Accordingly, at December 31, 2019, the voting power of Vereniging Aegon under normal circumstances amounted to approximately 14.75%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon N.V.).
At December 31, 2019, the General Meeting of Members of Vereniging Aegon consisted of eighteen members. The majority of the voting rights is with the sixteen members who are not employees or former employees of Aegon N.V. or one of the Aegon Group companies, nor current or former members of the Supervisory Board or the Executive Board of Aegon N.V. The other two members are from the Executive Board of Aegon N.V..
Aegon, are made with an absolute majority of the votes. When a vote in the Executive Committee results in a tie, the General Meeting of Members has the deciding vote. Regarding the amendment of the Articles of Association of Vereniging Aegon, a special procedure requires a unanimous proposal from the Executive Committee, thereby including the consent of the representatives of Aegon N.V.
BlackRock, Inc. and Franklin Resources, Inc. hold a capital or voting interest in Aegon of 3% or more.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at June 20, 2018, Dodge & Cox International Stock Fund stated to hold 131,792,024 common shares, which represent 4.9% of the issued capital and votes as at December 31, 2019.
Other financial information Schedules to the financial statements Index to schedules Schedule I—Summary of Investments other than Investments in Related Parties as at December 31, 2019
Schedule II—Condensed Cash Flow Statement for the years ended December 31, 2019, 2018 and 2017
Schedule II—Dividends from and Capital Contributions to Business Units for the years ended December 31, 2019, 2018 and 2017
Schedule V—Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018 and 2017
Schedule I Summary of investments other than investments in related parties As at December 31, 2019
Real estate: Investments in real estate - 2,901 2,901 1 Cost is defined as original cost for available-for-sale shares and amortized cost for available-for-sale and held-to-maturity bonds
Net cash flows from operating activities (330)‍ 418 (1,208)‍ Dividends and capital repayments of subsidiaries, associates and joint ventures 647 824 700
Net cash flows from investing activities 646 822 700 Issuance of perpetuals 496 - -
Kingdom, Asset Management and Southern & Eastern Europe. Aegon spent EUR 0.1 billion on capital contributions.
The numbers included in Schedule III are based on IFRS-EU and excludes the proportionate share in Aegon's joint ventures and
established Sicoob Seguradora de Vida e Previdência, a company dedicated to providing life insurance and pension products within the Sicoob system, Brazil’s largest cooperative financial system2 with over 4.6 million associates and over 3,000 points of sale. As of
Organizational structure Aegon USA Transamerica Corporation is the holding company for US operations, and all US business is conducted through its various subsidiaries. The use of the term 'Aegon USA' throughout this business overview refers to the operating subsidiaries and joint venture(s) in the United States and Latin America, collectively or individually, through which Aegon conducts business. Aegon USA
entities collectively have operating licenses in every US state, in addition to the District of Columbia, Puerto Rico, the US Virgin
On January 11, 2018, Transamerica entered into an agreement with Tata Consultancy Services (TCS) to administer the company’s US
On March 21, 2019, Transamerica announced that it entered into an agreement with LTCG to transfer the administration and claims management of the company’s LTC insurance business. This strategic relationship enables Transamerica to enhance and modernize its claims and administrative systems and processes in order to better serve its long-term care customers. LTCG is a leading provider of administrative solutions to the long-term care insurance industry, serving more than 100 carriers nationwide. LTCG’s advanced data analytics, actuarial and risk management capabilities, and general long-term care industry expertise are aligned with our focus on providing an excellent customer experience. LTCG will support the administration of Transamerica’s LTC insurance business with the transfer of over 200 Transamerica employees, which was completed in August 2019.
Overview of sales and distribution channels Aegon USA's distribution channels are organized in order to meet customer needs and offer solutions through affiliated and nonaffiliated distributors that provide guidance to Aegon USA customers. Workplace Solutions supports customers primarily through their employers, and Individual Solutions supports individual customers and investors.
Workplace solutions Through Workplace Solutions, Aegon USA provides employer-sponsored retirement plans, group life insurance (universal life, whole life, and term life), supplemental group health products (critical illness, cancer, hospital indemnity, supplemental medical expense, short-term disability, vision, and dental policies), group accident products, and institutional stable value solutions to US
organizations of all sizes. Workplace Solutions accesses these employers through financial advisors, benefits consultants and agents.
(ETFs)), life insurance and long-term care insurance products through agreements with independent broker-dealers, banks, wirehouses, independent financial planners, and independent insurance producers. Annuity and investment products are also offered through institutions, including large broker-dealer research and advisory platforms, and registered investment advisers.
through third-party distribution outlets known as 'Brokerage General Agents' or 'Independent Marketing Organizations'. These are predominantly non-registered products sold through independent insurance producers. This channel offers life insurance (term life, universal life, index universal life, and whole life insurance), LTC insurance and supplemental health products and services (Medicare
Retail distribution Aegon USA’s retail affiliate distribution group, 'Transamerica Financial Network' (TFN), provides advice and guidance to individuals to meet their protection and investment needs. TFN consists of World Financial Group Insurance Agency ('WFGIA'), Transamerica
th er n o n -fin an cial in fo rm atio n of both employees and independent producers. Approximately 3,400 WFGIA and TAN agents are associated with TFA as registered representatives, of which approximately 1,700 are registered as investment advisor representatives.
Variable universal life insurance VUL insurance is permanent life insurance that offers both a death benefit and cash value accumulation potential with financial market participation. The premium amount for VUL insurance is flexible and may be changed by the policyholder within contract limits.
Whole life insurance WL insurance provides permanent death benefit protection, provided that the required premiums are paid, while accumulating cash values based on statutory requirements. Premiums are generally fixed and usually payable over the life of the policy.
international equity, fixed income, money markets and alternative investments, as well as asset allocation and target date funds with combined equity and fixed income strategies. Transamerica mutual funds utilize the portfolio management expertise of asset managers across the industry in a sub-advised platform, using managers both affiliated with and not affiliated with Aegon. These managers are subject to a rigorous selection and monitoring due diligence process conducted by Transamerica Asset Management.
ETFs are a pooled investment vehicle for individual and institutional investors that combine some of the features of a mutual fund with the flexibility of allowing investors to trade throughout the day on an exchange. Transamerica offers a suite of managed risk passive exchange-traded funds that seek to track the S&P Managed Risk 2.0 Indices marketed under the name DeltaShares. This Managed Risk strategy is applied to US Large Cap, Mid Cap, Small Cap, International Developed Equity and Emerging Market Equity Indices.
Fixed annuities Fixed annuities allow the policyholder to accumulate assets for retirement on a tax-deferred basis through periodic interest crediting and principal protection. Aegon USA has de-emphasized traditional fixed deferred annuities, and is only marketing new sales through the TAC. The traditional fixed deferred annuity book is, according to plan, continuing to reduce over time. Aegon USA actively offers a fixed-index annuity that may credit interest based, in part, on the percentage change in the value of the selected index account option(s) at the start and end of the crediting period. A fixed account option is also available. Additional guarantees, which are offered through riders, can be added to fixed-index annuities, including GLBs.
Plan sponsors have access to a wide array of investment options. Depending on the product chosen by the plan sponsor, unrestricted access to all publicly available investments can be offered. Certain smaller plans have access to hundreds of investment choices from more than 40 investment advisory companies.
Latin America Aegon's business in Latin America includes a 50% interest in Mongeral Aegon Seguros e Previdência S.A., a Brazilian independent life insurer. Mongeral Aegon's activities include a life insurance and pension company, an asset management company, a multi sponsored pension fund, a liabilities management company for pension funds, and a longevity institute. To further capture growth prospects in Brazil, Mongeral Aegon and Bancoob (Banco Cooperativo do Brasil) established Sicoob Seguradora de Vida e Previdência, a life insurance and pensions company dedicated to providing life insurance and pension products via the Sicoob system. The joint venture began operations on March 1, 2017, and distributes products through Sicoob. Bancoob is a private commercial bank owned by the credit cooperative entities affiliated with the Sicoob system. This agreement represents a key expansion of distribution for
Run-off businesses Latin America Beginning in 2017, Akaan Transamerica, Aegon’s joint venture in Mexico with Administradora Akaan S.A. de C.V., offered a wide variety of mutual funds and investment solutions. In 2019, Transamerica made the strategic decision to wind down this joint venture as the business had not performed according to expectations. The wind down of the joint venture is expected to be completed in 2020.
Life reinsurance In August 2011, Aegon USA completed the effective divestment of its life reinsurance business to SCOR Global Life (SCOR) through the reinsurance and sale of its reinsurance entity based in Ireland. In 2017 and 2018, Aegon USA further divested a life reinsurance block that had been previously ceded to a captive structure to SCOR. As of 2019, Aegon USA has divested substantially all of its life reinsurance operations through retrocessions to SCOR. Life reinsurance business was comprised primarily of the reinsurance of term insurance products.
In June 2017, Aegon USA completed the divestment of its two largest US run-off businesses, the payout annuity business and the bank owned life insurance / corporate owned life insurance (BOLI/COLI) through reinsurance to Wilton Re. The payout annuity block was placed in run-off in 2003 and the BOLI/COLI products were discontinued in 2010.
The largest competitors in the mutual fund market include Vanguard, Fidelity, American Funds, T. Rowe Price, J.P. Morgan and BlackRock.
In the defined contribution plan administration market, Aegon USA’s largest competitors are Fidelity, Empower, TIAA, Principal
Regulation and supervision Aegon USA's insurance companies and the business they conduct in the United States are regulated primarily at the state level, as carried out by various state insurance regulators. Some activities, products and services are also subject to federal regulation.
State Insurance Regulation The Aegon USA insurance companies are licensed as insurers and are regulated in each US state and jurisdiction in which they conduct insurance business. The extent of such regulation varies, but has a shared purpose in terms of the protection of policy and contract holders. The insurance regulators in each state carry out their mission by providing oversight in the broad areas of market conduct and financial solvency regulation.
Recent regulatory enhancements in recent years include increased reporting of holding company activities, increased transparency and uniformity for certain captive reinsurance transactions, and requirements for companies to conduct an Own Risk and Solvency
Emerging state issues that may impact Aegon USA include a project by the NAIC to develop a group capital calculation that could impact an NAIC group capital ratio and NAIC projects to update capital charges for asset default risk and longevity risk that could impact required capital. LTC is currently regulated by states as health insurance, although both state regulators and federal agencies are examining the current environment for the LTC industry, which may lead to a more predictable regulatory regime for premium adjustments, and facilitate the development of new and innovative products.
annuity accounts, with the other 50% from the combined health/HMO accounts. These amendments must be adopted into law in each state before becoming effective in each such state. To date, approximately 12 states have adopted the amended model.
Federal Regulation of Financial Services and Health Insurance Although the insurance business is primarily regulated at the state level, many federal laws and initiatives impact the insurance sector in such areas as the regulation of financial services, derivatives, retirement plans, securities products, health care, taxes, information security and privacy. Regulation of financial services has increased as a result of the Dodd Frank Act, which also created the Federal
Insurance Office (FIO) and the Office of Financial Research (OFR). The FIO is authorized to review the insurance market in the United
States and report to Congress, and the OFR conducts research in financial services, including insurance, in support of such oversight.
In addition, the FIO is authorized to establish US insurance policy in international matters.
Exchange Commission (SEC) and aspects of states' securities and other laws. Variable insurance policies, certain annuity contracts and registered investment management companies (mutual funds) offered by Aegon USA are subject to regulation under the federal securities laws administered by the SEC and aspects of states' securities laws. Certain separate accounts of Aegon USA insurers that offer variable life insurance and certain annuities, and interests under these annuity and insurance policies are registered and subject to SEC regulation. The distribution and sale of variable products, mutual funds, and other securities by affiliate and non-affiliate broker-dealers are regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). A number of Aegon USA companies are also registered as investment advisors and subject to SEC regulation or operate under registrations or exemptions from registration as commodity pool operators or Commodities Trading Advisers, regulated by the Commodities Futures Trading Commission and the National Futures Association.
In addition, since the Department of Labor Fiduciary Rule was vacated, several states have moved forward with developing standard of conduct rules and proposals. New York and Nevada have enacted best interest rules, and other states, including Massachusetts and
New Jersey, have proposed their own fiduciary regulation. The state standard of conduct landscape continues to evolve.
The financial services industry continues to operate under heightened scrutiny and increased regulation in various jurisdictions.
Aegon USA, like other businesses in the financial services industry, is routinely examined and receives requests for information from the SEC, FINRA, state regulators and others in connection with examinations and investigations of its own companies and third-party or unaffiliated insurers, broker-dealers, investment advisers, investment companies and service providers relating to certain historical and current practices with respect to these and other matters. Some of those inquiries have led to investigations, which remain open, or have resulted in fines, corrective actions or restitution. Aegon USA continues to cooperate with these regulatory agencies. In certain instances, Aegon USA modified business practices in response to those inquiries or findings.
Regulation of Retirement Plans and IRAs Aegon USA administers and provides recordkeeping, investment and insurance services and products used to fund defined contribution plans, such as 401(k), 403(b), multiple employer and 457 plans, in addition to defined benefit plans, IRAs, 529 plans and other savings vehicles. Aegon USA also administers pension benefits distributed upon termination of defined benefit plans. These products and services are generally subject to the Employee Retirement Income Security Act (ERISA) (certain government and church plans are exempt from ERISA) and the federal Internal Revenue Code of 1986, as amended (the 'Code') for which the US Department of Labor
Federal Tax Treatment of Insurance Companies and their Products and Plans Although the insurance business is regulated at state level, the US federal tax treatment of life insurers, life insurance, pension and annuity products is governed by the US federal tax code. Provisions that increase the taxation of life insurers, as well as remove or decrease the value of tax incentives for life insurance, pensions and annuity products – considered alone and relative to other investment vehicles – have been proposed in prior Administrations federal budgets and by the US Congress. These initiatives also contemplate international tax reform, including proposals that would limit the ability of companies to deduct interest expense on financing provided by a non-US affiliate. Executive Administration budget proposals, legislative proposals and discussion drafts must be enacted by Congress and signed by the President before they become law. The risk of tax law changes is heightened when additional revenue is sought to reduce the federal deficit or to pay for other tax law changes, such as lower tax rates. In addition, tax reform initiatives of the type contemplated by discussion drafts of comprehensive federal tax reform legislation further increase the risk of both increased taxation of life insurers and of decreased tax incentives for short- and long-term savings products. These changes, if enacted, would have a direct impact on the cost and competitiveness of life insurance, annuity and pension products sold to ensure Americans’ financial and retirement security.
Premiepensioeninstelling B.V. as per January 1, 2019 (subsequently changed its name into Aegon Cappital B.V.) and OPTAS Pensioenen
Aegon Bank N.V. sells the majority of its Aegon label banking products via the intermediary sales. For the Knab label it solely uses the direct and online channels to help its customers to make smart decisions by giving them a clear overview of their finances, and helps them pro-actively with products and services that can help them achieve their financial goals. In 2020, all Aegon Bank products and customers will be migrated to the Knab label. The distribution via intermediaries will remain, but via the Knab label.
Overview of business lines Life Pensions Interest rates have been low for an extended period of time and have decreased even further in 2019. This drives a shift from Defined
(as explained below), and existing DB and DC books, while most of the new business flows to other Aegon entities.
Regarding premium paying DB products Aegon offers two variations: a subscription product and a contract. Both are straight forward
The DB subscription product is a simple and cost-efficient product targeting small and medium-sized companies. It reduces complexity and enables Aegon to adapt the tariffs, cost loadings and risk premiums annually. In addition, customers have the opportunity to decide on an annual basis as to whether they wish to continue with their subscription or not.
Minimum interest guarantees exist for all generations of accumulation products written, except for universal life products, for which premiums are invested solely in equity funds. Older generation products contained a 4% guarantee when sold. In 1999, the guarantee for new products decreased to 3%. In 2013, the guarantee on new products was reduced to 0% and in 2019 the guarantee has been ended.
th er n o n -fin an cial in fo rm atio n are borne by Aegon, or a variable annuity without investment guarantees, where all risks are borne by the participant. Given that a significant shift has been observed towards defined contribution schemes, these annuities are a natural driver of growth as they provide a solution for the payout phase. Annuity insurance includes older products with guaranteed interest rates and profit sharing for which no new business is written.
For individuals, Aegon the Netherlands offers a disability product mainly targeted at the growing self-employed market. Product options were extended during 2019.
Through the service concepts, Aegon provides (non-financial) incentives for intermediaries to help their customers in the optimal way, while also protecting the health of the supply chain by stimulating performance at sustainable levels for customers, intermediaries and insurer. In addition to the intermediary market, Aegon the Netherlands develops digital and online capabilities, as distribution is slowly shifting towards the direct market. This market includes sales via Aegon’s own website and affiliates, and via aggregator websites.
Aegon Bank N.V. will continue to reinforce the Aegon Netherlands wide pension offering with its banking (savings, bank savings and investments) products, but under the Knab brand. Aegon Bank and Knab offer banking solutions to 650,000 Dutch customers, being consumers and small-scale enterprises.
Aegon Cappital offers defined contribution pension schemes in a standardized subscription based model to small and medium enterprises and customized contracts for medium to large corporations. The model enables employers to choose from a variety of contribution tables and social security offsets, while remaining flexible for regulatory changes, such as changes in pension age or fiscal contribution limits. Savings premiums are invested in life cycle funds by Aegon Investment Asset Management B.V..
TKP, Stap, Robidus and Nedasco TKP Pensioen specializes in pension administration for company and industry pension funds, and also provides administration services for defined contribution plans to corporate and institutional clients.
Competition Aegon the Netherlands has strong competition in all markets from insurers, banks, investment companies and pension funds. Its main competitors are Achmea, ASR, NN Group and Vivat1.
Aegon the Netherlands' non-life market share is around 2%, making it the ninth largest company in the market.
In the mortgage loans market, Aegon the Netherlands held a market share of approximately 8% based on new sales in 2018, making it the fourth largest mortgage loan provider in the market. Rabobank, ING Bank and ABN AMRO are the largest mortgage loan providers in the market, and competition is increasing from foreign competitors and capital from pension funds.
Aegon the Netherlands' share is growing in the market for Dutch household savings. In 2018, its market share was approximately 3%, which is relatively small in comparison to banks such as Rabobank, ING and ABN AMRO.
Various legal and regulatory changes have had an impact on demand for insurance products in the Dutch market. This is especially true in the life insurance market, where the tax deductibility of certain products has been reduced, leading to a shift to bank-saving products. Moreover, volatility in economic and financial markets has meant that customers are more reluctant to commit themselves to long-term contracts. These changes have resulted in more competition, greater focus on competitive prices, improved customer service and retention, and product innovation.
The defined contribution (PPI) market is set to grow significantly due to the shift from defined benefit plans to defined contribution plans and the demand for transparent and cost-effective pension products. As a result, significant growth of scale remains necessary to effectively serve this market, and the number of providers is expected to shrink further within a few years. Aegon the Netherlands has identified this market as an opportunity for growth and intends to maintain its leadership position with Aegon Cappital.
The Wft embeds the cross-sectorial functional approach within the Dutch supervisory system. The supervision of financial institutions pursuant to the Wft rests with the De Nederlandsche Bank DNB and the Dutch Authority for the Financial Markets (AFM).
The AFM's conduct of business supervision focuses on ensuring orderly and transparent financial market processes, integrity in relations between market parties, and due care in the provision of services to customers.
Solvency II Aegon the Netherlands uses a partial internal model (PIM) to calculate the solvency position of its insurance activities under Solvency II.
The calculation includes the use of the volatility adjustment (VA), but does not include the use of any transitional measures. The initial internal model of Aegon the Netherlands was approved on November 26, 2015, by the supervisor, the DNB, as part of the Internal
Dutch Act on Recovery & Resolution for Insurers On January 1, 2019, the Dutch Act on Recovery & Resolution for Insurers (R&R Act) came into force in the Netherlands, replacing the previously applicable intervention regime for insurance companies in the Netherlands faced with financial difficulties.
The R&R Act has introduced a revised regulatory framework for recovery and resolution of Dutch insurance and reinsurance companies and provides for a range of measures to be taken by these companies and the Dutch Central Bank ex ante, in order for these insurance and reinsurance companies to be prepared for recovery in circumstances where it no longer meets the required solvency requirements and for orderly resolution, in circumstances where it is failing or is likely to fail.
Financial supervision of credit institutions Aegon Bank N.V. is subject to indirect supervision by the ECB under the Single Supervisory Mechanism (SSM), being one of the elements of the Banking Union. As a consequence thereof, the ECB may give instructions to the DNB in respect of Aegon Bank N.V. or even assume direct supervision over the prudential aspects of the Aegon Bank N.V.'s business. Pursuant to the banking supervision by the DNB, Aegon Bank N.V. is (among others) required to file monthly regulatory reports and an audited Annual Report. Aegon
Pursuant to the EU Banking Reforms (as described below), a binding leverage ratio of 3% will become applicable to banks. According to the EU Banking Reforms, competent authorities remain responsible for monitoring leverage policies and processes of individual institutions and may impose additional measures to address risk of excessive leverage, if warranted.
The Banking Recovery and Resolution Directive, as implemented in the Netherlands in the Wft, and the SRM Regulation form the European framework for recovery and resolution for (among others) ailing banks, certain investment firms and their holding companies. The Banking Recovery and Resolution Directive provides for early intervention measures that may be imposed by the DNB
in respect of Aegon Bank N.V. in the event that its financial condition is deteriorating. It also allows the DNB under certain circumstances to write down or convert relevant capital instruments, including Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments, in a specific order. Were Aegon Bank N.V. to fail or be likely to fail and the other resolution conditions were also met, the DNB would be able to place Aegon Bank N.V. under resolution. As part of the resolution scheme to be adopted by the DNB it may decide to apply certain resolution tools and exercise its powers pursuant to the implemented BRRD in order to give effect to such resolution tools.
The DNB will set a level of minimum MREL on a bank-by-bank basis based on assessment criteria due to be set out in technical regulatory standards.
The Basel III Reforms includes stricter rules for internal models, a capital floor and revisions to the standardized approaches for credit risk, operational risk and the credit valuation adjustment specified at a counterparty level ('CVA').
The business has deep relationships with in excess of 5,000 adviser firms (around 50% of the market) and 10,000 employers, and continues to show strong market growth growing assets under administration by 13%.
It employs over 2,000 people and its main offices are in Edinburgh, London, Peterborough and Witham.
Organizational structure Aegon UK plc is Aegon's holding company in the United Kingdom. It was registered as a public limited company at the beginning of December 1998. The leading operating subsidiaries, which all operate under the Aegon brand, are:  Aegon Investment Solutions Ltd.;  Scottish Equitable plc;  Cofunds Ltd.; and  Aegon Investment Ltd.
The Digital Solutions business is responsible for Aegon UK's new platform propositions sold through Financial Adviser and workplace channels, together with protection products and an institutional trading platform business. The financial adviser and workplace channels are supported by an investment solutions capability which allows customers to invest in Aegon funds. This capability is well established within the workplace channel with plans to significantly grow within the financial adviser channel.
It is positioned for growth, given the participation in the workplace pensions and financial advice market, which are forecast to grow at 9.2% and 13.5% over the next 5 years respectively.
Overview of sales and distribution Aegon UK has two principle distribution channels: financial advisers and workplace supported by a modern technology platform which provides services both to the adviser/employer and their underlying customers.
This gives Aegon UK the ability to support customers throughout their life journey unlike the majority of its competitors.
In addition, Aegon UK also participates in the protection and institutional trading platform markets.
Aegon UK provides a technology platform that supports the adviser and their customers in managing their finances, and integrates into the back office of the adviser. The aim is create a primary platform relationship, which positions Aegon to receive the majority of new business flows from the adviser partner. An example being the partnership agreed with leading wealth/workplace advisory firm LEBC
in 2019 that is expected to deliver additional flow in 2020.
Workplace channel The Workplace channel provides UK-based employers with workplace pensions and savings schemes. It allows Aegon UK to participate in the strong growing auto-enrolment market, cost effectively acquiring individual customer relationships.
Aegon UK now has a market-leading position covering all major workplace savings products and participates in both the small and medium-sized (SME) and large employer segments. A key driver of growth is in the mastertrust product, the fastest growing sector of the UK DC market, Aegon UK has an established and market leading offering.
Aegon UK’s proposition extends to include a range of tools to assist employers with their governance responsibilities: auto enrolment functionality and member insights tool to enable them to effectively manage their pension schemes.
Protection channel Aegon UK offers a range of products for individual customers, including life cover, critical illness and income protection available through financial advisers. The target market is wealthier customers over the age of 40, where Aegon UK's underwriting expertise helps it to provide a customer-centric proposition.
This also provides a strong overlap with the target customers for Aegon UK’s financial adviser and workplace platform and the advisers who help them, giving the opportunity to leverage opportunities to cross-sell.
In addition, Aegon UK offers a range of protection products for small to medium-sized companies that wish to insure key personnel, complementing the core workplace channel.
Institutional channel Aegon UK also participates in the institutional market in two distinct areas where capability is provided to other parties who provide policy administration to the end-client:  An institutional trading platform which powers 28 of the UK’s leading end-customer platforms (e.g. Brooks MacDonald, AJ Bell) and manages a total of GBP 52 billion assets; and  An investment-only proposition for pension schemes, which provides access to insured funds for approximately 160 clients who represent GBP 7 billion assets under administration.
Competition Aegon UK is well positioned for growth, possessing a market leading position in markets with strong growth potential. There are a diverse range of competitors in the markets in which Aegon UK operates, and market dynamics are continuing to evolve.
In the financial adviser market, Aegon UK competes with the likes of Fidelity, Transact and Quilter with the objective being to become
Regulation and supervision All relevant Aegon UK companies based in the United Kingdom are regulated by the Prudential Regulation Authority (PRA) and/
The UK vote on June 23, 2016 to leave the European Union (EU) has implications for financial services companies in the UK. Much financial regulation currently applicable in the UK derives from EU legislation. But this regulation will remain in force until any changes are made, which will be a matter for the UK government and the UK Parliament. Aegon UK must, therefore, continue to comply with
Every life insurance company licensed by and/or falling under the supervision of the PRA must file audited regulatory reports on at least an annual basis. These reports, primarily designed to enable the PRA to monitor the solvency of the insurance company, include a (consolidated) balance sheet, a (consolidated) income statement, a breakdown of the Solvency Capital Requirements, extensive
EU directives, and have to hold the level of capital required to withstand a 1-in-200 shock on a 1-year value at risk basis.
CRD IV The Capital Requirements (Country by Country Reporting) Regulations 2013 (‘CRD IV’) came into force on January 1, 2014. These require credit institutions and investment firms, as defined within the directive, which are regulated under CRD IV, to “disclose annually, specifying by Member State and by third country in which it has an establishment, the following information on a consolidated basis for the financial year”:  Name, nature of activities and geographical location;  Turnover;  Number of employees on a full time equivalent basis;  Profit or loss before tax, and tax on profit or loss;  Public subsidies received.
Aegon Investments Limited is a BIPRU firm, is regulated by the FCA and must maintain a capital framework in line with the FCA
In conjunction with the FCA, the investment related companies within the Aegon UK group will in future be subject to consolidated reporting under CRD IV. This applies the same principles and rules under CRD IV to the consolidated group of entities.
Overview of sales and distribution channels In Spain & Portugal, the Aegon affiliates distribute their products mainly through partner branches (bancassurance). In addition, Aegon also has its own sales network, comprising of brokers, agents and the direct channel.
Aegon Spain and Banco Santander Since June 4, 2013, Aegon Spain and Banco Santander S.A., the largest financial institution in Spain, have partnered to distribute certain types of insurance products in Spain, through Banco Santander’s network of branches. This was followed on December 31, 2014 by Aegon Spain entering into a similar partnership with Banco Santander and Santander Totta Seguros, S.A., a Portuguese insurance company, part of the Santander International group.
In Spain, the life insurance (mainly pure risk and health) products are sold by Santander Life Insurance and Reinsurance, whereas the non-life insurance (mainly accident, home, commercial multi-risk insurance, critical illness and funeral) products are sold by Santander General Insurance and Reinsurance Company. Both entities are joint venture insurance entities, owned 51% by Aegon
In Portugal, the life insurance (mainly pure risk) products are sold by Aegon Santander Portugal Life, whereas the non-life insurance
Overview of Southern and Eastern Europe Overview of Southern and Eastern Europe Overview of Southern and Eastern Europe Overview of Southern and Eastern Europe
Aegon Spain own network and direct channel Aegon Spain's own network and direct channel offers life and health insurance and pension products of the fully owned Aegon subsidiary. The own network comprises the network of brokers and agents, accounting for approximately 80% of the total sales.
The remaining 20% of the total sales is accounted for by the direct channel.
In Poland, unit-linked and different types of traditional life insurance products are distributed by tied agents and broker partners.
In Romania, unit-linked and different types of traditional life insurance products are distributed mainly by bank partners.
In Turkey, the most important sales channels are insurance brokers and tied agents, in addition to bank partners, which distribute savings and term life insurance products.
Overview of business lines Aegon Southern and Eastern Europe focuses primarily on retail customers. It offers mainly individual life, different types of general insurance, accident and health products.
Life insurance, Savings & Protection Spain & Portugal's life insurance business comprises savings as well as individual and group protection products, with individual products forming the larger part of the business.
Group life contracts are renewable each year any carry optional accident and health cover. Aegon Hungary also offers traditional saving type products that consist of index-life products that are not unit-linked, but have guaranteed interest rates. Additionally, in Hungary
Aegon also offers unit-linked policies, which are frequently accompanied with riders. These riders provide customers — in addition to the main coverage – with additional financial support in the event of, for instance, having an accident, becoming disabled, or being hospitalized.
In Poland, Aegon focuses on unit-linked as well as traditional life products.
In Turkey, Aegon focuses on traditional life insurance products, the most important of which are pure term life with several riders, term life with premium refund on maturity, and saving-type endowment products.
Also up until the end of September 2018, Aegon Hungary Home Savings and Loan Association, being the subsidiary of Aegon Hungary
Health In Spain, health insurance is offered by Aegon Spain through its affiliated entities through its own network of brokers and agents, its direct channels, and through Santander's network of branches. Medical expense coverage for doctor visits, diagnoses, hospitalization, dental and other health covers are offered through a broad network of medical partners across the country.
Aegon's pension business in Central & Eastern Europe was impacted by reforms to the pension system in several countries in the region during the past years. In 2019, Aegon was active in the (formerly mandatory) private pension market in Poland and Romania.
Aegon Hungary also offers non-life cover (mainly household and car insurance, in addition to some wealth and liability industrial risk and travel insurance). In recent years, margins on non-life insurance in Hungary have been attractive. Moreover, household insurance provides considerable opportunities for the cross-selling of life insurance.
Aegon Hungary has operated branch offices selling household insurance policies in Slovakia since 2010 and in Poland since 2011.
So as to optimize its portfolio, Aegon Hungary sold the portfolio of its Slovak branch on September 6, 2019 to Union poisťovňa, a.s..
Competition The Spanish insurance market is highly competitive. For Aegon Spain’s traditional life, unit-linked variable life and pension products, the major competitors are retail bank-owned insurance companies. For Aegon Spain’s health and general insurance products, the main competitors are both foreign and local companies. Aegon Spain is the exclusive provider of protection products to Santander.
In the voluntary pension fund market Aegon was ranked third in terms of both the number of participants and managed assets in 2018 in Hungary 3. Based on February 2019 data, Aegon was ranked fourth in terms of both the number of participants and managed assets in Poland 4. In September 2019, Aegon was the fourth largest provider in the Romanian mandatory private pension market, both in terms of net assets under management and number of participants 5. Aegon is a less significant participant on the voluntary pension market in Romania, Turkey and Spain.
1 Source: MABISZ, Website visited January 10, 2020. 2 Source: Insurance Association of Turkey, Website visited January 10, 2020. 3 Source: MNB, Website visited January 10, 2020. 4 Source: KNF, Website visited January 10, 2020. 5 Source: APAPR, Website visited January 10, 2020
Insurance Company, Aegon Hungary Home Savings and Loan Association is under the supervision of MNB. In Romania, the private and voluntary pension system is regulated and supervised by the Authority for Financial Supervision (ASF). The mandatory pension system is subject to the Privately Administered Pension Funds Act (411/2004) and the voluntary pension system is subject to the Voluntary
Pension Law (204/2006), both complemented by individual regulations (as secondary legislation). In Poland, this activity is supervised by the KNF and governed by the Organization and Operation of Pension Funds Act. In Turkey, the voluntary pension funds are under the supervision of the Undersecretariat of Treasury and the companies are subject to Individual Retirement Saving and Investment
In Hungary, the Credit Institutions and Financial Enterprises Act (2013) stipulates the foundation, operation and reporting obligations of the country's financial institutions. Just like Aegon Hungary Composite Insurance Company, Aegon Hungary Home Savings and Loan
Solvency II The Solvency II insurance solvency regime became effective in European Economic Area (EEA) countries on January 1, 2016.
Aegon's EU-domiciled entities in Southern and Eastern Europe use the Standard Formula to calculate the solvency position of their insurance activities. As mentioned on page 284, Aegon Spain no longer applies the matching adjustment or transitional arrangements.
The insurance activities in Turkey have been included through Deduction & Aggregation on a Solvency II Standard Formula basis.
Overview of Asia Aegon Asia operates through two major joint ventures in India and the People's Republic of China (hereafter referred to as 'China'), in addition to several whollyowned subsidiaries, including Aegon's businesses in Hong Kong and Singapore that serve the high-net-worth segment.
Since 2009, Aegon had been operating in Japan through a joint venture with Sony Life, one of Japan's leading insurance companies, named Aegon Sony Life Insurance Co., Ltd. (Aegon Sony Life). The primary focus of Aegon Sony Life was variable annuity sales in Japan.
Aegon and Sony Life also jointly established a reinsurance company, SA Reinsurance Ltd. (SARe), to provide Aegon Sony Life with greater flexibility in the pricing and design of its annuity products.
Wholly-owned subsidiaries Transamerica Life (Bermuda) Ltd. (TLB) was established in 2005 and its full-service branches opened in Hong Kong and
Aegon Insights is a marketing, distribution and administration services business operating in the Asia-Pacific region with new business discontinued since 2017 due to change in consumer preferences. The Aegon Insights business, currently maintains operations in Australia, Hong Kong, Indonesia and Japan to serve existing customers.
Overview of sales and distribution In China, Aegon THTF follows a multi-channel distribution strategy. Current distribution channels include agency, brokerage, banks, direct marketing, group and digital.
In India, Aegon Life distributes its products predominantly via its e-sales, direct and group channels, utilizing its own website, digital partners, as well as its own direct sales force.
TLB distributes its products to high-net-worth consumers through targeted distribution relationships with select local and international brokers, as well as through bancassurance channels.
Overview of business lines High-net-worth businesses TLB's main products consist of USD denominated Universal Life and USD denominated Term Life Insurance solutions for the high-networth market segment. Universal Life products are TLB's key products to meet the needs of high-net-worth individuals, supporting
Aegon Insights Aegon Insights primarily worked with local insurers to develop marketing, distribution and administration solutions tailored to the needs of specific markets and customers. Revenue is primarily generated through reinsurance arrangements and fee income from marketing services, product distribution and administration. With changes in consumer preferences, Aegon made the strategic decision in 2017 to discontinue Aegon Insights’ new business while continuing to provide services to existing customers.
Strategic partnerships In China and India, Aegon provides a broad range of life insurance products including unit-linked, universal life, and traditional life products.
In China, Aegon THTF's agency, broker, and direct marketing channels primarily offer its flagship whole-life critical illness products.
In India, Aegon Life offers individual term plans, traditional participating and non-participating savings products, and unit-linked life insurance plans through the direct sales force, e-sales channels and e-commerce partners.
Regulation and supervision Aegon Insights keeps abreast of all relevant changes or proposed changes to regulations in all of its markets.
The IRDAI regulates, promotes and encourages the orderly growth of insurance and reinsurance businesses in India. Established by the government of India, it safeguards the interests of the country's insurance policyholders.
Hong Kong, Singapore and Bermuda: TLB TLB is incorporated in Bermuda and regulated by the Bermuda Monetary Authority, the regulator of the financial services sector in Bermuda. TLB has branches which are registered and licensed in Hong Kong and Singapore. The insurance industry is regulated by the Hong Kong Insurance Authority (HKIA) in Hong Kong and the Monetary Authority of Singapore (MAS) in Singapore. The MAS
consultancy business licensing rules, insurance laws, and personal data protection laws. In addition, various regulators also keep oversight of activities undertaken by entities licensed by Aegon Insights. These regulators include the FSA in Japan, the Australian
Solvency II Solvency II requirements became effective for Aegon Group as of January 1, 2016. Aegon's Asian insurance activities are included in the Aegon Group Solvency II ratio through Deduction & Aggregation. For TLB, Deduction & Aggregation is applied using available and required capital as per the local capital regime. The regulatory regime of Bermuda and Japan were granted full provisional equivalence on December 7, 2015.
It has offices in the United States, the Netherlands, the United Kingdom, Hong Kong, Japan, Germany, Hungary and Spain. It operated under three main brands in 2019:  Aegon Asset Management specializes in a range of high-quality investment solutions across asset classes, including fixed income, equities, real estate, absolute return, liability-driven, and multi-asset and balance sheet solutions. A long and successful history of partnership with Aegon’s insurance businesses has enabled Aegon Asset Management to establish experienced investment teams, a solid asset base and proven long-term track records;  Kames Capital is a UK-based asset management company that provides fixed income, equities, real estate and multi-asset solutions to both UK and international clients; and  TKPI is a Netherlands-based fiduciary manager that is recognized for its manager selection and tailored advice on balance sheet solutions for the pension market.
Aegon Investment Management B.V., Kames Capital plc and Aegon Hungary Asset Management Company Zrt. The operating entities
Aegon Investment Management B.V. and TKP Investments B.V. have been merged as per January 1, 2019.
Overview of sales and distribution channels Aegon Asset Management uses a variety of sales and distribution channels in the Americas, Europe and Asia. These include: affiliated companies, direct to institutional clients, independent investment advisors, investment consultants, joint ventures and third-party investment platforms.
Aegon Asset Management employs a full range of asset classes, and manages the funds against objectives, targets and risk profiles agreed with clients. Aegon Asset Management offers both absolute and relative return products.
In the United States, Aegon Asset Management focuses on offering investors fixed income, balance sheet solutions and real estaterelated strategies. It works directly with pension funds, endowments and foundations as well as investment consultants within the institutional market. In the wholesale market, Aegon Asset Management works as a sub-advisor with its insurance company affiliates and other partners in order to offer competitive and relevant strategies for its client base. It also works with consultants and other partners to offer products to third-party institutions. Primary competitors in the United States include AllianceBernstein,
In mainland China, Aegon Industrial Fund Management Company focuses on Chinese equity, fixed income, and money market strategies.
It competes against a wide range of local based asset managers including Alibaba's Yuebao fund, China Universal Asset Management,
In France, La Banque Postale Asset Management competes for private investors through La Banque Postale's retail banking network, with a focus on new multi-asset strategies. In the institutional market, it also offers strategies from Aegon Asset Management businesses in order to compete with large local asset managers and specialized international competitors. In France, primary competitors include Amundi Asset Management, AXA Investment Management, BNP Paribas Investment Partners and Natixis Global
Regulation and supervision Regulation of asset management companies in general differs to that of insurers. Aegon Asset Management's global holding company,
(CFTC) for the US-based entities. Kames Capital is also regulated by the SEC for its activities in the US market. From a regulatory perspective, the asset management activities of the US-based entities of Aegon Asset Management in the United States do not fall under the responsibility of Aegon Asset Management Holding B.V., as these entities are subsidiaries of Transamerica Corporation.
MiFID II MIFID II requirements became effective for Aegon Asset Management as of January 3, 2018, and the Company adheres to the regulation. In line with most of its peers, the European Aegon Asset Management entities (Aegon Investment Management B.V.
and Kames Capital plc decided in principle to pay external research costs by their own means.
Some liabilities can be surrendered, while some assets, such as privately placed loans, mortgage loans, real estate and limited
The profitability of Aegon’s spread-based businesses depends in large part upon the ability to manage interest rate risk, credit spread risk and other risks inherent in the investment portfolio. Aegon may not be able to successfully manage interest rate risk, credit spread risk and other risks in the investment portfolio or the potential negative impact of those risks.
The sensitivity of Aegon’s net income and shareholders’ equity to a change in interest rates is provided in the notes to the consolidated statements, note 4 Financial risks, section ‘Interest rate risk’ of Aegon’s Annual Report 2019.
Rapidly rising interest rates may adversely affect Aegon’s profitability and available liquidity.
In periods of rapidly increasing interest rates, policy loans, surrenders and withdrawals may and usually do increase. Premiums in flexible premium policies may decrease as policyholders seek investments with higher perceived returns. This activity may result in cash payments by Aegon requiring the sale of invested assets at a time when the prices of those assets are affected adversely by the increase in market interest rates. This may result in realized investment losses.
Credit and default risk Declines in value and defaults in Aegon’s debt securities, private placements and mortgage loan portfolios held in Aegon’s general and separate accounts, or the failure of certain counterparties, may adversely affect Aegon’s profitability and shareholders’ equity.
Aegon is exposed to credit risk on its general account fixed-income portfolio (debt securities, mortgages, small and medium sized entities (SME) & consumer loans and private placements), over-the-counter (OTC) derivatives and reinsurance contracts. In addition, financial institutions acting as a counterparty on derivatives may not fulfill their obligations. Default by issuers and counterparties on their financial obligations may be due to, among other things, bankruptcy, lack of liquidity, market downturns or operational failures, and the collateral or security they provide may prove inadequate to cover their obligations at the time of the default. Losses in excess of predicted losses due to any such default or series of defaults by issuers or counterparties may have a material adverse effect on Aegon’s results of operations and financial position.
Aegon’s investment portfolio has a large exposure to the residential real estate market in the Netherlands through the residential mortgages sourced by Aegon and the AMVEST funds. Non market impacts assumed by Aegon the Netherlands include lower illiquid returns and lower margin forfeited due to higher prepayment in the mortgage portfolio in the event of lower interest rates, where higher prepayments results in market value losses and lower reinvestment yields. Furthermore, a general downturn in the real-estate
The default of a major market participant may disrupt the markets and may affect Aegon’s business, financial condition, liquidity, operations and prospects.
The failure of a sufficiently large and influential financial institution, or other market participant including a government issuer, may disrupt securities markets or clearing and settlement systems in Aegon’s markets. This may cause market declines or volatility.
Even the perceived lack of creditworthiness of a government or financial institution (or a default by any such entity) may lead to market-wide liquidity problems and losses or defaults by Aegon or by other institutions. This risk is sometimes referred to as
These withdrawals may require the sale of invested assets, including illiquid assets, at a price that may result in realized investment losses. These cash payments to policyholders would result in a decrease in total invested assets and a decrease in net income.
Among other things, early withdrawals may also cause Aegon to accelerate amortization of deferred policy acquisition costs (DPAC), reducing net income.
Currency risk Fluctuations in currency exchange rates may affect Aegon’s reported results of operations.
As an international group, Aegon is subject to foreign currency translation risk. Foreign currency exposure also exists when policies are denominated in currencies other than Aegon’s functional currency. Currency risk in the investment portfolios backing insurance and investment liabilities are managed using asset liability matching principles. Assets allocated to equity are kept in local currencies to the extent shareholders’ equity is required to satisfy regulatory and Aegon’s self-imposed capital requirements. Therefore, currency exchange rate fluctuations may affect the level of Aegon’s consolidated shareholders’ equity as a result of translation of the equity of Aegon’s subsidiaries into euro, Aegon’s reporting currency. Aegon holds the remainder of its capital base (capital securities, subordinated and senior debt) in various currencies in amounts that are targeted to correspond to the book value of Aegon’s business units. This balancing is intended to mitigate currency translation impacts on equity and leverage ratios. Aegon may also hedge the foreign exchange component of expected dividends from its principal business units that maintain their equity in currencies other than the euro.
Aegon is exposed to changes in the fair value of its investments, the impact of interest rate, equity markets and credit spread changes, currency fluctuations and changes in mortality and longevity. Aegon uses common financial derivative instruments, such as swaps, options, futures and forward contracts to hedge some of the exposures related to both investments backing insurance products and Company borrowings. Aegon may not be able to manage the risks associated with these activities successfully through the use of derivatives. In addition, a counterparty may fail to honor the terms of its derivatives contracts with Aegon. Clearing members and clearing houses may terminate their derivatives contracts with Aegon. Aegon’s inability to manage risks successfully through
th er n o n -fin an cial in fo rm atio n derivatives, a counterparty’s failure to honor Aegon’s obligations or the systemic risk that failure is transmitted from counterparty to counterparty may each have a material adverse effect on Aegon’s businesses, results of operations and financial condition.
Aegon uses the London Clearing House (LCH) as a central counterparty to clear most of its derivatives transactions. In December 2018, the European Commission declared the system of supervision in the United Kingdom to be equivalent to that of the European Union for 12 months following Brexit. If following this period LCH has not been granted recognition as a third country central counterparty by the European Securities Market Authority (ESMA), new and existing derivatives cleared through LCH and executed by EU27 entities, may not comply with EMIR regulations. If this situation materializes then it is possible that existing trades will have to be terminated and replaced by new trades to be cleared by an authorized clearing house located in the EU27. This could lead to additional costs and may impair the effectiveness of Aegon’s hedging programs.
Aegon’s operations, and some of which are related to the insurance industry and equity markets in general. As a result of these factors, investors may not be able to resell their common shares at or above the price paid for them. In particular, the following factors, in addition to other risk factors described in this section, may have a material impact on the market price of Aegon’s common shares:  Investor perception of Aegon as a company;  Actual or anticipated fluctuations in Aegon’s revenues or operating results;  Announcements of intended acquisitions, disposals or financings, or speculation about such acquisitions, disposals or financings;  Changes in Aegon’s dividend policy, which may result from changes in Aegon’s cash flow and capital position;  Sales of blocks of Aegon’s shares by significant shareholders, including Vereniging Aegon;  A downgrade or rumored downgrade of Aegon’s credit or financial strength ratings, including placement on credit watch;  Potential litigation or regulatory actions involving Aegon or the insurance industry in general;  Changes in financial estimates and recommendations by securities research analysts;  Fluctuations in capital markets, including foreign exchange rates, interest rates and equity markets;  The performance of other companies in the insurance sector;  Regulatory developments in the United States, the Netherlands, the United Kingdom, and other countries in which Aegon operates;  International political and economic conditions, including the effects of terrorist attacks, military operations and other developments stemming from such events, and the uncertainty related to these developments;  News or analyst reports related to markets or industries in which Aegon operates; and  General insurance market conditions.
Vereniging Aegon, Aegon’s major shareholder, holds a large percentage of the voting shares and therefore has significant influence over Aegon’s corporate actions.
As a matter of Dutch corporate law, common shares and common shares B offer equal full voting rights, as they have equal nominal values (EUR 0.12). The financial rights attached to a common share B are 1/40th of the financial rights attached to a common share.
Cause has occurred. A Special Cause includes the acquisition of a 15% interest in Aegon N.V., a tender offer for Aegon N.V. shares or a proposed business combination by any person or group or persons, whether individually or as a group, other than in a transaction approved by the Executive Board and the Supervisory Board. In the event of a Special Cause, Vereniging Aegon’s voting rights will increase to 32.6% for up to six months. Consequently, Vereniging Aegon may have substantial influence on the outcome of corporate actions requiring shareholder approval.
In April 2019 Aegon issued EUR 500 million Perpetual Contingent Convertible Securities (“PCCS”). Upon the occurrence of a conversion trigger event the PCCS will be converted into common shares of the Company at the prevailing conversion price. A conversion trigger event shall occur if at any time: (i) the amount of eligible own funds items eligible to cover the Solvency Capital Requirement is equal to or less than 75 per cent. of the Solvency Capital Requirement; (ii) the amount of own fund items eligible to cover the Minimum capital requirement is equal to or less than the Minimum Capital Requirement; or (iii) in case the Minimum Capital Requirement is an event, such event occurs; or (iv) a breach of the Solvency Capital Requirement has occurred and such breach has not been remedied within a period of three months from the date on which the breach was first observed. The conversion price was set at EUR 2.994 per common share and will be adjusted upon occurrence of dilutive events like stock splits, extra ordinary dividend or stock dividend, rights issues and others. A reduction of the conversion price will result in an increase in the number of common shares to be issued.
The PCCS and other convertible securities may influence the market for Aegon’s common shares. For example, the price of Aegon’s common shares may become more volatile and may be depressed by the issue of common shares upon conversion of the PCCS and/or any convertible securities or by the acceleration by investors of any convertible securities (or other such securities)
that Aegon may have issued. Negative price developments may also result from hedging or arbitrage trading activity by holders of such convertible securities that may develop involving such convertible securities (or other such securities) and Aegon’s common shares. Any such developments may negatively affect the value of Aegon’s common shares.
Certain products, particularly Aegon’s variable annuity products and defined benefit pension business in the Netherlands, include death benefit guarantees, guarantees of minimum surrender values or income streams for stated periods or for life, which may be in excess of account values. These guarantees are designed, among other things, to protect policyholders against downturns in equity markets and interest rates. As a result, a drop in the value of underlying assets or more volatile markets could result in an increase in the valuation of Aegon’s liabilities associated with these products. An increase in these liabilities may decrease its net income. Aegon uses a variety of hedging and risk management strategies to mitigate these risks. However, these strategies may not be fully effective.
Product development risk Aegon regularly develops new financial products to remain competitive in its markets and to meet the expectations of its customers. If customers do not achieve expected returns on those products, Aegon may be confronted with litigation and negative publicity.
As part of Aegon’s overall risk and capital management strategy, Aegon purchases reinsurance for certain risks underwritten by Aegon’s various business segments. Market conditions beyond Aegon’s control determine the availability and cost of the reinsurance protection Aegon purchases. In addition, interpretations of terms and conditions may differ over time from anticipated coverage as contracts extend for decades, which may lead to denials of coverage and potentially protracted litigation, the eventual outcome of which may be uncertain.
Catastrophe risk Catastrophic events, which are unpredictable by nature, may result in material losses and abruptly and significantly interrupt Aegon’s business activities.
Operational risks Business risk Competitive factors may adversely affect Aegon’s market share.
th er n o n -fin an cial in fo rm atio n earnings, reserve increases, capital requirements or a lack of access to debt capital markets and other sources of financing. Such conditions may also lead to changes by Aegon or Aegon’s competitors in product offerings and product pricing that may affect Aegon and Aegon’s relative sales volumes, market shares and profitability. Additionally, the competitive landscape in which Aegon operates may be affected by government-sponsored programs or actions taken in response to, for instance, dislocations in financial markets.
Aegon’s businesses, results of operations and financial condition. Future acquisitions may also have a dilutive effect on the ownership and voting percentages of existing shareholders. There can be no assurance that Aegon will successfully identify suitable acquisition candidates or that Aegon will properly value acquisitions made. Aegon is unable to predict whether or when any prospective acquisition candidate will become available, or the likelihood that any acquisition will be completed once negotiations have commenced.
New technologies are transforming the insurance industry. New technologies include, but are not limited to, communication channels, automation, artificial intelligence, data analytics and blockchain. These technologies are changing the way insurance is distributed and sold. They are also changing the way insurers manage their businesses and the skills they need in their workforces. Furthermore, the new technologies are influencing customer and consumer demands. Technology makes it easier to move into new markets. This increases competition, not just among peers, but also from new competitors and disruptors. Inability to adapt quickly enough to and apply these new technologies may impact Aegon’s competitive position, and its ability to maintain profitability, and may adversely affect Aegon’s future financial condition and results of operations.
Aegon may not be successful in managing its exposure to climate risk and adequately adapting investment portfolios for the transition to a low-carbon economy.
Given the significant uncertainties related to climate change impacts and the long-term nature of the issue, it cannot be ruled out that climate change may lead to losses to Aegon’s businesses, the investment portfolios it manages and to its corporate reputation.
Information technology risk Failure of Aegon’s information technology or communications systems may result in a material adverse effect on Aegon’s results of operations and corporate reputation.
The information security risk that Aegon faces includes the risk of malicious outside forces using public networks and other methods, including social engineering and the exploitation of targeted offline processes, to attack Aegon’s systems and information. It also includes inside threats, both malicious and accidental. For example, human error, unauthorized user activity and lack of sufficiently automated processing can result in improper information exposure or use. Aegon also faces risk in this area due to its reliance in many cases on third-party systems, all of which may face cyber and information security risks of their own. Third-party administrators or distribution partners used by Aegon or its subsidiaries may not adequately secure their own information systems and networks, or may not adequately keep pace with the dynamic changes in this area. Potential bad actors that target Aegon and its applicable third parties may include, but are not limited to, criminal organizations, foreign government bodies, political factions, and others.
In recent years information security risk has increased sharply due to a number of developments in how information systems are used by companies such as Aegon, but also by society in general. Threats have increased as criminals and other bad actors become more organized and employ more sophisticated techniques. At the same time companies increasingly make information systems and data available through the internet, mobile devices or other network connections to customers, employees and business partners, thereby expanding the attack surface that bad actors can exploit.
As Aegon continues to focus on reducing expenses necessary to support its business, a key part of its operating strategy has been to outsource certain services that are important to its business. Aegon outsources certain information technology, finance and actuarial services, investment management services and policy administration operations to third-party providers and may do so increasingly in the future. If Aegon fails to maintain an effective outsourcing strategy or if third-party providers do not provide the core administrative, operational, financial, and actuarial services Aegon requires and anticipates, or perform as contracted, such as compliance with applicable laws and regulations, or suffer an information security or data privacy breach, Aegon may not realize the productivity improvements or cost efficiencies or customers might experience lower service levels. In addition, Aegon may not be able to find an adequate alternate provider, and instead experience financial loss, reputational harm, operational difficulties, increased costs, a loss of business and other negative consequences, all of which could have a material adverse effect on Aegon’s results of operations. In addition, Aegon’s reliance on third-party providers does not relieve Aegon of its responsibilities and requirements. Any failure or negligence by such third-party providers in carrying out their contractual duties may result in Aegon being subjected to liability and litigation. Any litigation relating to such matters could be costly, time-consuming, and the outcome would be uncertain. Moreover, any adverse publicity arising from such litigation, even if the litigation is not successful, could adversely affect Aegon’s reputation and distribution of its products. Finally, Aegon’s ability to receive services from third-party providers based in different countries might be impacted by political instability, cultural differences, regulatory requirements or policies inside or outside of the countries within which Aegon has operations. As a result, Aegon’s ability to conduct its business might be adversely affected.
Data privacy risk A breach of data privacy or security obligations may disrupt Aegon’s business, damage Aegon’s reputation and adversely affect financial conditions and results of operations.
Pursuant to applicable laws, various government agencies and independent administrative bodies have established numerous rules protecting the privacy and security of personal information and other confidential information held by Aegon. For example, certain of our businesses are subject to laws and regulations enacted by US federal and state governments, the EU or other non-US jurisdictions and/or enacted by various regulatory organizations relating to the privacy and/or information security of the information of customers, employees or others. Effective May 25, 2018, the General Data Protection Regulation (GDPR) took effect in the EU. Compared to the previous directive, the GDPR, among other things, increased compliance obligations, impacted our businesses’ collection, processing and retention of personal data, reporting of data breaches, and provides for significantly increased penalties for non-compliance. The New York Department of Finance Services (NYDFS), pursuant to its cybersecurity regulation, requires financial institutions regulated by the NYDFS, including certain Aegon subsidiaries, to, among other things, satisfy an extensive set of minimum information security requirements, including but not limited to governance, management, reporting, policy, technology and control requirements. Numerous other US laws also impose various information security and privacy related obligations with respect to various Aegon subsidiaries operating in the US, including but not limited to the Gramm-Leach-Bliley Act and related state laws (GLBA), the California Consumer Privacy Act (CCPA) and the Health Insurance Portability and Accountability Act (HIPAA), among many others. Other legislators and regulators with jurisdiction over our businesses are considering or have already enacted enhanced information security risk management and privacy rules and regulations. A number of Aegon’s subsidiaries are also subject to contractual restrictions with respect to the information of our clients and business partners. Aegon, and numerous of its systems, employees and business partners have access to, and routinely process, the personal information of consumers and employees.
Aegon relies on various processes and controls to protect the confidentiality, integrity and availability of personal information and
People risk Aegon may be unable to retain personnel who are key to the business.
As a global financial services enterprise, Aegon relies, to a considerable extent, on the quality of local management and personnel in the various countries in which Aegon operates. The success of Aegon’s operations is dependent, among other things, on Aegon’s ability to attract and retain highly qualified professional personnel. Competition for key personnel in most countries in which Aegon operates is intense. Aegon’s ability to attract and retain key personnel, in particular senior officers, experienced portfolio managers, mutual fund managers and sales executives, is very much dependent on the competitiveness of the compensation package for employees in the market in which it competes. As a part of the governmental response in Europe and, to a certain extent, the United States to the financial crisis in 2008, there have been various legislative initiatives that have sought to give guidance or regulate the structure of remuneration for personnel, in particular senior management, with a focus on performance-related remuneration and limiting severance payments. With differences in interpretation of these regulations by local regulators on how the guidelines need to be applied, as well as to the question of whether they apply to insurance industries at all, these restrictions create an uncertain playing field and may adversely affect Aegon’s ability to compete for qualified employees, as well as Aegon’s ability to transfer employees between regions.
Political, Regulatory and Supervisory Aegon may be required to increase its technical provisions and/or hold higher amounts of regulatory capital as a result of changes in the regulatory environment or changes in rating agency analysis, which may impact Aegon’s financial position and/ or decrease Aegon’s returns on its products.
The way such requirements are applied to groups like Aegon has an impact on the Group’s capital position, as well as on the availability of capital at a Group level. Changes to prudential regulatory requirements may have an impact on Aegon’s competitive position versus companies that are not subject to these or similar requirements at Group level. As an example, as part of the Solvency
DNB otherwise exercises group supervision on Aegon, for example through more stringent requirements with respect to intra-group transactions, risk concentrations and reporting.
There are several important regulatory standards with respect to capital adequacy that apply to Aegon and are subject to change, which changes could impact Aegon’s financial position and results:  Capital adequacy requirements resulting from the further development of the Insurance Capital Standards (ICS), as part of the
Commission, and the extent to which the EIOPA advice will be taken over by the European Commission and the European colegislators;  The NAIC’s requirements with respect to risk-based capital, the NAIC continues to review the risk-based capital (RBC) charges for invested assets. Additionally, the NAIC has an ongoing project to review longevity risk. These initiatives or other regulatory changes to capital factors may lead to higher risk-based charges. In addition, the NAIC formed the Group Capital Calculation (E) Working
In addition to requirements imposed by regulatory and/or supervisory authorities, rating agencies may incorporate higher capital thresholds into their quantitative analyses, thus requiring additional capital for Aegon’s regulated subsidiaries for Aegon Group and/
The application of these capital standards and changes thereto could adversely affect Aegon’s ability to compete with other insurers that are not subject to those capital requirements. These requirements may also lead Aegon to engage in transactions that affect capital and constrain Aegon’s ability to pay dividends or repurchase its own shares. Furthermore, such requirements may constrain
Aegon’s ability to provide guarantees and may increase the cost to Aegon of offering certain products, resulting in price increases, discontinuance of offering of certain products or reducing the amount of risk Aegon takes on. Aegon may consider structural and other business alternatives in light of requirements or standards applicable with respect to systemic entities or activities, of which the impact on shareholders cannot be predicted.For further detail on developments in these areas, we refer to the section ''Regulation and supervision'' of Aegon’s Integrated Annual Report 2019.
Aegon’s financial statements are prepared and presented in accordance with IFRS-EU. Any future changes in these accounting standards may have a significant impact on Aegon’s reported results, financial condition, shareholders’ equity and dividend. This includes the level and volatility of reported results and shareholders’ equity. New accounting standards that are likely to have a significant impact on Aegon’s reported results, financial condition and shareholders’ equity include, but are not limited to, IFRS 9 –
The IASB issued the complete version of IFRS 9 Financial Instruments in July 2014, which was endorsed by the European Union in November 2016. The IASB issued IFRS 17 Insurance Contracts in May 2017. The Standard will replace IFRS 4, which was intended as an interim solution and allowed insurers to continue to use accounting principles that they had applied prior to the initial adoption of IFRS. In November 2018, the IASB agreed to start the process to amend IFRS 17 to defer the mandatory effective date of IFRS 17 by one year (original effective date was January 1, 2021). Subject to IASB due process, entities will be required to apply IFRS 17 for annual periods beginning on or after January 1, 2022. As a consequence of the IFRS 17 deferral, the IASB also agreed to revise the fixed expiry date of the temporary exemption from IFRS 9 in IFRS 4 to allow entities to continue applying the temporary exemption from IFRS
9 until January 1, 2022. As this decision is still subject to IASB due process, this could lead to another year of deferral.
An implementation project was started soon after the publication of the new Standard. Currently no choices have been made as to the accounting policy options provided in IFRS 17, however, it is expected that the impact of the initial application on Aegon’s financial statements is significant.
Further details are provided in the notes to the consolidated financial statements, note 2 ‘Summary of significant accounting policies’.
Local statutes and regulators may limit the amount of dividends paid by Aegon’s subsidiaries to Aegon N.V., thereby limiting Aegon’s ability to make payments on debt obligations.
Aegon’s ability to make payments on debt obligations and pay operating expenses is dependent upon the receipt of dividends from subsidiaries. Some of these subsidiaries are subject to regulatory restrictions that can limit the payment of dividends. In addition, local regulators, may decide to impose further restrictions to dividend payments, which may affect Aegon’s ability to satisfy its debt obligations or pay its operating expenses.
under contracts of any form, including the expropriation, write-off, write-down or conversion of securities such as shares and debt obligations issued by the failing institution. The R&R Act and the regime of the Bank Recovery and Resolution Directive are described in more detail in the section ‘Regulation and supervision’ of Aegon’s Integrated Annual Report 2019.
Since January 31, 2020, the United Kingdom is no longer a member of the European Union. It is currently uncertain if the UK and
EU will succeed in reaching an agreement on the future trade relationship before December 31, 2020, and if they do, what that relationship would look like. This means that the implications of 'Brexit' remain unclear, with respect to the European integration process, the relationship between the UK and the European Union, and the impact on economies and businesses. Aegon has assessed possible outcomes, the risks and prepared possible contingency measures, including in particular, related to a hard Brexit (nodeal ) scenario. Despite these efforts, Aegon could be adversely impacted by unexpected developments and market developments such as increased exchange rate movements of the UK pound versus the euro and higher financial market volatility in general due to increased uncertainty, any of which could reduce the value or results of Aegon’s operations. Aegon could also be adversely impacted
Legal and Compliance Legal and arbitration proceedings and regulatory investigations and actions may adversely affect Aegon’s business, results of operations and financial position.
or the imposition of monetary fines, penalties and/or disgorgement as well as other remedies, sanctions, damages and restitutionary amounts. Regulators may also seek changes to the way Aegon operates. In some cases, Aegon subsidiaries have modified business practices in response to inquiries.
Customers of certain of Aegon’s products bear significant investment risks with respect to those products, which are affected by fluctuations in equity markets as well as interest rate movements. When investment returns disappoint, are volatile, or change due to changes in the market or other relevant conditions, customers may threaten or bring litigation against Aegon.
In some jurisdictions, plaintiffs may seek recovery of very large or indeterminate amounts under claims of bad faith, which can result in tort, punitive and/or statutory damages. Damages alleged may not be quantifiable or supportable or may have no relationship to economic losses or final awards. As a result, Aegon cannot predict the effect of litigation, investigations or other actions on its businesses.
Separate from financial loss, litigation, regulatory action, legislative changes or changes in public opinion may require Aegon to change its business practices, which could have a material adverse impact on Aegon’s businesses, results of operations, cash flows and financial position. Disputes and investigations initiated by governmental entities and private parties may lead to orders or settlements, including payments or changes to business practices, even if Aegon believes the underlying claims are without merit.
Several US insurers, including Aegon subsidiaries, have been named in class actions, as well as individual litigation, relating to increases in monthly deduction rates (MDR) on universal life products. Plaintiffs generally allege that the increases were made to recoup past losses rather than to cover the future costs of providing insurance coverage. In one such class action against an Aegon subsidiary pending in the US federal district court for the Central District of California, which arose from increases implemented in 2015-2016, the parties agreed to settle the case. In January 2019, the court approved the settlement. While less than 1% of policyholders opted out of the settlement, they represent approximately 43% of the value of the settlement fund. The individual opt out cases and disputes are on-going. Resolution of this class action ended a number of other related cases, including other related class actions.
In addition, Aegon’s subsidiary is facing class action and individual lawsuits arising out of MDR increases implemented in 2017-2018.
In the only individual case against Aegon’s subsidiary to reach trial (in 2017), a jury found that a 2013 increase to a certain group of policies was improper. That case is on appeal.
In addition, insurance companies and their affiliated regulated entities may face lawsuits that threaten their business models.
For example, several US-based Aegon subsidiaries are defendants in a class action alleging that the business model improperly characterizes distributors as independent contractors instead of employees. Depending on the outcome, this lawsuit, along with similar claims against other companies, as well as regulatory action, could necessitate a change in the business model and/or could result in a significant settlement or judgment.
In September 2014, consumer interest group Vereniging Woekerpolis.nl filed a claim against Aegon in court. The claim related to a range of unit linked products that Aegon sold in the past, including Aegon products involved in the earlier litigation. In June 2017, the court issued a verdict which upheld the principle that disclosures must be evaluated according to the standards at the time when the relevant products were placed in-force. Most of the claims of Vereniging Woekerpolis.nl were dismissed under this standard, although the court found that Aegon did not adequately disclose certain charges on a limited set of policies. The district court did not decide on the reasonableness of the cost levels and whether the previous compensation arrangements provide sufficient compensation.
Supreme Court ruled on a case involving a securities leasing product sold by one of Aegon’s competitors. It decided that the financial institution was liable if a broker (remisier) that advised on the sale of the institution's products, was not properly licensed. It also upheld the ruling of the Court of Appeals that a higher compensation might be payable in those circumstances, regardless of the financial position of the customer at the time of entering into the securities leasing contract. In July 2016, consumer interest group Stichting Platform Aandelenlease filed a mass claim against Aegon Bank regarding securities leasing product Sprintplan.
Currently, proceedings are pending before the Dutch courts and the Complaint Institute for Financial Services (‘Klachteninstituut
There can be no assurances that these matters will not ultimately result in a material adverse effect on Aegon’s business, results of operations, competitive position, reputation, and financial position. For additional information on proceedings in which
Certain key regulatory proposals that could materially impact Aegon’s financial condition and results of operations are described below.
In addition, the ComFrame, which was adopted in November 2019 by the IAIS, establishes minimum supervisory standards and guidance on the effective group-wide supervision of Internationally Active Insurance Groups (IAIGs) and builds on the IAIS Insurance
Core Principles (a set of principles that is applicable to all insurers). Therefore, IAIGs may be subject to additional standards that other insurers or other insurance groups are not subject to.
The development of ComFrame and the holistic framework may cause Aegon to engage in transactions that affect capital or constrain
In the United States, the Patient Protection and Affordable Care Act (PPACA) adopted in 2010 has been challenged in whole or in part since its adoption. Changes to the PPACA and to other laws and regulations impacting the US health insurance industry could have a material effect on Aegon’s financial condition, results of operations, and competitive position. The extent to which employers or individuals may discontinue their purchase of supplemental health insurance products as a result of any such changes may significantly impact Aegon USA's supplemental health insurance products business. The extent of any such changes or the corresponding impact on Aegon USA's supplemental health insurance business cannot be determined at this time.
The introduction of state-run retirement programs for private-sector employees in the United States could directly compete with private-market retirement plans. More than 30 US states have considered legislation that would establish state-run plans but fewer than 10 states have enacted legislation, and among those, even fewer have actually implemented them. Federal ERISA law raises questions as to whether such plans are pre-empted by ERISA.
Tax risks also include the risk of consequences arising from failure to comply with procedures required by tax authorities. Failure to manage compliance tax risks potentially leads to inaccurate, incomplete or untimely tax returns. Materialisation of those risks would lead to non-compliance, and potentially increased tax charges, penalties and interest. Failure to manage reporting risks, may lead to tax positions in financial reporting that do not represent a true and fair view.
Aegon relies on a combination of contractual rights with third parties and copyright, trademark, patent and trade secret laws to establish and protect Aegon’s intellectual property. Third parties may infringe on or misappropriate Aegon’s intellectual property, and it is possible that third parties may claim that Aegon has infringed on or misappropriated their intellectual property rights. Any resulting proceedings in which Aegon would have to enforce and protect its intellectual property or defend itself against a claim of infringement of a third-party's intellectual property, may require significant effort and resources and may not prove successful.
As a result of any proceeding in which Aegon would have to enforce and protect its intellectual property, Aegon may lose intellectual property protection, which may have a materially adverse effect on Aegon’s businesses, results of operations, financial condition and
Compliance with regulations Iran Threat Reduction and Syria Human Rights Act Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 requires Aegon to disclose whether Aegon N.V. or any of its affiliates has engaged during the calendar year in certain Iran-related activities, including any transaction or dealing with the Government of Iran that is not conducted pursuant to a specific authorization of the U.S. government. The amounts in this section are reported in EUR 1 or GBP 1.
Aegon UK has six UK resident customers who have one active Individual Pension Plan (IPP) and are UK-based employees of a British registered charity that appears on the Specially Designated Nationals (SDN) List with the identifier Specially Designated Global Terrorist
(SDGT); the charity made contributions to the pensions. The customers are not SDNs; the charity does not own, benefit from, or have control over the pensions. All payments have been paid in UK Pounds from a UK bank account. The pensions are managed in line with applicable legislation and regulation in the UK and the charity is not subject to sanctions in the UK or EU. The relationships are under close ongoing review. IPP #1 has a value of GBP 14,268 as at February 5, 2020, and regular monthly contributions of GBP 69.41 are being received into this policy. IPP #2 has a value of GBP 5,948 as at February 5, 2020, and regular monthly contributions of GBP 18.61 are being received. IPP #3 has a value of GBP 244,158 as at February 5, 2020, and regular monthly contributions of GBP 527.91 are being received. IPP #4 has a value of GBP 11,218 as at February 5, 2020, and no further contributions are being received. IPP #5 has a value of GBP 51,746 as at February 5, 2020, and no further contributions are being received. IPP #6 has a current value of GBP 10,580 as at February 5, 2020, and no further contributions are being received. The related annual net profit arising from these contracts, which is difficult to calculate with precision, is estimated to be no greater than GBP 10,130.
In the Netherlands, Aegon Levensverzekering N.V. has one Dutch resident customer who is a party subject to US sanctions for whom two active IPPs and one individual life investment linked insurance policy are held. This person is on the Foreign Sanctions Evaders
January 1, 2023 for policy #1 will be EUR 560.64 gross per year and for #2 EUR 34.11 gross per year. The contributions into these policies ended in the 1980’s. The related annual net profit arising from these two contracts is negligible.
The individual life investment linked insurance policy has a value of EUR 68,505 as of January 1, 2020, and regular monthly contributions of EUR 198.60 are being received; all contributions have been paid in Euros from a Dutch bank account. The policy is managed in line with applicable legislation and regulation in the Netherlands; the individual is not subject to sanctions in the Netherlands or EU. The end date of this policy is February 1, 2023. The related annual net profit arising from this contract, which is difficult to calculate with precision, is estimated to be EUR 500 per year.
Aegon’s common shares are also listed on NYSE New York under the symbol ‘AEG’. Aegon’s common shares B are not listed to trade on any securities market.
Employees and labor relations At the end of 2019, Aegon had 23,757 employees. Approximately 36% are employed in the Americas, 38% in Europe, 19% in Asia and 6% in Asset Management. Note that employees of the Holding are included in Europe.
NL. Aegon, the unions and the Dutch Central Works Council are working closely together in the co-creation steering group to come to new agreements. The current collective labor agreement has a duration of two years. Aegon has experienced no significant strike, work stoppage or labor dispute in recent years.
Employees and labor relations Employees and labor relations Employees and labor relations Employees and labor relations
Dividend policy Under Dutch law and Aegon’s articles of association, holders of Aegon’s common shares are entitled to dividends paid out of the profits remaining, if any, after the creation of a reserve account. Aegon’s Executive Board may determine the dividend payment date and the dividend record date for the common shares, which may vary for the various kinds of registered shares. Aegon’s Executive Board, with the approval of Aegon’s Supervisory Board, may also determine the currency or currencies in which the dividends will be paid.
Aegon may make one or more interim distributions to the holders of common shares.
Objects and purposes  The objects of Aegon are to incorporate, acquire and alienate shares and interests in, to finance and grant security for commitments of, to enter into general business relationships with, and to manage and grant services to legal entities and other entities, in particular those involved in the insurance business, and to do all that is connected therewith or which may be conducive thereto, all to be interpreted in the broadest sense; and  In achieving the aforesaid objects due regard shall be taken, within the scope of sound business operations, to provide fair safeguards for the interests of all the parties directly or indirectly involved in Aegon.
Vereniging Aegon determines that a Special Cause has occurred, Vereniging Aegon will notify the General Meeting of Shareholders and retain its right to exercise the full voting power of one vote per common share B for a limited period of six months;  All shares have the right to participate in Aegon’s net profits. Net profits is the amount of profits after contributions, if any, to a reserve account;  In the event of liquidation, all shares have the right to participate in any remaining balance after settlement of all debts;  The General Meeting of Shareholders may, at the proposal of the Executive Board, as approved by the Supervisory Board, resolve to reduce the outstanding capital either by (i) repurchasing shares and subsequently canceling them, or (ii) by reducing their nominal share value;  There are no sinking fund provisions;  All issued shares are fully paid-up; so there is no liability for further capital calls; and  There are no provisions discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares.
Actions necessary to change the rights of shareholders A change to the rights of shareholders would require an amendment to the Articles of Association. The General Meeting of Shareholders (Annual General Meeting or Extraordinary General Meeting) may only pass a resolution to amend the Articles of Association pursuant to a proposal of the Executive Board with the approval of the Supervisory Board. The resolution requires a majority of the votes cast at the meeting in order to pass. The actual changes to the text of the Articles of Association will be executed by a civil law notary.
The Dutch law determines that the record date is 28 days prior to the General Meeting of Shareholders. Shareholders must notify
In the event a Special Cause occurs (such as the acquisition of 15% of Aegon’s voting shares, a tender offer for Aegon’s shares or a proposed business combination by any person or group of persons, whether individually or as a group, other than in a transaction approved by the Executive Board and Supervisory Board), Vereniging Aegon will be entitled to exercise its full voting rights of one vote per each common share B for up to six months per Special Cause, thus increasing its current voting rights to 32.6%.
This section does not address the Dutch corporate and individual income tax consequences for: i. Investment institutions (fiscale beleggingsinstellingen).
ii. Pension funds, exempt investment institutions (vrijgestelde beleggingsinstellingen) or other entities that are exempt from Dutch corporate income tax.
(deelnemingsvrijstelling) of the Dutch Corporate Income Tax Act 1969 (Wet op de vennootschapsbelasting 1969) or would qualify for the participation exemption had the corporate holders of the Aegon common shares been resident in the Netherlands. Generally speaking, a shareholding is considered to qualify as a participation for the participation exemption if it represents an interest of 5%
iv. Holders of Aegon common shares holding a substantial interest (aanmerkelijk belang) or deemed substantial interest (fictief aanmerkelijk belang) in Aegon and holders of Aegon common shares of whom a certain related person holds a substantial interest in Aegon. Generally speaking, a substantial interest in Aegon arises if a person, alone or, where such person is an individual, together with his or her partner (statutory defined term), directly or indirectly, holds or is deemed to hold (i) an interest of 5% or more of the total of capital issued by Aegon or 5% or more of the issued capital of a certain class of Aegon shares, (ii) rights to acquire, directly or indirectly, such interest or (iii) certain profit-sharing rights in Aegon.
vi. Entities which are resident in Aruba, Curacao or Sint Maarten that have an enterprise which is carried on through a permanent establishment or a permanent representative on Bonaire, Sint Eustatius or Saba, to which permanent establishment or permanent representative the Aegon common shares are attributable.
vii. Holders of Aegon common shares which are not considered the beneficial owner (uiteindelijk gerechtigde) of these shares or of the benefits derived from or realized in respect of the Aegon common shares.
ii. Liquidation proceeds, proceeds on redemption of Aegon common shares and, as a rule, the consideration for the repurchase of its own common shares by Aegon in excess of the average paid-in capital recognized for Dutch dividend withholding tax purposes, unless a particular statutory exemption applies.
iv. Partial repayments of paid-in capital recognized for Dutch dividend withholding tax purposes, if and to the extent there are qualifying profits (zuivere winst), unless Aegon’s General Meeting of Shareholders has resolved in advance to make such repayment and provided that the nominal value of Aegon common shares concerned has been reduced by an equal amount by way of an amendment of the Articles of Association. The term 'qualifying profits' includes anticipated profits that have yet to be realized.
A refund of Dutch withholding dividend tax is available to an entity resident in another EU member state, Norway, Iceland, or Liechtenstein if:  This entity is not subject to corporate income tax there;  This entity would not be subject to Dutch corporate income tax, if this entity would be tax resident in the Netherlands for corporate income tax purposes; and  This entity is not comparable to an investment institution (fiscale beleggingsinstelling) or exempt investment institution
US-residents Residents of the United States that qualify for, and comply with the procedures for claiming benefits under the Convention between the Kingdom of the Netherlands and the United States of America for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income 1992 (the US/NL Income Tax Treaty) may, under various specified conditions, be eligible for a reduction of the Dutch dividend withholding tax rate from 15% to 5% if the resident of the United States is a company which
th er n o n -fin an cial in fo rm atio n holds directly at least 10% of the voting power in Aegon. The US/NL Income Tax Treaty provides, subject to certain conditions, for a complete exemption from, or refund of, Dutch dividend withholding tax for dividends received by exempt pension trusts and exempt organizations, as defined therein.
Beneficial owner A recipient of proceeds from Aegon common shares will not be entitled to any exemption, reduction, refund or credit of Dutch dividend withholding tax if such recipient is not considered to be the beneficial owner of such proceeds. The recipient will not be considered the beneficial owner of these proceeds, if, in connection with such proceeds, the recipient has paid a consideration as part of a series of transactions in respect of which it is likely:  That the proceeds have in whole or in part accumulated, directly or indirectly, to a person or legal entity that would: (i) as opposed to the recipient paying the consideration, not be entitled to an exemption from dividend withholding tax; or (ii) in comparison to the recipient paying the consideration, to a lesser extent be entitled to a reduction or refund of dividend withholding tax; and  That such person or legal entity has, directly or indirectly, retained or acquired an interest in Aegon common shares or in profit sharing certificates or loans, comparable to the interest it had in similar instruments prior to the series of transactions being initiated.
Dutch dividend withholding tax upon redistribution of foreign dividends Aegon must pay to the Dutch tax authorities all Netherlands dividend withholding tax it withholds on dividends it distributed with respect to the Aegon common shares. Provided certain conditions are met, Aegon may apply a reduction with respect to the withholding tax that it has to pay to the Dutch tax authorities. This reduction can be applied if Aegon distributes dividends that stem from dividends Aegon itself has received from certain qualifying non-Dutch subsidiaries, provided these dividends received by Aegon are exempt from Dutch corporate income tax and were subject to a withholding tax of at least 5% upon distribution to Aegon. The reduction is applied to the Netherlands dividend withholding tax that Aegon must pay to the Dutch tax authorities and not to the amount of the Dutch dividend withholding tax that Aegon must withhold. The reduction is equal to the lesser of: i. 3% of the amount of the dividends distributed by Aegon that are subject to Dutch dividend withholding tax; and ii. 3% of the gross amount of the dividends received during a certain period from the qualifying non-Dutch subsidiaries.
The amount of the above mentioned reduction of the withholding tax will be reduced on a pro rata basis to the extent that Aegon distributes dividends to entities that are entitled to a refund of the Dutch dividend withholding tax. This reduction does not apply in respect of dividends paid to entities that own less than 5% of the nominal paid-up capital of Aegon.
If neither condition (i) nor condition (ii) above applies to the holder of the Aegon common shares, taxable income with regard to the Aegon common shares must be determined on the basis of a deemed return on income from savings and investments (sparen en beleggen), rather than on the basis of income actually received or gains actually realized. This deemed return on income from savings and investments is fixed at a percentage of the individual's yield basis (rendementsgrondslag) at the beginning of the calendar year (1 January), insofar as the individual's yield basis exceeds a certain threshold (heffingsvrij vermogen). The individual's yield basis is determined as the fair market value of certain qualifying assets held by the holder of Aegon common shares less the fair market value of certain qualifying liabilities on 1 January. The fair market value of Aegon common shares will be included as an
asset in the individual's yield basis. The deemed return percentage to be applied to the yield basis increases progressively depending on the amount of the yield basis. The deemed return on income from savings and investments is taxed at a rate of 30%.
If a person is neither a resident nor is deemed to be a resident of the Netherlands for Dutch individual income tax purposes, such person is not subject to Dutch individual income tax in respect of income derived from Aegon common shares and gains realized upon the redemption or disposal of Aegon common shares, except if the person is an individual that: 1 has an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands to which permanent establishment or permanent representative Aegon common shares are attributable, or 2 realizes income or gains with respect to Aegon common shares that qualify as income from miscellaneous activities (resultaat uit overige werkzaamheden) in the Netherlands which include activities with respect to Aegon common shares that exceed regular, active portfolio management (normaal, actief vermogensbeheer), or 3 is entitled to, other than by way of securities, a share in the profits of an enterprise that is effectively managed in the Netherlands and to which enterprise Aegon common shares are attributable.
Income and gains derived from Aegon common shares as specified under (1) and (2) by an individual are subject to individual income tax at up to a maximum rate of 49.5%. Income derived from a share in the profits of an enterprise as specified under (3) that is not already included under (1) or (2) will be taxed on the basis of a deemed return on income from savings and investments (as described above under 'Residents of the Netherlands'). The fair market value of the share in the profits of the enterprise (which includes Aegon common shares) will be part of the individual's Netherlands yield basis.
Gift and inheritance tax Residents of the Netherlands Generally, gift tax (schenkbelasting) or inheritance tax (erfbelasting) will be due in the Netherlands in respect of the acquisition of Aegon common shares by way of a gift by, or on behalf of, or on the death of, a holder of Aegon common shares that is a resident or deemed to be a resident of the Netherlands for the purposes of the Dutch Gift and Inheritance Tax Act 1956 (Successiewet 1956)
The same twelve-month rule may apply to entities that have transferred their seat of residency out of the Netherlands.
The proposed financial transactions tax A Financial Transactions Tax (FTT) is currently being considered by participating European Union Member States (Belgium, Germany,
Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia). The FTT would be levied on the acquisition of shares of listed companies which have their head office in a member state of the EU and market capitalization in excess of €1 billion on December 1 of the preceding year. The tax would be levied on the transfer of ownership when shares of listed public limited companies are acquired.
Value added tax In general, no value added tax will arise in respect of payments in consideration for the issue of Aegon common shares or in respect of a cash payment made under Aegon common shares, or in respect of a transfer of Aegon common shares.
ii United States tax consequences to holders of shares This section describes certain US Federal income tax consequences to beneficial holders of common shares that are held as capital assets. This section does not address all US Federal income tax matters that may be relevant to a particular holder. Each investor should consult their tax advisor with respect to the tax consequences of an investment in the common shares. This section does not address tax considerations for holders of common shares subject to special tax rules including, without limitation, the following:  Financial institutions;  Insurance companies;  Dealers or traders in securities or currencies;  Tax-exempt entities;  Regulated investment companies;  Persons that at any time hold the common shares as part of a 'hedging' or 'conversion' transaction or as a position in a 'straddle'
or as part of a 'synthetic security' or other integrated transaction for US Federal income tax purposes;  US expatriates and former citizens or long-term residents of the United States;  Persons subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement;  Holders that own (or are deemed to own for US Federal income tax purposes) 10% or more of the voting shares of Aegon;  Partnerships, or arrangements treated as partnerships for US tax purposes, or pass-through entities or persons who hold common shares through partnerships or other pass-through entities; and  Holders that have a 'functional currency' other than the US dollar.
For the purposes of this section, a 'US holder' is a beneficial owner of common shares that is, for US Federal income tax purposes:  A citizen or individual resident of the United States;  A corporation created or organized in or under the laws of the United States or any state of the United States (including the District of Columbia);  An estate, the income of which is subject to US Federal income taxation regardless of its source; Aegon Integrated Annual Report 2019
If an entity treated as a partnership for US Federal income tax purposes holds common shares, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding common shares and the partners in such partnerships should consult their tax advisors regarding the US Federal income tax consequences to them.
Passive foreign investment company considerations Aegon does not believe it is a passive foreign investment company (PFIC) and does not expect that it will become a PFIC
Whether Aegon or any entities in which it owns equity is a PFIC is a factual determination that must be made annually after the close of each taxable year. If Aegon or an entity in which Aegon owns equity were treated as a PFIC and if a US holder were treated as an indirect shareholder of such a PFIC in any year during which a US holder owns equity in Aegon, certain adverse tax consequences could apply to such US holder. Investors should consult their tax advisors with respect to any PFIC considerations.
Tax consequences to non-US holders A non-US holder generally will not be subject to US Federal income tax on dividends received on common shares or on any gain realized on the sale or exchange of common shares unless the gain is connected with a trade or business that the non-US holder conducts in the United States or unless the non-US holder is an individual, such holder was present in the United States for at least 183 days during the year in which such holder disposes of the common shares, and certain other conditions are satisfied. Non-US holders should consult their tax advisors with respect to the US Federal income tax consequences of dividends received on, and any gain realized from the sale or exchange of, the common shares.
if they do not provide required documentation and certifications to the appropriate reporting agent. When documentation and certifications are required, they will generally be requested by the appropriate reporting agent.
Backup withholding and withholding under FATCA are not additional taxes. Any amounts withheld under the backup withholding rules from a payment to a US holder or a non-US holder generally may be claimed as a credit against such holder's US Federal income tax liability provided that the required information is furnished to the US Internal Revenue Service (IRS). Investors should consult their tax advisors as to their qualification for exemption from backup withholding and withholding under FATCA.
Period Total number of shares purchased1) Average price paid per share in EUR
Maximum number of shares that may yet be purchased under the plans or programs at end of month 1 The shares have been purchased as part of a share purchase program, to neutralize the dilution effect of issued stock dividends and agent-related incentive programs. Excluding Aegon shares purchased by index funds controlled by Aegon. Such purchases are made to the extent necessary to maintain a basket of securities within the relevant fund reflecting the underlying index. Please refere to note 20 ‘Dividend per common share’ and to the section ‘Major shareholders’ in the ‘Other information’.
2 Share purchase program announced on June 19, 2019 3 Share purchase program announced on September 18, 2019
Principal accountant fees and services PricewaterhouseCoopers Accountants N.V. (PwC) has served as Aegon’s independent public accountant for each of the years in the three-year period ended December 31, 2019, for which audited financial statements appear in this Annual Report.
Non-financial data Data on Aegon’s environmental, social and governance performance has been grouped according to stakeholder
Total number of customers1) 29.9 million 29.3 million 2.1% 28.7 million
Net Promoter Score - above peer average (NPS)3) 9% 38% (29 pp)‍ 44%
2 Percentage of total number of customers with two or more products for 2019 and 2018 did not include Aegon’s operations in UK. 3 Figures for 2018 and 2017 have been restated; this is to reflect changes in weighting and to exclude results from Hungary (which had been incuded in previous years). Table shows NPS performance benchmarked against peers for Ageon businesses in the US, Netherlands and UK. Results from Knab, our online bank in the Netherlands, have also been incorporated. Top line shows percentage of businesses ranking in the top half, weighted by customer numbers. Figures below provide the breakdown by quartile.
Salaries EUR 1.3 billion EUR 1.2 billion 4.1% EUR 1.5 billion
Spending on training and career development EUR 16.9 million EUR 12.5 million 35.4% EUR 13.8 million
NM - not measured pp - percentage points 1 Index developed by Culture Amp. Employee engagement measures the degree of employee motivation and commitment to the Company. 2 Figures cover all employment costs relating to both staff and CEO.
Other non-financial information Other non-financial information Non-financial data Non-financial data Non-financial data Non-financial data
Premiums paid to reinsurers EUR 2.4 billion EUR 2.7 billion (8.6%)‍ EUR 3.4 billion
Amount spent on goods and services EUR 1.5 billion EUR 1.5 billion 4.0% EUR 1.4 billion
% of goods and services spend covered by a Supplier Sustainability Declaration 41% 25% 16 pp NM
Incidents/attempts of fraud involving employees, intermediaries and third parties 4,541 3,652 24.3% 551
Returns to investors EUR 899 million EUR 861 million 4.4% EUR 721 million
Coupon payments EUR 288 million EUR 291 million (1.1%)‍ EUR 282 million
Community investment EUR 9.0 million EUR 10.1 million (10.5%)‍ EUR 8.9 million
Cash donations EUR 8.1 million EUR 9.3 million (12.9%)‍ EUR 8.1 million
Volunteering1) EUR 0.9 million EUR 0.7 million 20.5% EUR 0.8 million
Community investment as % of net income 0.6% 1.4% (0.8 pp)‍ 0.4%
Americas (EUR 12 million) (EUR 35 million) NA (EUR 293 million)
Others EUR 31 million EUR 40 million NA EUR 17 million
5 GHG emissions have been calculated based on energy consumption and air travel for the US, the UK and the Netherlands, and extraolated to cover the headcount of our remaining in-scope business units. Under the market-based calculation methodology prescribed by the Greenhouse Gas Protocol, electricity consumption in the US has been accounted as zero-carbon through the purchase of Renewable Energy Certificates (RECs). A significant proportion of electricity consumed in the UK and the Netherlands is procured on a ‘green tariff’ basis which has also been accounted as zero-carbon. Aegon’s operations in US, UK and the Netherlands have been carbon neutral since August 2016 through offsetting our remaining market-based GHG emissions by supporting projects in Brazil, China and Turkey. These offset projects were selected in cooperation with NGO ClimateCare.
Basis of preparation Frameworks Aegon’s aim in producing this report is to provide a balanced overview of the Company’s operations, strategy and performance, as well as its approach to long-term value creation. This is an integrated report, prepared in accordance with the standards of International Integrated Reporting Council (IIRC). While we support the objectives of the Global Reporting Initiative (GRI)
Disclosures (TCFD) reporting framework herein. The basis of preparation for the financial information can be found in note 2 Significant accounting policies on page 155.
UK and Asset Management), and include other fully-owned businesses as practicable. We have excluded all divested businesses, as well as all joint ventures and associates in which
Aegon does not have a majority shareholding. For a more detailed overview, see page 418. Aegon reports impact on both its business and its immediate stakeholders (customers, employees, business partners and investors). Where possible, the Company also includes secondary impacts on the wider community (local economies, communities, public services etc.).
Materiality principle Aegon uses materiality to determine the scope and content of its integrated report. For non-financial data, the report contains only material information. This is the information related to topics the Company believes have, or will have, a significant long-term impact on its profitability, operations or reputation. Materiality applies to both Aegon’s own businesses and to the Company’s relations with its main stakeholders (see
Reporting scope by operating segment, page 418). To determine materiality, Aegon takes into account various factors, which may affect long-term value creation. These include potential risks, impact on earnings, brand, reputation, strategy, customer loyalty and recruitment, as well as Aegon’s ability to deliver long-term growth and returns to investors.
Topic identification, mapping and selection are based on desk research, interviews with experts and management judgment.
For more information on the materiality reporting refer to the section: Aegon’s business environment on page 14.
Global non-financial indicators Our strategy aims to build life-long relationships with customers to provide financial security and well-being to and through retirement. Our strategy helps us address the material topics that are important to our customers, employees, investors and other stakeholders; this strategy will also strengthen our ability to create long-term value. Aegon has selected six global non-financial indicators; these will be used to assess progress against specific aspects of the Company’s strategy (see page 19).
Additional non-financial data In addition to the data in this report, Aegon collects other nonfinancial data. This includes data on working conditions, use of social media in customer support, consumption of energy and greenhouse gas emissions etc. Further details may be found on the Company’s website (www.aegon.com).
Responsible Investment report, last published in May 2018 and available at www.aegon.com.
Number of customers with two or more products (as % of total number of customers)
Total number of customers who have registered and created an online account with Aegon, and have logged in to this account at least once (divided by the total number of customers).
% of women in workforce /senior management ● ● ● ● ● ● ● ●
Spending on training and career development ● ● ● ● ● ● ● ●
Amount spent on goods and services ● ● ● ● ● ● ● ●
Community investment (cash donations and volunteering) ● ● ● ● ● ● ● ●
Responsible Investment Solutions (RIS) ● ● ● ● ● ● ● ●
Non-financial policies, procedures and outcomes (page 86) Decree non-financial information (article 3.1.b)
Note: Non-financial data (page 413) also includes information on environmental, social and employee matters.
Note: Aegon’s strategy (page 19) and Responsible business (page 24) describe in detail our approach to managing the risks and opportunities associated with our most important environmental, social and employees matters.
 EU Directive on Non-Financial Information  EU Directive on Non-Financial Information
Management. New for 2019 is the inclusion of this content in the Aegon N.V. integrated annual report.
(TCFD) four-pillar framework to facilitate disclosure and the business integration of risks and opportunities resulting from climate change. Aegon strives to continuously enhance its reporting and business practices and welcomes feedback from stakeholders on the appropriateness and relevance of this disclosure.
The Climate Change Working Group (CCWG) – formerly called the Climate Working Group – continues to be the primary body responsible for assessing and monitoring climate-related issues within Aegon. The CCWG is a working group of the RBIC tasked with evaluating new climate developments affecting investment, insurance and our other business activities, and recommending further action when necessary.
The CCWG meets at least quarterly. It is chaired by a member of Aegon Asset Management’s Responsible Investment team, and comprises representatives from different functional areas across the company including investment portfolio risk management, operational and underwriting risk management, investment analysis, investor relations and reporting, corporate strategy and sustainability, public affairs and responsible investment.
Strategy Aegon is committed to a responsible way of doing business, and needs to meet increasing expectations of multiple stakeholders –
(failure of) climate change mitigation and adaptation, which was considered to have a medium to high likelihood with a low to medium impact over the three-year time horizon of the scan.
As a result it remains an area of strategic interest. However, climate change more broadly can be considered a driver of other important risk factors identified including but not limited to regulatory reforms, trade wars/protectionism, and reputational risks. See the Business Environment Scan itself for further discussion of our associated risk management process.
Taking all this into consideration, Aegon follows widely adopted industry methods where the extrapolation of future longevity is performed solely based on past experiences of mortality and morbidity rates, without separately modelling each of the underlying drivers like climate change.
For our property and casualty (P&C) business we expect a more direct impact from climate change through, for example, high claim frequencies arising from an increase in extreme weather events. However, prices for P&C insurance are set in advance for much shorter periods than is the case for life insurance. Prices are determined by closely monitoring past claim frequencies and adjusting the premiums over time while maintaining an adequate level of expected profitability. As a result, it can be reasonably expected that climate change impacts will be gradually considered and reflected in adjusted premiums as the physical consequences of an increase in global temperatures become apparent.
(LGD) and has prompted more detailed, follow-up analysis regarding mortgage valuation, capital requirements and consideration in the annual own risk and solvency assessment (ORSA).
Modelling results indicated that the current asset allocation renders the portfolio rather robust to key systemic climate risk drivers –
S ta n d a rd d e vi a ti o n i n ve st m e n t re tu rn
th er n o n -fin an cial in fo rm atio n climate-related risks are dynamic in nature. Transition risks are expected to dominate in the near to medium term (i.e. to 2030)
Opportunities As an investor, Aegon has an important role to play in supporting the climate transition. By making climate smart investment choices, Aegon can contribute to a cleaner, healthier environment as well as provide our clients with opportunities to minimize their own climate impacts. Climate change continues to be a focus of Aegon’s investment strategy and is guided by our Responsible
In July 2019, Aegon’s Climate Change Working Group hosted a workshop to provide background on climate change and insight on how a changing climate can be reflected in investments, as well as to discuss our progress and objectives approach as a company. The event took place at the Aegon head office in The Hague and was made available via webcast to staff located in other offices around the world. External speakers presented on climate scenario analysis (Ortec Finance), climate risks and opportunities in fixed income (Moody’s), and companylevel transition risk (Sustainalytics).
Risk Management Identification and Management Climate change is a long-term risk associated with high uncertainty regarding timing, scope and severity of potential impacts. 2019 saw no material change to the overall climate risk identification, assessment and evaluation process described in previous years’ disclosures.
Throughout 2019 Aegon N.V. and Aegon Netherlands undertook a review of their responsible investment policies.
The updated policies cover all proprietary or general account assets of Aegon N.V. entities, while the Aegon Netherlands policy is also applicable to third-party assets where Aegon
The Aegon Netherlands policy builds on the group-level criteria to also consider companies operating coal-fired electricity generation.
Active Ownership Engagement with corporates As an institutional investor, Aegon expects investee companies to work towards reducing their environmental impact. Aegon engages with the companies it invests in – both individually and collectively through networks to encourage better climaterelated risk practices, including emissions disclosure and target setting.
Responsible Investment (PRI), the Institutional Investors Group on Climate Change (IIGCC), Climate Action 100+ (CA100+), and the ShareAction Investor Decarbonisation Initiative.
In 2019 Aegon Netherlands and Aegon Asset Management supported nine climate resolutions at four oil and gas company shareholders’ meetings (AGMs): BP, Equinor, ExxonMobil, and
In December 2019, Aegon joined a group of 631 institutional investors managing more than US$37 trillion in signing the Global Investor Statement to Governments on Climate
Aegon also signed a call to action urging the EU to endorse a long-term decarbonization strategy to achieve climate neutrality by 2050 ahead of the May 2019 Future of Europe
II regulatory regime. Aegon has also advocated for action to complete the Capital Markets Union to unlock capital from institutional and cross-border investors to fund sustainable transition projects in Europe.
Metrics and Targets Own Operations Aegon measures and reports annually on its operational carbon footprint. Our main operations (US, Netherlands,
In 2019, we extended the scope of our offsetting to cover all of our wholly-owned operations. Total emissions can be found on page 415.
Aegon created a Responsible Business Community to put the different global functions and business units in regular contact. Meetings are held throughout the year to share knowledge, best practices, and offer support. In October,
e with an average energy rating of between C and D.
Carbon Accounting Financials (PCAF). However, due to data availability, calculations for sovereign fixed income were completed using country-level emissions and GDP. Weighted average carbon intensity was calculated following TCFD
Further investigation will be required to identify an appropriate methodology and corresponding data sources for assetbacked securities and other asset types currently not included in Aegon’s calculations.
Paris Alignment In 2015, Aegon signed the Paris Pledge for Action, committing to action in support of implementing the Paris Agreement and accelerating the transformative changes needed to meet the climate change challenge.
In an early effort to understand the degree of action required, we undertook an internal review of our alignment with a (less than) 2°C future. It revealed the distance between our current position as a globally diversified financial services company and this ambition, helping us to understand what actions are required.
To address this gap we intend to initiate a multi-year program of action across the company that brings together awareness raising and education of climate change with actions and steps our businesses can take to support the low carbon transition.
General Account assets in the Netherlands so as to comply with regulatory requirements and building a deeper understanding of how our General Account investments align with the goals of the Paris Agreement.
UN Principles for Sustainable Insurance (PSI)‍ As a signatory, Aegon reports each year on actions taken to implement the PSI’s four commitments: Principles Actions taken (2019)‍
For more information, please see: Responsible business at Aegon – page 24; Non-financial policies, procedures and outcomes – page 86; Business Environment Scan – page 16; Responsible investment – page 28; Task Force on Climate-related Financial Disclosures - page 421.
Aegon engages with stakeholders through polls and surveys, conferences, perception studies, workshops and face-to-face meetings so that we can learn about their lives, their aspirations and their unmet needs. These engagements, alongside panels with our customers and employees help us to improve our products and services, to price our offerings appropriately and to reach untapped or underserved customers around the world.
For more information, please see: Responsible business at Aegon – page 24; Aegon: A partner to the world – page 30; Responsible investment – page 28; Non-financial policies, procedures and outcomes - page 86; Task Force on Climate-related Financial Disclosures – page 421.
Each year, we publish progress against the PSI principles. Our progress report is included as part of our Integrated Annual report, and is available at www.aegon.com.
 UN Principles for Sustainable Insurance (PSI)  UN Principles for Sustainable Insurance (PSI)
UN Sustainable Development Goals (SDG)‍ In September 2015, the UN adopted new Sustainable
(page 13) • Providing a long-term source of employment for communities in which we operate
Responsible Investment Policy (page 88, 423) • Exclusion of thermal coal production from investment, and further limit coal-related new
Industry, innovation and infrastructure Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
• Aegon business operations have been climate neutral since 2016 (page 26, 415, 424)
• Responsible investment policy contains company position on biodiversity (page 28, 88, 423)
Peace, justice and strong institutions Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
Note: in our analysis, we excluded four SDGs, where our contributions are not sufficiently material (primarily because of the nature of our business and the location of our operations).
International Responsible Business Conduct Agreement for the insurance sector (also known as the covenant) in Aegon entities outside of the Netherlands. Aegon Nederland signed up for the covenant. The covenant asks companies to explicitly address non-financial aspects of investments. It is based on the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and, amongst others, also promotes animal welfare.
Next to the aforementioned Principles and Guidelines, Aegon has committed itself to support the UN Sustainable Development
Goals (SDGs) where it can; both as a financial services provider and as an investor. As such, Aegon endeavors to align its investment strategies with the objectives of the SDGs it considers most relevant for its business practices. These being
SDG 1 (no poverty), SDG 3 (good health and well-being), SDG 7
(affordable and clean energy), SDG 8 (decent work and economic growth) and SDG 13 (climate action). For further details on
Aegon’s commitment to the SDGs, please see pages 27 and 428.
 International Responsible Business Conduct Agreement  International Responsible Business Conduct Agreement
Glossary Accounting Consolidation is the default method for calculating the Group solvency position. With this consolidation method, diversification benefits in the calculation of capital requirements are allowed.
Alt-A mortgages are primarily backed by loans with fixed interest rates for the entire term of the loan.
Authorized Control Level (ACL)‍ is the level US regulators are permitted to seize control of a company.
ultimately are controlled by the same party or parties both before and after the combination, and that control is not transitory.
Collateralized Debt Obligation (CDO)‍ isa type of asset-backed security which provides investors exposure to the credit risk of a pool of fixed income assets.
Contingent liability is a possible obligation dependent on the occurrence of an uncertain future event or a present obligation for which payment is not probable or the amount cannot be measured reliably.
Discretionary participation feature is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits:  That are likely to be a significant portion of the total contractual benefits;  Whose amount or timing is contractually at the discretion of the issuer; and
Exchange differences are differences resulting from translating a given number of units of one currency into another currency at different exchange rates.
Financial asset is any asset that is:  Cash;  An equity instrument of another entity;  A contractual right to receive cash or another financial asset from another entity or to exchange financial instruments with another party under conditions that are potentially favorable; or  A contract that will or may be settled in the entity’s own equity instruments; and is  A non-derivative for which the entity is or may be obliged to receive a variable number of the entity’s own equity instruments; or  A derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments.
Foreign currency translation reserve (FCTR)‍ is part of shareholders’ equity, and is the reserve for the exchange differences recognized from the financial statements of the group entities. On the consolidation, the financial statements of group entities with a foreign functional currency are translated to euro, the currency in which the consolidated financial statements are presented. Assets and liabilities are translated at the closing rates on the reporting date. Income, expenses and capital transactions (such as dividends) are translated at average exchange rates or at the prevailing rates on the transaction date, if more appropriate. The resulting exchange differences are recognized in the FCTR.
Guaranteed minimum income benefits are a type of option that annuitants can purchase for their retirement annuities. When the annuity is annuitized, this specific option guarantees that the annuitant will receive a minimum value’s worth of payments, regardless of the current level of the account value.
Minimum capital requirement (MCR)‍ is the absolute minimum level of capital an insurance company must hold in excess of its
Non-controlling interests are that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.
Partial Internal Model is a combination of a Standard Formula and Internal Model, used to calculate the Solvency II capital requirement.
Risk Based Capital Company Action Level is designed primarily for US regulators to identify poorly capitalized companies whose continued operations may be hazardous to policyholders.
The insurer’s RBC solvency ratio is determined as its ‘total adjusted capital’ divided by ‘authorized control level risk based capital. (ACL)’. However, it is industry and rating agency convention to complete and communicate the RBC solvency ratio relative to the ‘Company Action Level Risk Based Capital’, which is twice the authorized control level.
Solvency capital requirement (SCR)‍ is the amount of funds that insurance and reinsurance companies are required to hold in order to have 99.5% confidence that they could survive the most extreme expected losses over the course of a year under Solvency
Standard Formula is a risk-based approach to the calculation of an insurer’s solvency capital requirement under the Solvency
Value of Business Acquired (VOBA)‍ the difference between the fair value and the carrying amount of the insurance liabilities recognized when a portfolio of insurance contracts is acquired
Volatility adjustment (VA)‍ is a volatility adjustment to the discount rates for calculating technical provisions aims at avoiding pro-cyclical investment behavior of insurers when bond prices deteriorate owing to low liquidity of bond markets or exceptional expansion of credit spreads, under the Solvency
Disclaimer Cautionary note regarding non-IFRS-EU measures This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax and income before tax. These non-IFRS-EU measures are calculated by consolidating on a proportionate basis Aegon’s joint ventures and associated companies. The reconciliation of these measures to the most comparable IFRS-EU measure is provided in note 5 Segment information of this report. Aegon believes that these non-IFRS-EU measures, together with the IFRS-EU information, provide meaningful supplemental information about the underlying operating results of Aegon’s business including insight into the financial measures that senior management uses in managing the business.
 The effects of declining creditworthiness of certain public sector securities and the resulting decline in the value of government exposure that Aegon holds;  Changes in the performance of Aegon’s investment portfolio and decline in ratings of Aegon’s counterparties;  Lowering of one or more of Aegon’s debt ratings issued by recognized rating organizations and the adverse impact such action may have on Aegon’s ability to raise capital and on its liquidity and financial condition;  Lowering of one or more of insurer financial strength ratings of Aegon’s insurance subsidiaries and the adverse impact such action may have on the written premium, policy retention, profitability and liquidity of its insurance subsidiaries;  The effect of the European Union’s Solvency II requirements and other regulations in other jurisdictions affecting the capital Aegon is required to maintain;  Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels;  Changes affecting currency exchange rates, in particular the
EUR/USD and EUR/GBP exchange rates;  Changes in the availability of, and costs associated with, liquidity sources such as bank and capital markets funding, as well as conditions in the credit markets in general such as changes in borrower and counterparty creditworthiness;  Increasing levels of competition in the United States, the
Aegon’s products;  Consequences of an actual or potential break-up of the
Union and potential consequences if other European Union countries leave the European Union;  Changes in laws and regulations, particularly those affecting
Global Systemically Important Insurer (G-SII); and  Changes in accounting regulations and policies or a change by
Aegon in applying such regulations and policies, voluntarily or otherwise, which may affect Aegon’s reported results, shareholders’ equity or regulatory capital adequacy levels.
of the EU Market Abuse Regulation (596/2014). Further details of potential risks and uncertainties affecting Aegon are described in its filings with the Netherlands Authority for the Financial
Markets and the US Securities and Exchange Commission, including the Annual Report. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, Aegon expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Aegon’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.