurance and reinsurance entities in (provisionally) equivalent third-country jurisdictions. Aegon Bank is excluded from the Group Solvency ratio, as required by the Group Solvency II supervisor, the DNB.
As at December 31, 2019, Aegon's estimated capital position was: Group own funds 18,470 17,602
Aegon Group Own Funds amounted to EUR 18,470 million on December 31, 2019 (2018: EUR 17,602 million). The increase of EUR 868 million in Own Funds since December 31, 2018, is mostly driven by the normalized capital generation, positive return from equity markets, and the impact of declining interest rates on assets and hedges. This increase was partly offset by the negative market impact primarily from the EIOPA
VA narrowing from 24 bps to 7 bps, the negative impact from model and framework changes, and the payment of external dividends. The lowering of the UFR from 4.05% to 3.90% led to a decrease in Own Funds as well.
Capital Requirement (SCR) amounted to EUR 9,173 million on December 31, 2019 (2018: EUR 8,349 million). The SCR
increased by EUR 824 million mainly due to the negative market movements driven by higher equity markets and lower interest rates, the treatment of illiquid assets. This was partly offset by the new longevity reinsurance contract of Aegon the Netherlands with Canada Life Reinsurance.
As a result of the above changes in Own Funds and PIM SCR, the Group Solvency II ratio declined by 10%-points to 201%
formula measures exposures to investment risk, insurance risk, market risk, and general business risk. The formula, as used for calculating the solvency ratio, applies a covariance diversification offset to determine the appropriate Risk-Based Capital. Life reinsurance is treated as life insurance. The most pertinent RBC
Financial Condition. The CAL is set at 200% of the Authorized
Control Level (ACL), the level at which regulators are permitted to seize control of a company. At the end of 2019, the combined risk-based capital ratio of Aegon's life insurance subsidiaries in the United States was estimated to be 470% (2018: 465%)
of the CAL risk-based capital requirement. The increase is mainly due to positive capital generation as a result of positive earnings on inforce partly offset by negative impact from higher new business strain than last year and remittances paid from
US regulated companies. Under the Solvency II requirements, the activities of Aegon Americas life insurance and reinsurance companies have been consolidated into the Aegon Group
Aegon the Netherlands Aegon the Netherlands uses a PIM to calculate the solvency position of its insurance activities under Solvency II.
(VA), but does not include the use of any transitional measures.
Aegon Bank, on December 31, 2019, is estimated to be 171%
(2018: 189%). The decrease of the Solvency II position is mainly driven by negative market impacts primarily from the EIOPA
These negative impacts are partly offset by normalized capital generation and management actions including the longevity reinsurance transaction with Canada Life Reinsurance. As at
to 65%, mainly as a consequence of lower interest rates, leading to a negative impact on the Solvency II ratio. The Solvency
Aegon UK Aegon UK uses a PIM to calculate the solvency position of its insurance activities under Solvency II. The calculation includes the use of both the matching adjustment and volatility adjustment (for the with-profits fund). The initial internal model of Aegon UK was approved on December 14, 2015 by the PRA
The decrease over 2019 is mainly driven by remittances paid to Aegon N.V.. This is partly offset by a negative impact from assumption updates, mainly due to expense assumptions, market impacts, and new business strain.
Sensitivities Aegon calculates sensitivities of its Solvency II ratios as part of its risk management framework. The following table provides an overview of the sensitivities (downward and upward) to certain parameters and their estimated impact on the Solvency II ratio.
Please note that the sensitivities listed in the disclosures below represent sensitivities to Aegon’s position at the balance sheet date for the respective years. The sensitivities reflect single shocks where other elements remain unchanged. Real world market impacts (e.g. lower interest rates and declining equity markets) may happen simultaneously which can lead to more severe combined impacts and may not be equal to the sum of the individual sensitivities presented in the disclosure.
US Credit Defaults ~200bps (19%) (19%) (37%) (35%) n.a. n.a. n.a n.a.
Mortgage spreads +50bps (5%) n.a. n.a. n.a. (14%) n.a. n.a n.a.
EIOPA VA -5bps (3%) n.a. n.a. n.a. (9%) n.a. n.a n.a.
Equity Sensitivities The Group is exposed to the risk of a fall in equity markets driven by adverse impacts on the solvency ratio in Aegon Americas,
In Aegon Americas, equity sensitivities are primarily driven by the Variable Annuity business, where hedging programs need to consider a balance between targeting stable earnings and stable capital ratios. Under the new Variable Annuity framework which Aegon Americas adopted in 2019, sensitivities are mainly driven by the change in reserves, while required capital is fairly stable. In declining equity markets, Own Funds decrease due to higher setup of reserves for the Variable
Aegon Integrated Annual Report 2019 98 99 Capital and liquidity management
Americas. The macro hedge program delivers payoffs only under extreme equity down scenarios to limit the adverse impact on the Aggregated RBC ratio.
Funds basis leading to Own Funds losses when rates go up and
Spread Sensitivities The Group is exposed to non-government spreads narrowing, government spreads widening and mortgage spreads widening.
Exposure to non-government spreads narrowing is contributed by Aegon Americas, Aegon the Netherlands and Aegon UK driven by the impact on Own Funds. For Aegon Americas, the impact arises from a lower discount rate for valuing the employee pension plan liabilities. For Aegon the Netherlands, the impact arises from lower Volatility Adjustment increasing the liabilities, partly offset by the gain on the mortgage portfolio. For
Group is exposed to mortgage spreads widening, driven by Aegon the Netherlands, which has an adverse impact on the asset valuation. Aegon Americas credit defaults sensitivity reflects the impact of credit defaults and rating migrations on assets held in the general account portfolio. Under this sensitivity, the credit impairments reduce the value of credit exposures and increase the amount of required capital. The increase in required capital is driven by the downward ratings migration of credit instruments, partly offset by a decrease in exposure due to the impaired value of bonds under the scenario.
Longevity Sensitivities The Group is exposed to higher longevity driven by Aegon
Reinsurance, partly offset by higher longevity sensitivity due to the fall in interest rates over the year.
Aegon's capital management framework, the target capitalization zone for Aegon Group and the bottom-end of the capitalization target range of the most relevant entities are as follows: Capitalization target1)
Aegon the Netherlands updated its capitalization zones as a result of higher capital sensitivities arising from the adoption of the new Dynamic VA model in 2018, and the exclusion of Aegon Bank from the Solvency II capital ratio. These changes were effective per the second quarter of 2019. The Group capitalization zones remained unchanged.
Aegon Group Capitalization management zones 1) Capitalization management actions >200% SCR Opportunity Accelerate capital redeployment and/or additional dividends.
150% - 200% SCR Target Execute capital deployment and dividends according to capital plan.
120% - 150% SCR Retention Re-assess capital plan and risk positions.
100% - 120% SCR Recovery Re-assess capital plan and risk positions. Reduce or suspend dividends.
Capitalization levels main operating units The capitalization levels for Aegon's main operating units at December 31, 2019, are included in the following table: Capital requirements Capital requirement Actual capitalization Excess over capital requirement Aegon USA (Life entities) 1) 100% Company Action Level (NAIC RBC CAL) 470% of combined RBC CAL EUR 7.3 bln 3)
Aegon the Netherlands 1), 2) 100% Solvency II SCR 171% Solvency II SCR EUR 2.5 bln
Aegon finalized the divestment of its business in Czech Republic and Slovakia to optimize its portfolio and capital allocation across business. Aegon also announced the agreement to sell its 50% stake in variable annuity joint ventures in Japan to its partner Sony Life. The transaction with Sony Life was completed on January 29, 2020.
G-SII designation and International Capital Standards For more information about Aegon's G-SII designation, the impact thereof and the status of development of the International
Capital quality Capital quality is a reflection of Aegon's stability and ability to absorb future financial losses.
Tier 2 and Tier 3 basic Own Funds. Aegon does not currently have ancillary Own Funds. Tier 1 basic Own Funds are divided into unrestricted Tier 1 capital and restricted Tier 1 capital.
The latter category contains Own Funds instruments subject to the restrictions of article 82 (3) of the Solvency II Delegated
Available Own Funds Unrestricted Tier 1 capital consists of Aegon's share capital, share premium and the reconciliation reserve. The reconciliation reserve includes deductions to account for foreseeable dividends that have been approved by the Board, but that have yet to be distributed to Aegon's shareholders, and restrictions related to Aegon's with-profits fund in the UK for which the excess of Own Funds over its capital requirement is ring-fenced for policyholders, and therefore unavailable to Aegon's shareholders.
The grandfathered restricted Tier 1 and Tier 2 capital instruments are grandfathered to count as capital under Solvency II for up to 10 years as of January 1, 2016. All call dates are listed in note 31
Aggregation method are allocated to tiers according to the principles laid out in Articles 87 to 99 of the Solvency II
The table below shows the composition of Aegon's available and eligible Own Funds, taking into consideration tiering restrictions.
The Available own funds equal to the Eligible own funds per
Tier 2 Own Funds is not applied anymore per year end 2019, as a result of increase of unrestricted Tier 1 capital and the redemption of grandfathered perpetual capital securities (Tier 1 Own Funds) during 2019.
In managing the use of financial and non-financial leverage throughout the Group, Aegon has implemented a Leverage
Aegon's gross financial leverage ratio is calculated by dividing total financial leverage by total capitalization. Aegon defines total financial leverage as debt or debt-like funding issued for general corporate purposes and for capitalizing Aegon's business units. Total financial leverage includes hybrid instruments, 102 103CONTENTS
th er n o n -fin an cial in fo rm atio n
Aegon's fixed charge coverage is a measure of the Company's ability to service its financial leverage. It is calculated as the sum of underlying earnings before tax and interest expenses on financial leverage divided by interest payments on financial leverage. The fixed charge coverage includes the impact of interest rate hedging.
Operational leverage Although operational leverage is not considered part of Aegon's total capitalization, it is an important source of liquidity and funding. Operational leverage relates primarily to financing Aegon's mortgage portfolios through securitizations, warehouse facilities, covered bonds, and the use of the Federal
The captives are utilized for a number of purposes that may include:  Financing term life insurance (subject to Regulation XXX
All external financing provided to captives to support statutory reserves is disclosed in note 37 'Borrowings' to the consolidated financial statements to the extent to which it has been funded. Letters of Credit (LOCs) issued by third parties provided to captives to provide collateral to affiliated insurers are disclosed in note 45 'Commitments and contingencies'
Aegon N.V. has regular access to international capital markets under a USD 6 billion debt issuance program. Access to the capital market in the United States is made possible by a separate shelf registration.
As at December 31, 2019, Aegon had EUR 58 million outstanding under these programs (2018: EUR 82 million).
LOCs, and to enhance its liquidity position, Aegon maintains backup credit and LOC facilities with international lenders.
N.V. and at the operating unit level. Aegon maintains a liquidity policy that requires all business units to project and assess their sources and uses of liquidity over a two-year period under normal and severe business and market scenarios. This policy ensures that liquidity is measured and managed consistently across the Company, and that liquidity stress management plans are in place.
Sources and uses of liquidity Liquidity in Aegon's subsidiaries Aegon's operating units are primarily engaged in the life insurance and pensions business, which is a long-term activity with relatively illiquid liabilities and generally matching assets. Liquidity consists of liquid assets held in investment portfolios, in addition to inflows generated by premium payments and customer deposits. These are used primarily to purchase investments, as well as to fund benefit payments to policyholders, policy surrenders, operating expenses, and, if the subsidiary's capital position allows, to pay dividends to the holding.
organic growth, capital generated by Aegon's operating units is available for distribution to the holding company, while maintaining a capital and liquidity position in the operating units in line with Aegon's capital management and liquidity risk policies. In addition, the ability of Aegon's insurance subsidiaries to transfer funds to the holding company is also constrained by the requirement for these subsidiaries to remain adequately capitalized at the levels set by local insurance regulations, and as administered by local insurance regulatory authorities.
Aegon N.V. are remittances from operating units, movements in debt, net expenses (including interest), funding operations, capital returns to shareholders, and the balance of acquisitions and divestitures. In addition, contingent internal and external liquidity programs are maintained to provide additional safeguards against extreme unexpected liquidity stresses.
Aegon's Executive Board balances prudence with offering an attractive return to shareholders. This is particularly important during adverse economic and/or financial market conditions.
Furthermore, Aegon's operating subsidiaries are subject to local insurance regulations that could restrict dividends to be paid to the holding company. There is no requirement or assurance that Aegon will declare and pay any dividends.
Aegon's holding excess cash The ability of the holding company to meet its cash obligations depends on the amount of liquid assets on its balance sheet and on the ability of the operating units to pay dividends to the holding company. In order to ensure the holding company's ability to fulfil its cash obligations and maintain sufficient management flexibility to allocate capital and liquidity support for Aegon's operating units and external dividend stability, it is the Company's policy that the holding excess cash position, including Aegon's centrally managed (unregulated)
holding companies, is managed to a target range of EUR 1.0 to 1.5 billion.
Proceeds from the sale of Aegon Czech Republic and Slovakia of EUR 131 million were received in 2019 as well as dividends from Aegon Americas (EUR 801 million) and Aegon UK
During 2019, payments related to the 2018 final dividend and 2019 interim dividend and the corresponding share buybacks amounted to EUR 626 million and holding and funding expenses amounted to EUR 312 million.
Aegon's liquidity is invested in accordance with the Company's internal risk management policies. Aegon believes that its working capital, backed by its external funding programs and facilities, is ample for the Company's present requirements.
(for the Universal Life range pf products) to derivative-based semi-static and dynamic hedges (to match variable annuities).
The Enterprise Risk Management (ERM) framework includes a number of risk policies that govern ALM strategies, such as the Investment and Counterparty Risk Policy (ICRP). The ICRP
governs the management of investment risks associated with credit, equity, property, alternative asset classes, interest rate and currency risk in addition to option markets, implied volatility risk, interest rate options and swaptions.
As well as product-level ALM programs, subsidiary businesses are required by the ICRP to maintain overarching ALM strategies that set the direction and limits for the various individual productlevel programs. Significant or complex ALM strategies are approved at group level, and all programs are subject to group risk oversight.
Together with the ICRP, which guides ALM strategy, a number of other ERM policies govern concentration risk, liquidity risk, use of derivatives and securities lending and repos. As Aegon uses derivatives extensively, collateral calls can be significant depending on market circumstances. Liquidity is managed at legal entity level in the first instance, and the large US and Dutch units may use external market solutions to match projected liquidity requirements with funding.
The introduction of Dodd-Frank Act in the United States and the European Market Infrastructure Regulation (EMIR) derivative regulations led to Aegon transitioning a significant proportion of formerly over-the-counter positions to clearing houses in recent years. Collateral and margin requirements increased, introducing the potential for liquidity strain, which has to be carefully managed. Market volatility can cause collateral requirements to increase rapidly, which means that it is important to have sufficient high-quality collateral available at all times.
Americas The investment choices of Aegon USA's companies are subject to regulation dependent upon the laws of the applicable state in which each company is domiciled. Each state prescribes the nature, quality and percentage of various types of investments that may be made by the companies. Such laws generally permit investments in government bonds, corporate debt, preferred and common stock, real estate and mortgage loans, while limiting investment in other classes of investments.
A range of ALM strategies are used at the product-group level.
'gamma' and 'vega' sensitivities. The Macro Hedge Program' is an overlay hedge that provides additional protection for regulatory capital against a sharp fall in equity markets.
Aegon USA also uses various liquidity management techniques including a contingent liquidity management facility - to ensure sufficient access to funding for collateral calls in the event of rapidly rising interest rates. Regular stress testing is used to monitor and manage liquidity risk.
Derivatives are central to Aegon's hedging strategy, and the derivatives market has been subject to a large number of changes in recent years. These include the introduction of the EMIR in Europe. Furthermore, counterparty risks associated with derivative contracts are mitigated by collateral, and the introduction of central clearing has increased collateral requirements and reduced counterparty risk over recent years.
United Kingdom Having disposed of the majority of its annuity portfolio,
Free assets help meet the cost of guarantees and provide a buffer to protect the fund from the impact of adverse events.
Central & Eastern Europe, Spain, Portugal and Asia Aegon has a range of ALM programs in place across life and nonlife businesses in the Southern and Eastern Europe region. Across the Central & Eastern European units, ALM focuses on assetliability matching in terms of duration and liquidity. In Spain &
Portugal, insurance liabilities are predominately long-term life benefits, and the focus of ALM is to minimize interest rate risk by duration matching.
Transamerica Life Bermuda (TLB) was established in 2005 with full-service branches opened in 2006 in Hong Kong and Singapore, writing universal life (UL) products and term products for the high net worth segment. TLB’s ALM strategy is to invest in predominantly investment grade fixed income assets to generate stable returns and support the UL crediting philosophy over the policy term. Derivative instruments can be used for efficient portfolio management and ALM. Assets are invested predominantly in the United States and in US dollar denominated assets to match the currency of our products.
SA Reinsurance Ltd. (SARe) from which it subsequently divested from on January 29th, 2020. SARe used a sophisticated dynamic hedge program to manage guarantee risk included in variable annuity products associated with equity markets and interest rates.
The court has given the receiver a deadline of March 31, 2020 to propose a plan of rehabilitation or to notify the court that liquidation is necessary. Aegon has carried out an impairment analysis to assess the recoverability of our IFRS reserves and has concluded that they are recoverable. The reserves and receivables of Aegon to Scottish Re Group at December 31, 2019 were less than EUR 100 million. Separately, Aegon ceded business to Senior Health Insurance of Pennsylvania (SHIP).
SHIP placed in rehabilitation. Aegon is protected by a trust account and has assessed that the trust assets are sufficient to cover the reserves and receivables to SHIP on Aegon's balance sheet at December 31, 2019.
Americas' overall risk and limit the maximum loss on risks that exceed policy retention levels. Maximum retention levels vary by product, method of underwriting, and the nature of the risk being reinsured.
'excess of loss' contracts. Reinsurance helps Aegon manage, mitigate and diversify its insurance risks, and thereby limit the maximum loss it may incur. Since January 1, 2014, Aegon the Netherlands has reinsured its term life assurance through a quota-sharing contract. In December 2019, Aegon announced the reinsurance of about one quarter of its longevity exposure in the Netherlands. The contract commenced on December 31, 2019 and will run until the portfolio runs off. For non-life, Aegon the Netherlands only reinsures its property, general and motor third-party liability business. For property insurance, motor thirdparty liability insurance, and general third-party liability, 'excess of loss' contracts are in place.
Southern and Eastern Europe Aegon uses reinsurance for its life and non-life businesses in order to mitigate insurance risk. The majority of treaties in force for Aegon's operations in Central & Eastern Europe are non-proportional excess of loss programs - except for the life reinsurance treaties - which are made on a surplus and quotashare basis (including various riders). The most significant reinsurance program currently in force is a property catastrophe excess of loss treaty.
Hong Kong and Singapore: Transamerica Life Bermuda (TLB)‍ TLB uses third-party mortality reinsurance for its universal life and traditional policies. Mortality reinsurance takes the form of yearly-renewable term, excess-of-retention or quotashare arrangements. This is typically arranged through a pool of reinsurers. TLB entered into a reinsurance treaty to provide further protection for the local solvency position in Singapore.
In terms of Aegon's purpose statement, risk taking should be instrumental to helping people achieve a lifetime of financial security. The competence with which Aegon is able to manage the risk is assessed and Aegon's risk preferences are formulated, taking into account Aegon's risk capacity. The risk preferences eventually lead to a targeted risk profile that reflects the risks
Aegon's risk appetite statement and risk tolerances are established in order to assist management in carrying out
2 Solvency and liquidity, to ensure that Aegon remains solvent and liquid even under adverse scenarios.
4 Responsible business with effective controls, which acknowledges an acceptable level of operational risk and stresses a low tolerance for (lack of) actions which could lead to material adverse risk events that result in breaking promises or not meeting reasonable expectations of customers, legal breaches or reputational damage.
Risk identification and risk assessment Aegon has identified a risk universe that captures all known material risks to which the Company is exposed. In order to assess all risks, a consistent methodology for measuring risks is required. Aegon's methodology for this is documented in a manual and kept up-to-date. The risk metrics are embedded in Aegon's key reports and are used for decision making.
Risk response Aegon distinguishes the following risk responses:  When the risk exposure is within the set risk tolerance, management can accept the risk; and  When an exposure exceeds the established risk tolerance or if cost-benefit analysis supports further actions, management can decide to control, transfer or avoid the risk.
Finally, the main risks derived from Aegon's strategy and the day-to-day business are discussed, as well as forward looking points for attention. If necessary, mitigating actions are taken and documented.
Risk universe and risk appetite The risk factors described in this Integrated Annual Report (see risk factors in the 'additional information' section) generally have an impact on financial markets (e.g. interest rates and share prices), underwriting assumptions (e.g. longevity and policyholder behavior) or result in operational risk events (e.g. fraud and business disruption). Aegon's risk universe is structured to reflect the type of risk events to which the Company is exposed.
Most significant risks The most significant risks Aegon faces in terms of exposures and required capital are:  Financial markets risks (particularly related to credit, equity and interest rates), and  Underwriting risk (particularly related to longevity and policyholder behavior).
The focus is on high-quality securities with low expected defaults because Aegon has a low appetite for default risk.
Equity market risk and other investment risks Aegon runs the risk that the market value of its investments changes. Investment risk affects Aegon's direct investments in the general account, indirect investments on the account of policyholders and agreements where Aegon relies on counterparties, such as reinsurance and derivative counterparties. Aegon has a low preference for investments in equity securities via the general account. Equity investments generate an equity risk premium over the long run, but in combination with a high capital charge result in a relatively low return on capital. Aegon has experience and expertise in managing complex investment guarantees, and leverages this capability by providing customers access to a range of investment strategies and guaranteed benefits.
Currency exchange rate fluctuations therefore affect the level of shareholders' equity as a result of converting local currencies into euro, the Group's reporting currency. The Company holds its capital base in various currencies in amounts that correspond to the book value of individual business units.
Liquidity risk Aegon needs to maintain sufficient liquidity to meet shortterm cash demands not only under normal conditions, but also in the event of a crisis. To that end, Aegon has put a strong liquidity management strategy in place. The Company considers extreme liquidity stress scenarios, including the possibility of prolonged 'frozen' capital markets, an immediate and permanent rise in interest rates, and policyholders withdrawing liabilities at the earliest conceivable date. In addition, the Company has liquidity stress planning in place.
Assumptions used to price products and establish technical liabilities are reviewed on a regular basis. Please refer to note 3 Critical accounting estimates and judgment in applying accounting policies to the consolidated financial statement for further information.
Operational risk Like other companies, Aegon faces operational risk resulting from operational failures or external events, such as processing errors, inaccuracies in used models, actions by personnel, noncompliance to laws and regulations, and natural or man-made disasters including climate change. In addition, major programs or organizational transformations may also increase potential for operational risks. Aegon's systems and processes are designed to support complex products and transactions, and to avoid such issues as system failures, business disruption, financial crime and breaches of information security. Aegon monitors and analyses these risks on a regular basis, and where necessary revises contingency plans to deal with them. Aegon’s operational risk universe distinguishes eight risk types: business risk; legal, regulatory, conduct and compliance risks; tax risk; financial crime risk; processing risk; systems and business disruption risk; people risk; and facility risk. These level 1 risk types are split out into more granular level 2 risk types. The operational risk universe also covers social and environmental risks. Please refer to the chapter non-financial policies, procedures and outcomes for an overview of how various social and environmental issues are incorporated in decision making processes and policies throughout the company.
Board. Aegon takes cybercrime very seriously, and is committed to enhancing its existing systems over time in order to provide additional protections to its systems and information.
(SIRA) 2019 all regions provided insight in their local anti-fraud programs and indicated that controls with regard to internal, external and intermediary fraud are properly designed and operating effectively.
Business environment scan In addition to the management of described risk types, Aegon performs a business environment scan. This scan brings together the former emerging risk process and the materiality assessment as described in the 2018 Annual Report. The aim is to identify topics, including opportunities and new and developing risks, which could have significant impact on value creation and
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 is performed on a two-yearly basis with annual updates for significant changes.
Aegon’s strategy process and for possible follow-up in terms of further analysis, tracking or as global project. For more information on the materiality reporting refer to the section: Aegon’s business environment on page 14.
Aegon's risk management governance structure has four basic layers:  The Supervisory Board and the Supervisory Board Risk
The formal responsibility regarding the effectiveness and design, operation and appropriateness of the ERM and internal control system rests, however, with the Audit Committee of the Supervisory Board. The Audit Committee works closely together with the SBRC with regard to the oversight of and reports on the effectiveness of the ERM framework and the risk control systems of the Company. The Audit Committee relies on the findings of the SBRC. The SBRC is responsible for overseeing Aegon's ERM framework, including risk governance and measures taken to ensure risk management is properly integrated into the Company's broader strategy.
Aegon's Executive Board has overall responsibility for risk management. The Executive Board adopts the risk strategy, risk governance, risk tolerance and material changes in risk methodology and risk policies. The Group's CRO has a standing invitation to attend Executive Board meetings and a direct reporting line to the Supervisory Board to discuss ERM and related matters, and is a member of the Management Board.
Aegon's strategic goals. The Management Board discusses and sponsors ERM, in particular the risk strategy, risk governance, risk tolerance and the introduction of new risk policies.
The Executive Board and Management Board are supported by the Group Risk & Capital Committee (GRCC). The GRCC
The purpose of the ERMAAC is to assist the GRCC, Executive
Each of Aegon's regions has a Risk & Capital Committee (RCC).
In addition to the four basic layers described above, Aegon has an established group-wide risk function. It is the mission of the Risk Management function to ensure the continuity of the Company through safeguarding the value of existing business, protecting Aegon's balance sheet and reputation, and through supporting the creation of sustainable value for all stakeholders.
Aegon's risk tolerances, and stakeholder expectations are managed under both normal business conditions and adverse conditions caused by unforeseen negative events.
Company is exposed to as defined in Aegon’s risk universe and protecting Aegon’s reputation;  Developing and maintaining Aegon’s risk methodology as described in the Aegon Market Consistent Reporting
framework, risk methodology and standards of practice where needed;  Supporting the Management Board in ensuring the effective operation of the ERM framework and related processes, providing subject matter expertise to businesses as appropriate and facilitating information exchange on good risk practices;  Identifying and analyzing emerging risks, being input for ongoing risk strategy development and to ensure that
Model validation ensures independent review of methodology, assumptions, data, testing, production, reporting and use of the Solvency II PIM;  Analyzing Solvency II PIM outputs and performance and reporting results to the Boards and relevant (Supervisory)
Challenging and monitoring  Monitoring the ERM framework and overseeing compliance with group-wide risk governance requirements, risk strategy and risk tolerances, risk policies and risk methodology, which are applicable to all businesses for which Aegon has operational control; 113 CONTENTS
Executive Board and Supervisory Board;  Overseeing material risk, balance sheet and business decisions taken throughout Aegon in line with established risk governance arrangements;  Monitoring and reporting on risk exposures and advising the
Boards and (Supervisory) Committees on risk management related matters, including in relation to strategic affairs such as corporate strategy, mergers and acquisitions and major projects and investments;  Monitoring that the PIM is and remains appropriate to the
Recovery Plan defined triggers and early warning indicators;  Acting as independent business partner with focus on talent development, control excellence, customer conduct, capital allocation and by providing management focused risk tools or fostering debates and proactively challenging on key business developments that may create significant exposure for example through hedging and investment remits;  Providing assurance on the integrity of models through model validations and maintenance of model validation policies and standards; and  Embedding robust oversight and risk management culture and processes; and  Protecting group capital for all stakeholders.
Aegon's Group and business unit's risk management staff structure is fully integrated. Business unit CROs have either a direct reporting line to the Group CRO or one of the regional
The internal control system has been developed in accordance with regulations that Aegon must comply with (i.e. Sarbanes-
Aegon's objectives and in particular compliance, operational and financial reporting objectives including the production of IFRS
and Solvency II numbers. The objective is to provide assurance regarding the reliability, accuracy, completeness, timeliness and quality of internal and external (regulatory) reporting, the safeguarding of assets, and compliance with internal and external requirements. A key element of Aegon's internal control system is to facilitate action planning and embed continuous improvement regarding the internal control environment throughout the organization.
– provide independent assurance on the effectiveness and integrity of the internal control, risk management and governance functions.
IBOR transition The future of IBORs (Interbank Offered Rates) such as Euribor,
to undertake a fundamental review of leading interest rate benchmarks in 2013. The FSB proposed new standards to reform interest rate benchmarks and the use of transaction-based input data instead of non-transactional/panel input data.
The impact of the IBOR transition on the business and operating models are described in transition plans and include among others project solutions and actions, timelines and ownership to ensure timely preparation and implementation.
Integrated Framework', the Treadway Commission's Committee of Sponsoring Organizations (COSO, 2013 framework), are used by Aegon's internal audit function to analyze and make recommendations to the Executive Board concerning the effectiveness of the Company's internal control framework.
Aegon's enterprise risk management under the supervision of the Supervisory Board and its Risk Committee. Through oversight and framework setting, Aegon's risk management function ensures that the group-wide risk profile is managed in line with Aegon's risk tolerances, and stakeholder expectations are managed both under normal business conditions and adverse conditions caused by unforeseen events. The Executive
practices. Finally, both the Regulatory Compliance function and the Operational & Model Risk Management function play key roles in monitoring the Company's adherence to external rules and regulations and internal policies.
Relevant facts, circumstances and risks relating to the consolidated financial position on December 31, 2019, were assessed in order to reach the going concern assumption.
Management concluded that the going concern assumption is appropriate on the basis of the financial performance of the Company, its continued ability to access capital markets, the fact that solvency and leverage ratios are well within target range, and the level of excess cash in the holding,
Aegon's risk management and control systems provide reasonable assurance for the reliability of financial reporting and the preparation and fair presentation of Aegon's published financial statements. They cannot, however, provide absolute assurance that a misstatement of Aegon's financial statements can be prevented or detected.
Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of Aegon's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934). Based on this evaluation, Aegon's CEO and CFO
concluded that, as of December 31, 2019, the disclosure controls and procedures were effective. There have been no material changes in the Company's internal controls or in other factors that could significantly affect internal controls over financial reporting subsequent to the end of the period covered by this
Exchange Commission regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, or SOX 404. These regulations require that Aegon's CEO (the Chairman of the Executive
Board) and CFO report on and certify the effectiveness of Aegon's internal controls over financial reporting on an annual basis. Furthermore, external auditors are required to provide an opinion on the effectiveness of Aegon's internal controls over financial reporting. The SOX 404 statement by the Executive Board is stated below, followed by the report of the external auditor.
Management's Annual Report on internal control over financial reporting The directors and management of Aegon are responsible for establishing and maintaining adequate internal control over financial reporting. Aegon's internal control over financial reporting is a process designed under the supervision of Aegon's principal executive and financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its published financial statements. Internal control over financial reporting includes policies and procedures that:  Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;  Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles;  Provide reasonable assurance that receipts and expenditures are made only in accordance with the authorizations of management and directors of the Company; and  Provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on Aegon’s financial statements would be prevented or detected in a timely manner.
Annual Report. Taking into account the financial performance of the Company, its continued ability to access capital markets, the fact that its solvency and leverage ratios are well within target range, and the level of excess cash in the holding, management concluded that the going concern assumption is appropriate.
Report of Independent Registered Public Accounting Firm To: The Annual General Meeting of Shareholders and Supervisory
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on internal control over financial reporting appearing under Item 15. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
147 Exchange rates 148 Consolidated income statement of Aegon N.V. 149 Consolidated statement of comprehensive income of Aegon N.V.
150 Consolidated statement of financial position of Aegon N.V. 151 Consolidated statement of changes in equity of Aegon N.V. 154 Consolidated cash flow statement of Aegon N.V.