Aegon Integrated
Annual Report 2021
Aegon Integrated Annual Report 2021
2 About Aegon
8 Our business environment
14 Our purpose
16 Our strategy and value creation
35 Governance and
riskmanagement
36 Boards and Governance
73 Risk and capital management
84 Regulation and compliance
91 Financial information
96 Results of operations
119 Financial statements
302 Business overviews
349 Non-financial information
350 Basis of preparation
352 Integration and monitoring
357 Regulation
363 Frameworks and initiatives
382 Value created
Contents
Welcome to Aegon’s 2021
Integrated Annual Report
This is Aegon’s Integrated Annual Report for the year ended
December 31, 2021. The report outlines thechallenges
andopportunitiesfacing our business today and how we
address thesethrough our purpose, vision, and strategy, to
create long-term value for our stakeholders. The report also
contains the 2021 consolidated financial statements and
company financial statements of Aegon N.V. (from page 119).
We have prepared the consolidated financial statements in
accordance with the International Financial Reporting Standards,
as adopted by the European Union (EU-IFRS). This report also
conforms to the relevant reporting requirements under the Dutch
Corporate Governance Code and Dutch Civil Code.
In compliance with the requirements resulting from our listing
on the New York Stock Exchange, we also prepare an Annual
Report on Form 20-F in accordance with the International
Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB).
Throughout this document, Aegon N.V. is referred to as either
‘Aegon’ or ‘the Company’. For the purposes of this report,
‘member companies’ shall mean, with respect to Aegon N.V.,
those companies consolidated in accordance with Dutch
legislation relating to consolidated accounts.
References to ‘NYSE’ and ‘SEC’ relate to the New York Stock
Exchange and the US Securities and Exchange Commission
respectively. Aegon uses ‘EUR’ and ‘euro’ when referring to the
lawful currency of European Monetary Union member states;
‘USD’ and ‘US dollar’ when referring to the lawful currency of
the United States, and ‘GBP’, ‘UK pound’, and ‘pound sterling’
when referring to the lawful currency of the United Kingdom.
If you have comments or suggestions about this report,
please contact our offices in The Hague, the Netherlands.
Contact details may be found on page 396.
Aegon Integrated Annual Report
2021
TOC 1
TOC-1
Our purpose
People are living longer, and at Aegon we are excited by the opportunities this brings.
We are here for everyone who wants to make the most of their time on our
planetand leave it a little better than they found it. That is why our purpose is
Helpingpeople live their best lives.
Much has changed since Aegon’s founding almost 180 years ago. But our principles of solidarity and being there for one
another when it matters remain unchanged. Our commitment to
Helping people live their best lives
is firmly rooted in our DNA. Our role is to champion the possibilities offered by longer lifespans. We are here to support every stage of a long,
healthy life with guidance, financial advice, and propositions. With our solutions for investment, protection, and retirement,
we give people the confidence to make the right choices for their future.
Helping people
live their best lives
Aegon Integrated Annual Report
2021
1
About Aegon
Aegon is an integrated, diversified, international financial services group. Weoffer
investment, protection, and retirement solutions, always with aclear purpose:
Helpingpeople live their best lives.
This commitment requires a sustainable, future-oriented business that actively considers all stakeholders, including our customers,
employees, investors, partners, and society at large. Our roots date back almost 180 years to the first half of the 19
th
century.
Our strategy is focused on three core markets (the United States, the United Kingdom, and the Netherlands), three growth markets
(Spain & Portugal, Brazil, and China), and one global asset manager. Aegon is headquartered in The Hague, the Netherlands.
Business overview
Aegon allocates capital toward profitable opportunities in its core and growth markets, and through Aegon Asset Management.
As an international financial services group, we share capital, talent, knowledge, processes, and technologies across our different
businesses. We derive our revenues and earnings from insurance premiums, investment returns, fees, and commissions.
We offer both direct and intermediary-assisted access to our products and services. For more complex and advanced services and
products requiring tailored advice, we rely on a broad network of business partners that includes brokers, agents, banks, employee
benefits consultants, and independent financial advisors. For simpler types of solutions, we are growing our direct distribution
capabilities to engage with customers directly.
31.7
490
34%
In millions
Number of customers
Weighted average
carbon intensity
1
Women in senior
management
1
Metric
tons CO
2
e/EURm revenue of corporate fixed
income and listed equity general account assets
EUR
729
In millions
Free cash flow
EUR
1,906
In millions
Operating result
211%
Group Solvency II ratio
68
Employee engagement
score
EUR
1,024
In billions
Revenue-generating
investments
Aegon Integrated Annual Report
2021
2
About Aegon
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
About Aegon
TAB - About Aegon
Aegon’s core markets
Aegon’s growth markets
One global asset manager
Aegon’s operations in small and niche markets
Aegon operates a small number of businesses that are sub-scale or active in small or niche markets, which are managed with tight
capital and with a bias to exit. They include Transamerica Life Bermuda, providing life insurance to high-net-worth individuals globally,
as well as our digitally focused joint venture Aegon Life Insurance Company in India
.
In November 2020, Aegon announced the saleof its
businesses
in Hungary, Poland, Romania, and Turkey to Vienna Insurance Group AG Wiener Versicherung Gruppe. The closing
of the
saleis subject to regulato
ry
approval
.
Further information on our businesses can be found in the business overview section on page 302 of this report.
In the
United
States
, Aegon operates primarily under the Transamerica brand. Through employers,
Transamerica’
s Workplace Solutions division offers retirement plans, individual retirement accounts,
voluntary employee benefits, and stable value solutions. Its Individual Solutions division offers life insurance,
annuities, and mutual funds through third-party broker-dealers, banks, wire houses, independent financial
planners, and agents. These products are also distributed through its affiliated retail distribution group.
In the
Netherlands
, Aegon mainly operates under the Aegon brand. Aegon the Netherlands focuses
on life insurance, long-term savings, and pension and annuity solutions. The Workplace Solutions business
focuses
on new-style defined contribution pension solutions, associated disability services, and pensions
administration.
The company also operates a large mortgage origination business. Under the Knab brand,
Aegon provides digital banking solutions with a focus on retail and self-employed customers.
In the
United Kingdom
, Aegon provides solutions for retirement, workplace savings, investing, and protection, all under the Aegon brand. Aegon UK accesses customers through wealth advisors
as well as the workplace, and holds leading positions in the retirement and savings markets in both
the workplace and retail segments.
In
China
, Aegon participates in two different joint ventures, each with its own brand and market presence.
Aegon owns a 49% stake in Aegon THTF Life Insurance Company, which offers life insurance solutions
through
a network of branches, primarily in eastern China, and develops multi-channel distribution
capabilities. Aegon Asset Management owns 49% of Aegon-Industrial Fund Management Company,
a Shanghai-based asset manager that offers mutual funds, segregated accounts, and advisory services.
In
Brazil
, Aegon has a 55% interest in Mongeral Aegon Group (MAG Seguros), the country’s third-largest independent life insurer. MAG Seguros offers individual protection solutions, ranging from life
insurance and pension products to solutions in investments, pension funds, and pension management.
Together with Banco Cooperativo do Brasil (Bancoob), MAG Seguros also operates a joint venture
company dedicated to providing life insurance and pension products within the Sicoob, Brazil's largest
cooperative financial system.
In
Spain & Portugal
, Aegon has operated under the Aegon brand since 1980. In 2013, Aegon entered a strategic partnership with a 51% stake in a joint venture with Banco Santander to distribute
life, health, and non-life insurance products through the bank’s network of branches. Distribution
agreements are also in place with Liberbank. Aegon Spain’s own distribution channel offers life
insurance, health insurance, and pension products.
Aegon Asset Management is an active global investment business that manages and advises on assets
of EUR 410 billion for a global client base consisting of pension plans, public funds, insurance
companies (including Aegon’s subsidiaries), banks, wealth managers, family offices, and foundations.
Aegon Asset Management is active in our core and growth markets, as well as in France, Germany,
Hungary, and Japan.
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
3
About Aegon
2021 milestones
•
Transamerica ceases sales of variable annuities with
significant interest-rate-sensitive riders, fixed index annuities,
and standalone individual long-term care products.
•
Aegon UK launches the Financial Wellbeing Index
in partnership with the Initiative for Financial Wellbeing and
Edinburgh University.
•
To standardize its operating model and reduce costs,
Aegon Asset Management (AAM) launches a program
to reduce its IT complexity by approximately halving the
number of systems it employs. AAM also creates a common
front office platform and global portfolio risk environment,
while shortening its client reporting from over five business
days to between one and two business days.
•
Aegon the Netherlands successfully prices a EUR 657million
residential-mortgage-backed securitization to further diversify
its mortgage funding. The transaction is oversubscribed three
times by investors.
•
Aegon completes the divestment of Stonebridge, a UK-based
provider of accident insurance products.
•
Together with its joint venture partner, Aegon ceases funding
of GoBear, a digital financial supermarket in Southeast Asia.
•
Transamerica earns a score of 100% from the Human Rights
Campaign Foundation on its annual Corporate Equality
Index (CEI).
•
Aegon UK acquires Pension Geeks, a business specializing
in connecting people with their finances through innovative
engagement techniques, communication, and events.
•
The Hungarian Ministry of Interior denies the acquisition
of the Aegon companies in Hungary by Vienna Insurance
Group AG Wiener Versicherung Gruppe (VIG). Aegon and
VIGjointly appeal this decision. For further details, see
Q3 milestones on page 5.
•
To achieve cost and capital efficiencies, Aegon combines its
programs for purchasing corporate insurance into a single
existing US-based unit and centralizes all retained risks.
•
Transamerica completes the sale of its portfolio of fintech
and insurtech companies to a fund managed and advised
by private equity firm Montana Capital Partners.
•
Aegon the Netherlands expands mortgage options to help
customers finance energy-efficient home improvements.
•
Together with the Aegon Transamerica Foundation in the
United States, Aegon donates EUR 300,000 to support
COVID-19 relief efforts in India.
•
Aegon places second in responsible investment NGO
ShareAction’s 2021 ranking of how leading global life
and health insurers approach responsible investment and
underwriting.
Q1
Q2
Aegon Integrated Annual Report
2021
4
About Aegon
About Aegon
Governance and risk management Financial information Non-financial information
•
To reduce financial market exposure and release capital,
Transamerica launches a program offering certain variable
annuity customers a lump-sum payment in return for
surrendering their policies.
•
Aegon the Netherlands ceases offering savings products
to customers of its original savings bank, giving them
the opportunity to transfer their funds to a Knab account
or to another bank.
•
The European Commission grants the competition law
clearance for the acquisition of Aegon’s businesses in
Central & Eastern Europe by VIG.
•
The Budapest Metropolitan Court rejects a joint appeal
by Aegon and VIG challenging the Ministry of the Interior's
decision to block the latter’s acquisition of Aegon's Hungarian
businesses. Subsequently, VIG and Aegon ask the Hungarian
Supreme Court to review the ruling. VIG continued its dialogue
with the Hungarian Ministry of Finance to clarify possibilities
for a positive conclusion to the acquisition. In February 2022,
VIG and the Hungarian government reached an agreement
about a 45% participation of the Hungarian state in VIG’s
and Aegon’s operations in Hungary.
•
Aegon calls USD 250million in perpetual capital securities
in line with the target to reduce gross financial leverage.
•
Aegon UK becomes a Living Wage Foundation
accredited employer.
•
Aegon commits to transitioning its general account investment
portfolio
to net-zero greenhouse gas emissions by 2050 and,
in doing so, joins the Net-Zero Asset Owner Alliance.
•
Aegon Asset Management becomes a signatory to the Net
Zero Asset Managers initiative.
•
Aegon Asset Management and Aegon UK partner with the
Global Ethical Finance Initiative (GEFI) to introduce the new
Aegon Global Sustainable Sovereign Bond Fund at ‘COP26’.
•
Aegon becomes a signatory of the United Nations (UN)
Global Compact, which calls upon companies to align
on universal principles on human rights, labor, environment,
and anti-corruption, and to advance societal goals.
•
Transamerica expands its dynamic hedging program to the legacy
variable annuities portfolio to stabilize economic cash flows and
reduce economic sensitivities to equity and interest rate risks.
•
Aegon reinsures an additional part of its longevity exposure
in the Netherlands with Reinsurance Group of America,
improving its risk profile.
•
Transamerica reinsures a portfolio of universal life secondary
guarantee policies with Wilton Re, which reduces its exposure
to mortality risk and policies with a large face amount.
•
Aegon maintains its position as leading third-party mortgage
originator in the Netherlands, having originated
EUR 10.9 billion worth of residential mortgages in 2021.
•
Aegon’s Global Sustainable Equity Fund wins the 2021
UNCTAD Global Sustainable Fund Award.
Q3
Q4
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2021
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5
About Aegon
CEO letter
“We have been fully engaged
in implementing a rigorous
company-wide transformation
program aimed at
strengthening our
operating performance.”
Lard Friese, CEO Aegon
The past year has been challenging in many ways, particularly as the ongoing COVID-19
pandemic has lasted longer than many people may have anticipated.
As a company, we are adjusting to this new reality, while also
dealing with other far-reaching changes taking place around
us. Looking back and reflecting on an eventful 12 months, I am
pleased with the progress we have made together in difficult
circumstances.
In 2021, my first full year as Chief Executive Officer of Aegon,
our focus remained on creating value for our different
stakeholder groups. To our shareholders and wider investor
community, in particular, I am pleased to report clear headway
with executing our new strategy. We have been working to build
a more enduring, high-performance company, with a focus
on three core markets, three growth markets, and one global
asset manager. To realize our goals, we have been fully engaged
in implementing a rigorous company-wide transformation
program aimed at strengthening our operating performance.
More than two-thirds of our planned performance improvement
initiatives have already been executed, and our focus on expense
savings puts us on track to realize a significant reduction
in addressable
1
expenses by 2023. Furthermore, the growth
initiatives being implemented are delivering positive results
across our activities in our core and growth markets.
In 2021 to invest
,
we continuedin the
expansion of our distribution
network, while simultaneously improving the digital experience
for our customers, advisers, and employers. This supported
solid growth in our US Life business, together with record-high
asset balances in our Dutch mortgage and defined contribution
businesses. Meanwhile, net deposits for our UK platform
turned positive. I can also point
to the
track record of our asset management business, which enjoyed a tenth consecutive year
of positive third-party net deposits. There is still work to be done,
though, including the need to attract more customers, for example
to our US Workplace Solutions business.
On the back of our performance improvement initiatives, we have
achieved an increase in our operating result, aided by increased
fees from higher equity markets and positive contributions
from business growth.These drivers were only partly offset
by an adverse claims experience in the United States mainly due
to COVID-19. We have also maintained a strong balance sheet
by actively managing both our risks and our capital position.
Looking ahead to 2022, we will continue the rigorous execution
of our performance improvement plan, building on what we have
achieved so far. We are actively managing our risks and capital
1
Addressable expenses are expenses reflected in the operating result, excluding deferrable acquisition expenses, expenses in joint ventures and associates,
and expenses related to operations in CEE countries.
Aegon Integrated Annual Report
2021
6
About Aegon
About Aegon
Governance and risk management Financial information Non-financial information
CEO letter
position to maintain a robust balance sheet, as we navigate
through the uncertainty created by the current geopolitical
situation. The actions we have taken to improve our performance
and improve our risk profile provide us with confidence in our
ability to deliver on our 2023 financial targets.
Aegon’s responsibility to society
Our strategic objectives go beyond operational and financial
performance. I understand the important role our company plays
within wider society, and I acknowledge the increasing importance
of sustainability for Aegon and its stakeholders.
In 2021, we continued to advance our approach to sustainability
and responsible investing by further embedding these topics
as central pillars within our strategy. We have established
a Global Sustainability Board, supported by our Global Corporate
Sustainability Team, to realize this goal and intensify our focus
on company-wide sustainability targets.
Sustainability is a broad topic, of course, and dialogues with our
stakeholders indicate two areas that should be at the forefront
of our thinking in the coming years: climate change and inclusion
and diversity. In November 2021, we decided to transition our
general account investment portfolio to net-zero greenhouse
gas emissions by 2050. To ensure progress toward this 2050
commitment, Aegon has set a clear medium-term target for
2025. Alongside this commitment, we are actively strengthening
our inclusion and diversity efforts to help position us as a
welcoming employer for underrepresented talent. I have been
personally involved in exploring ways to further build inclusion
and diversity into our talent pipelines, and in 2022 Aegon will
appoint a Global Head of Inclusion & Diversity to address this
important issue.
Moving closer to our customers and business partners
In 2021, we continued to expand and evolve our offerings
to customers across our core and growth markets, with a focus
on building close, personal connections. Many recent and ongoing
initiatives have been prompted by the need to help people
navigate the deep financial and personal impact of the pandemic.
However, I believe the steps we are taking to support our
customers now will have positive benefits for our company
and its stakeholders for many years to come.
Similarly, we are building closer relationships with our business
partners and suppliers around the world to support our efforts
to deliver value to our stakeholders. It is especially important
that our partners share our values, and over the course of 2021,
we continued to integrate specific sustainability criteria and
requirements into our supplier selection, development, and
ordering processes, as we work to develop a more sustainable
supply chain.
Employee engagement top of mind
In a year of tremendous change, the recent period has been
particularly transformative for Aegon’s workforce. Against
the backdrop of the COVID-19 pandemic, we continue to closely
monitor employee wellbeing and engagement amid the disruption
taking place all around us. Based on feedback from our employees,
we have introduced local initiatives and adapted our ways of working
to help people cope with the dual pressures of work
a
nd COVID-19.An unfortunate consequence of our transformation journey
is that we have had to say goodbye to valued Aegon colleagues.
I extend my respect and concern for those who are no longer
employed at Aegon, and thank them for their invaluable
contribution over the years. I realize that this has also been
a difficult process for all members of our community, and I would
like to thank those colleagues continuing with Aegon, too, for
their resilience and their continued efforts during this journey.
Looking ahead with purpose
Over the past few months, we have taken time as a company
to carefully consider our purpose, and reflect on what makes
Aegon relevant to its customers, local communities, and wider
society. This has been a valuable exercise: as people generally
live longer and embark on non-linear life journeys, their financial
behaviors and needs are changing. Aegon is adapting accordingly.
We champion the opportunities offered by a longer, multi-stage
life, and seek to support individuals, families, and employers
as they move through the resulting changes.
This responsibility is at the heart of Aegon
’
s redefined purpose
of
Helping
people live their best lives
, which describes our focus
on positive longevity, and how we seek to be
a force for good for
our customers and other stakeholders throughout their lifetimes.
Renewing our purpose provides a common thread that will guide
our vision and strategy. This process has also inspired Aegon's new
employee behaviors,
We tune in, We step up, We are
a force for good
.
These core behaviors will ensure our entire organization continues
to work in unison
to create value for our stakeholders. As I look
ahead, our solidarity and togetherness will remain vitally important
as we navigate new challenges in an increasingly uncertain world.
Indeed,
the weeks preceding the publication
of this Integrated
Annual Report saw the escalation
of the
aggression against Ukraine and its citizens. On behalf of Aegon
,
I want to express our support
to everyone affected by this shocking and saddening situation,
and
to add our voice to international demands for an immediate
cessation
of violence
.
Thank you to all our stakeholders for your continued contributions
and commitment; I look forward to continuing our journey together
in 2022 and beyond.
The Hague, the Netherlands, March 16, 2022
Lard Friese
CEO of Aegon
Aegon Integrated Annual Report
2021
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About Aegon
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7
About Aegon
Our business environment
Aegon operates in a complex and fast-moving environment influenced by a wide range
of economic, financial, regulatory, social, and environmental factors. We keep a close
eye on developments across these different areas, and we seek to understand their
impact on our business and our stakeholders.
These insights support our day-to-day decision-making as well
as our long-term business planning. They also help in shaping
Aegon’s purpose and vision.
The global economy recovered strongly in 2021 on the back
of continued fiscal and monetary stimulus. The steady roll-out
of vaccination programs allowed the world’s major economies
to scale back COVID-19 restrictions during large parts of the year.
The economic rebound, which was strongest in the early months
of 2021 before slowing in the second half of the year, has
boosted employment and wage growth. Improved consumer
confidence has, in turn, supported demand for financial
services, including various types of long-term savings and life
insurance products.
Despite the ongoing pandemic, financial markets performed well
in 2021, regaining positive momentum following the volatility
seen during 2020. Prices for equities and real assets increased
throughout the year on the back of the global economic recovery.
Interest rates remained at relatively low levels, rising nonetheless
from the historical lows witnessed in 2020.
Rising inflation has become an important concern for financial
services providers, as consumer prices increased at their fastest
pace in decades in the final months of 2021. Increasing demand,
in combination with supply chain disruptions, led to surges
in the price of energy, raw materials, and other goods. Higher
inflation and volatile economic growth later in 2021 created
uncertainties that influence consumer behavior, including the risk
of reduced purchasing power of households, and weaker demand
for investment products in the years ahead.
Despite current inflationary pressures, interest rates have
remained low as central banks have only gradually begun scaling
back pandemic-era stimuli. Aegon’s medium-term view is that
interest rates will slowly increase while remaining at low levels.
Although there is a risk of increasing inflation, we expect to see
a normalizing inflation rate, well managed by central banks,
and modest economic growth. Persistently low nominal interest
rates present challenges for insurers given that they make saving
fundamentally less attractive, and they represent a headwind
to our businesses, particularly in the United States and Europe.
Aegon Integrated Annual Report
2021
8
Our business environment
About Aegon
Governance and risk management Financial information Non-financial information
Our business environment
Our business environment
Overview
Our business environment
Geopolitical factors also feature significantly in our business
planning. January 2021 saw the United Kingdom formally exit
the European Union, and provisions for the activities of financial
services firms within the ‘Trade and Cooperation Agreement’
between the regions are still being negotiated. Meanwhile,
the shift in global economic power to developing regions is a
long-term ‘megatrend’ that affects multinational companies like
Aegon in different ways. On the one hand, we see opportunities
to further expand our business in growth markets such as China
and Brazil. However, the increasing geopolitical influence of Asia
has also created political and regulatory uncertainty, and ongoing
tensions between the United States and China are a concern,
given our extensive interests in these markets.
Increasing regulatory scrutiny and complexity continues to shape
our operating environment. At Aegon, we keep a close eye
on specific insurance industry requirements, but also on broader
developments with respect to sustainability, data management,
and privacy, as well as consumer protection and fiduciary duties.
While compliance is our absolute priority, our Government and
Policy Affairs team proactively monitors potential developments
regarding these areas. Aegon is also actively involved in helping
to shape future regulations, either directly or as an active
member of various industry associations.
1
https://aegon.me/sustainable-funds
2
https://aegon.me/esgfundsforecast
Sustainability is increasingly top of mind for the global business
community, and our stakeholders expect us to manage our
business in accordance with the highest ethical standards,
beyond legal and regulatory requirements. November 2021
saw heightened private sector involvement in the UN Climate
Change Conference (COP26). The increasing expectations
of governments and society are elevating the sustainability
agenda, and sustainability has the potential to be a key value
driver as companies align with these requirements. Net inflows
into US sustainable funds rose by 35% to nearly USD 70 billion
in 2021, according to Morningstar
1)
. Meanwhile, in Europe, assets
in sustainable investment products are on track to outnumber
traditional funds by 2025, according to a publication from PwC
2)
.
Aegon Integrated Annual Report
2021
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9
Our business environment
Business Environment Scan
At Aegon, we conduct a biennial Business Environment Scan
(BES) to identify emerging structural trends, risks, and
opportunities with the potential to impact our financial
strength and competitive position, and consequently
thevalue we create for our stakeholders. The key findings
fromthe exercise help inform Aegon’s strategic and
planning activities, watch lists, and management discussions
and actions.
The BES is a critical, cross-functional exercise that combines
the materiality assessment with emerging risk identification.
It looks beyond impact alone to assess the potential of topics
to influence ongoing value creation, as shown by the materiality
matrix below. While the BES highlights opportunities for our
business, we are also mindful of potential challenges ahead.
Indeed, the exercise is a key component of our Enterprise Risk
Management (ERM) framework and provides input for our wider
reporting activities as described in this Integrated Annual Report,
as well as for the annual Own Risk and Solvency Assessment
(ORSA). For more information on Aegon’s risk management
approach, please see the dedicated risk management section
on page 73 of this report and the risk factors for Aegon N.V.
on page 326.
The 2021 BES drew out a number of relevant insights, and our
materiality matrix has been adjusted to reflect this. The topics
‘Rise of inflation’ and 'Sustainability and ESG-integration' both
moved into the top-right quadrant of the matrix, signifying
them as material topics that are both high impact and high
likelihood to materialize during the next three years. This means
they are significant for our business and our stakeholders, with
the potential to have an impact over our business planning
horizon. We have also dedicated space to the discussion
of these and other selected material topics in ‘Opportunities and
challenges’ on page 11.
Focus area:
Atrocities between
major powers
New (digital)
distribution
Ecosystems and
open finance
Relaxed
underwriting
standards
Increasing customer
expectations
New pension crisis
and expropriation
of pension assets
Relaxed investment
discipline
Rapidly increasing
personal
indebtedness
Decentralized ledger
technologies (DLT)
Community
engagement
Deteriorating
mental health
Religious illiberality
Fracture
of social network
Educational
progress
New asset classes
Continued
urbanization
Regulation
of Big Tech/level
playing field(s)
Increasing
interconnectedness
of supply chains
Climate change
Social unrest
and respect for
human rights
Higher life
expectancy and
falling birth rates
Rise of Asia
Disinformation and
conspiracy theories
Intergenerational
wealth gap
Inclusion
and diversity
Employee
engagement
Cross-industry
competition
Hunt for yield
Rise of inflation
Technological
advancements
Cybersecurity
Post-pandemic
recovery and
future pandemics
Geopolitical tensions
and regulatory
regionalization
Increased reporting
and regulations
Sustainability and
ESG integration
Competition
for talent
Likelihood to materialize over three-year planning horizon
Impact on our business
Low High
Low High
Aegon Integrated Annual Report
2021
10
Our business environment
About Aegon
Governance and risk management Financial information Non-financial information
Business Environment Scan
Opportunities and challenges
1
https://aegon.me/cybercrime-pandemic
We have selected the important topics for discussion
that we believe are significant for our short-term planning
horizon. Below, we look at how these issues may affect
our business, the opportunities and challenges they present
for our business and our stakeholders, and the actions
we are taking to leverage or mitigate these developments.
The hunt for yield and the rise of inflation
In the current low-interest-rate environment, companies
and investors seek ways to generate higher financial returns
by investing in riskier asset classes, which increases the risk
of asset bubbles and debt crises forming. Aegon is exposed
to potential economic and financial market shocks. In addition,
inflation expectations are increasing, with Aegon exposed
to expense and claims cost increases, and their potential impacts,
through guarantees for policyholders.
What Aegon is doing
We closely monitor financial and wider economic developments
to understand our exposure to potential shocks in the markets
where we invest, and we work proactively to mitigate related
risks. In the United States, we have expanded our dynamic
hedging program to the full legacy variable annuities portfolio
to better protect us from equity and interest rate risks.
To address the uncertainty around the rise in inflation, we have
implemented an inflation hedge covering liabilities with
conditional indexation rights in the Netherlands. In the United
States, the inflation risk within long-term care claims derives
primarily from wage inflation, which we mitigate by offering
customers downgrades of the maximum daily benefit as an
alternative to premium rate increases. In addition, our expense
savings program helps to mitigate the impact of rising inflation.
Cybersecurity
The increasing digitalization of the financial services landscape
has intensified the financial and reputational risk presented
by cybersecurity threats. The COVID-19 pandemic, and
the rise in remote working, have further escalated these
threats, with the FBI reporting a 300% increase in cybercrimes
in the UnitedStates since the start of the pandemic
1
. As our
business becomes more technology driven and our digital reliance
increases, we become a greater target for cybercriminals, and
more vulnerable to threats such as ransomware attacks.
What Aegon is doing
We continue to take steps to strengthen our cybersecurity
governance, infrastructure, and ability to respond to cyberattacks,
for example by further developing our dedicated IT security
team, and strengthening controls. The security program aims
at analyzing and remediating known vulnerabilities, as well
as conducting ongoing exercises to prepare for and respond
effectively to cyberattacks. Aegon’s Risk department also
periodically assesses known potential cyber risk factors, together
with the first line functions such as the Security Operations
Center, with known trends or material incidents reported
to Aegon’s Management and Supervisory Boards as necessary.
Aegon also has dedicated teams, processes, and procedures
in place that are intended to mitigate potential cyberattacks.
Sustainability and ESG-integration
Sustainability is increasingly a key value driver for companies
like Aegon. Businesses that shape their sustainability journeys
along consistent, company-wide approaches, covering the entire
sustainability landscape while paying specific attention to areas
where they can have a significant positive impact, enjoy op
portunities
to attract new customers, and receive access to capital
at preferential terms. In contrast, businesses that fail to meet
their stakeholders’ expectations with regard to sustainability
are at risk of damaging their reputations and market positions.
What Aegon is doing
In 2020 and 2021, we took significant steps to strengthen our
sustainability approach. We established a Global Sustainability
Board, which is supported by our Global Corporate Sustainability
Team. Furthermore, in November 2021, we committed
to transitioning our general account investment portfolio
to net-zero greenhouse gas emissions by 2050. The commitment
includes an immediate target to reduce the carbon intensity
of our corporate fixed income and listed equity general account
assets by 25% by 2025. Our focus remains on strengthening
our governance and enhancing the quality of our reporting
processes and infrastructure, to ensure that we are ready for
limited assurance for external non-financial reporting over 2023.
Furthermore, we are improving our engagement on sustainability-
related topics both internally and externally.
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11
Our business environment
Opportunities and challenges
Competition for talent and technological
advancements
In today’s increasingly technology-driven financial services
industry, there is a growing demand for – and shortage
of – digital and analytical talent. To remain successful as a
business, we require a reliable long-term pipeline of these
specific talents, and we must prioritize attracting and retaining
hard-to-find employees and upskilling our existing workforce.
Equally, we must continue to further improve our IT systems,
by developing our cloud infrastructure, data lakes, and
data analytics capabilities, and by resolving issues with our
legacy systems.
What Aegon is doing
Aegon has dedicated IT talent acquisition programs in place
around the world, which are overseen by our local and global
human resources teams and discussed in various forums,
including Aegon’s Management Board. As part of this approach,
we direct attention and resources to topics such as employee
compensation, personal development, and our employer value
proposition.
Aegon also recognizes the need to attract new and diverse
talents with the broader skills and capabilities required to deliver
our purpose and transformation agenda. Our Talent Acquisition
teams actively source underrepresented candidates and partner
with organizations to encourage interest from diverse groups.
In 2021, Aegon Asset Management also launched its Inclusive
Hiring Guide for recruiting managers, and now works with talent
acquisition agencies to ensure a diverse selection of candidates
for open positions.
Other topics
Aegon’s additional identified focus areas relate to the post-
pandemic recovery period and future pandemics, as well
as geopolitical tensions, regulatory regionalization, and
increased reporting and regulation. This last focus area concerns
insurance-specific requirements but also broader developments,
for instance with respect to sustainability, ESG, privacy, data
management, and fiduciary rules. Aegon actively monitors
developments in these focus areas and takes management
actions where necessary.
Aegon Integrated Annual Report
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Our business environment
About Aegon
Governance and risk management Financial information Non-financial information
Looking to the longer term
As well as our immediate operating environment, we examine
the longer-term horizon to identify trends and developments
with the potential to significantly influence our business and
our stakeholders in the years ahead. We have identified the
key trends we believe will provide the greatest opportunities
or challenges for our business in the medium to long term.
These themes serve as the foundation for our purpose and
long-term vision, in turn shaping our company strategy.
Higher life expectancy and falling birth rates
As people live longer and birth rates decline, these long-term
demographic shifts taking place in Aegon’s core and growth
markets have significant repercussions for its customers and
other stakeholders. They are also critical for our longer-term
value proposition, and therefore for our product development
strategy and wider business planning. We capture opportunities
to deliver retirement solutions and other products and
services linked to longevity at scale, as well as other solutions
associated with higher life expectancies and shrinking working-
age populations. The question of how to manage the impact
of longer lifespans on individuals and society is directly linked
to Aegon’s purpose and vision.
Changing customer expectations
Increasingly, our customers are embarking on non-linear
life journeys rather than the traditional path to retirement,
a trend that raises questions for our long-term business model
and that we directly address through our company purpose
of
Helping people live their best lives
. The rapid digitalization of financial services and the rise of artificial intelligence provide
opportunities to strengthen our direct relationships with
customers by using digital tools such as portals, platforms,
and so-called ‘robo-advice’. With our new business strategy,
we seek to harness these trends by continuing to invest in our
customer engagement and experience.
Meeting the needs of a diverse society
We see a growing long-term need for retirement solutions
that cater to less affluent individuals, as well as for other
financial products and services that can meet the increasingly
disparate needs of different segments of society. In our long-
term planning, we consider ways to expand our reach, for
example by broadening our distribution and continuing to provide
fairly priced financial products and advice. In addition to adapting
our products and services, we are working to further embed
inclusion and diversity within our employer value proposition
to make it easier for underrepresented talent to work and
thrive at Aegon.
Sustainability, competition for talent, and
technological advancements
In keeping with our short-term outlook, we expect sustainability,
competition for talent, and technological advancements
to continue to shape our strategy over the longer-term horizon.
As we move toward a net-zero society, it is important that
our approach to issues such as climate change and inclusion
and diversity positions us in line with, or ahead of, our peers.
The long-term success of our business also depends on attracting
diverse talent and seizing opportunities created by technological
advancement and innovation.
Aegon Integrated Annual Report
2021
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About Aegon
Governance and risk management Financial information Non-financial information
13
Our business environment
Looking to the longer term
Our purpose
As the lives of our customers become longer and more varied, at Aegon we strive to
beafinancial services company that gives people the confidence and flexibility to find
their own way and contribute to a better world.
This ambition underpins our new company purpose,
Helping people live their best lives.
Our purpose shapes how
we engage with and create value for our customers and wider
stakeholder base. In turn, this provides the foundation for our
vision and strategy, as well as for our business planning and
decision-making.
Living and working in the age of longevity
Pensions and other financial services providers have traditionally
based their customer propositions on a three-stage view of life.
Broadly speaking, this involves individuals partaking in education
up to the ages of 20 to 25, followed by a career of around
40 years and a short retirement of about 15-20 years. However,
in recent decades, demographic, technological, and health trends
have brought an end to the concept of the three-stage life.
People everywhere are living longer, and many children born
today can expect to live to 100 in developed countries. The World
Bank forecasts the proportion of the global population aged
65 and over to nearly double from 9% in 2020 to 16% in 2050
(see Figure ‘Population aged 65 or above’ on page 15).
While the possibility of a 100-year life is a leap forward for
humankind, it also presents a number of economic, social,
and health challenges. As lifespans generally increase around
the world, there is a need to rethink conventional, linear
approaches to both work and life. An education gained before
the age of 25 is unlikely to sustain an individual through
a career spanning multiple decades. Meanwhile, supporting
older people through a retirement of potentially 30 or more
years is increasingly unsustainable from a societal perspective.
According to the World Bank, the global age-dependency
ratio (a metric used to measure the size of the working-age
demographic relative to the total population) fell from a modern-
day high of 77.1% in 1967 to 54.1% in 2020. This changing
demographic landscape is putting increasing strain on state
retirement systems.
However, longevity creates an extensive agenda for governments
that goes beyond retirement with considerations, including
education, vitality, the environment, and a range of broader
social concerns. In particular, corresponding with the rapid
increase in life expectancy, there is a growing awareness that
our environment can no longer sustain our rampant consumption
of resources.
Aegon Integrated Annual Report
2021
14
Our purpose
About Aegon
Governance and risk management Financial information Non-financial information
Our purpose
Our purpose
Our purpose
Our purpose
A positive view on aging
The growth in life expectancies and the shift away from
the traditional, linear life journey have long been top of mind
within the pensions and financial services industry. However,
the topic has too often been framed in a negative context.
At Aegon, we believe an aging society can also be a healthy
and productive society, and we view longevity as an opportunity
for individuals and companies to rethink how they exist within
society. Nearly half of all Fortune 500 CEOs are over the age
of 60, while the elected leaders of more than 60 nations are
in their seventies. The long-held association of aging with frailty
and long periods of inactivity is being replaced by the expectation
that the years after 60 can be the most rewarding.
Individuals are also taking advantage of their longer lifespans
by finding new ways to have a positive impact on society
and the environment. Similarly, Aegon sees longevity and
sustainability as two sides of the same coin, as both issues
create an extensive agenda for governments, businesses,
and individuals. To champion the possibilities offered by a
longer life and help improve quality of life and wellbeing for
everyone, we need an approach founded on ESG factors that
creates lasting value. Indeed, our recent engagements with our
stakeholders have revealed two key strategic priorities: climate
change, and inclusion and diversity. These topics are shaping our
sustainability agenda.
Ensuring positive longevity
At Aegon, we can realize our purpose by helping our different
stakeholder groups capture the opportunities offered by a longer,
non-linear life journey. The advice, products, and services we
provide help people accumulate and use their wealth throughout
the different stages of life, take control of their finances, and
adapt confidently to changing circumstances. We support our
customers as they move jobs, start a family, take sabbaticals,
save for the future, or buy a home. At the same time, we help
them balance their financial priorities with other crucial assets,
such as their health, social networks, and personal development.
The shift to a multi-stage life also has consequences for
Aegon’s workforce, creating the possibility of an improved
trade-off between work and leisure, career and family, and
finances and health. As a responsible employer, we want
to be at the forefront of this change, providing broad career
opportunities, dynamic support for learning and development,
and a purpose-led, inclusive culture that supports vitality.
More widely, we commit to helping society adapt to far-reaching
demographic changes through our expertise, investment
strategies, ESG commitments, and community investment
programs. We also remain committed to investing responsibly.
As an asset manager, we can make a difference by integrating
longevity into our sustainability approach, and actively investing
in companies that equip society to support longer lifespans.
Our business partners play an important role in delivering on our
purpose. Together, we cultivate strong, respectful relationships,
enabling them to provide the support our customers need
to enjoy a long and fulfilling life.
Our investors are equally central to how we live our purpose
as a company. We balance our efforts to generate stable,
competitive returns for our shareholders and bondholders
with our aim to have a positive impact on the world around
us and our future society.
https://data.worldbank.org/indicator/SP.DYN.LE00.IN
https://data.worldbank.org/indicator/SP.POP.DPND
https://data.worldbank.org/indicator/SP.POP.65UP.TO.ZS
Life expectancy at birth
1
(world; years)
74
68
64
60
56
52
1960 1970 1980 1990 2000 2010 2020
Population aged 65 and above
2
(world; % of total population)
10
9
8
7
6
5
1960 1970 1980 1990 2000 2010 2020
1
Source World Bank database.
2
Aegon Integrated Annual Report
2021
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15
Our purpose
Our strategy and value creation
Our operating environment presents new challenges but also new opportunities.
Bytaking steps to strengthen our business, we are adapting to this evolving
landscapewhile playing a key role in shaping a thriving and sustainable society.
With our strategy, we are positioning Aegon to be a leader
in investment, protection, and retirement solutions. We aim
to build a resilient, future-fit business that can continue to add
value to our customers, shareholders, and other stakeholders.
Indeed, our strategy is not just about strengthening our
operational and financial performance; we also seek to have
a positive impact on society by balancing the financial objectives
of our direct operations and investment activities with our
sustainability ambitions.
Realizing our vision
As we work toward our vision to be a leader in investment,
protection, and retirement solutions, we strive to create
a well-managed, well-respected company that delivers value
for all, including attractive, sustainable capital distributions
to our shareholders. Realizing our future vision will involve
building on our strengths today, including, first and foremost,
the deep capabilities of our business, whereby we leverage
our global expertise to operate trusted brands and leading
retirement platforms.
Investment proposition
Leader in
investment,
protection, and
retirement
solutions
Clear strategic
focus, building on
our strengths
Value-
creating capital
allocation
Strong balance
sheet and
growing capital
distributions
Improving
operational
performance
Aegon Integrated Annual Report
2021
16
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Our strategy and value creation
Our strategy and value creation
Our strategy
Our strategy and value creation
Aegon has strong foundations in advanced retirement and global
asset management solutions, as well as in under-penetrated
growth markets. Aegon is well positioned to benefit from
favorable structural trends in its key markets, where demographic
realities and low interest rates are requiring customers to save
more. We also operate with an increasing presence in large
growth markets such as China and Brazil.
Our base of 31.7million customers provides a strong foundation
for further growth. We have the global reach to deliver our
propositions to our customers, who will increasingly benefit
from more sophisticated and tailored digital services and advice.
Our global, integrated asset management business is key to our
continued success, offering the opportunity to grow our share
of the overall assets under management over time.
Focusing our business portfolio
We are creating a more focused business portfolio to deliver
success for us and our stakeholders as we move toward our
vision. A central element of this approach is the reallocation
of capital from our Financial Assets to our Strategic Assets in our
three core markets, as well as our three growth markets, and
Aegon Asset Management. We want to be seen as leading with
contemporary propositions and outstanding, digitally enabled,
customer service. The organization of Aegon’s core and growth
markets is explained in the next column.
In parallel, we own several businesses that are sub-scale or active
in niche or small markets. These are managed with tight capital
and with a bias to exit. For Transamerica Life Bermuda, for
example, our focus is on products that are less interest-rate
sensitive, as well as on actively managing the policies that are
in force while reducing expenses. We have closed our traditional
distribution channels in India in favor of our digital commerce
partnerships, and we are exiting other sub-scale positions and
ventures globally. In 2020, we reached an agreement with
Vienna Insurance Group AG Wiener Versicherung Gruppe to sell
our businesses in Central & Eastern Europe. The transaction
is subject to regulato
ry
approval.
Our portfolio
Aegon has narrowed its strategic focus to three core markets,
three growth markets, and one global asset manager.
Core markets
We have three core markets – the United States,
the Netherlands, and the United Kingdom – where
we possess leading positions that we want to grow.
Within our core markets, we distinguish between Strategic
Assets and Financial Assets.
Strategic Assets
are businesses with a greater potential
for an attractive return on capital, and where Aegon is
well-positioned for growth. In these businesses, Aegon will
invest in profitable growth by expanding its customer base
and increasing its margins. These businesses are:
•
United States: Individual Solutions (certain life insurance
products, investment products, and mutual funds), and
Workplace Solutions (middle-market retirement plans
and voluntary employee benefits);
•
The Netherlands: Workplace Solutions, mortgage
origination, and banking;
•
United Kingdom: Workplace and Retail platform business
and protection.
Financial Assets
are blocks of business that are capital
intensive with relatively low returns on capital employed.
New sales for these blocks are limited and focused on
products with higher returns and a moderate risk profile.
We aim to maximize the value of these businesses through
disciplined risk management and capital management
actions. These businesses are:
•
United States: Fixed and Variable Annuities with interest-
rate-sensitive riders, and stand-alone long-term care;
•
The Netherlands: term life, individual deferred annuities,
and defined benefit group pensions.
Growth markets
Aegon focuses on three attractive growth markets – China,
Brazil, and Spain & Portugal – that we will continue to access
through our successful partnerships. Together with our
partners,
we will develop these businesses and capture
the growth potential they provide while leveraging our global
expertise and c
apabilities.
Aegon Asset Management
Aegon Asset Management (AAM) is an active global
investment business with approximately EUR 410 billion
assets under management. Leveraging our global brand
and a global operating platform, AAM is active in our
core and growth markets as well as in France, Germany,
Hungary, and Japan.
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17
Our strategy and value creation
Building on our strengths
We have identified several areas of our business in our
different markets, together with corresponding actions,
that will best contribute to profitable growth and create
value for our customers, shareholders, and other stakeholders
in the years ahead.
In the United States, the largest of our core markets, we aim to
harness the current market dynamics that play into the historical
strengths and presence of Transamerica. Our Workplace Solutions
division is well positioned for growth in volume and earnings,
and we will invest in growth with an enhanced focus on small
and mid-sized employers. The Individual Solutions division will
invest in selected individual life, accumulation, and investment
products and leverage our strong distribution capabilities in this
large market.
In the Netherlands, we plan to expand our capabilities
in new-style, defined contribution pensions, and in mortgage
origination, to support our growth ambitions. We are further
expanding our position in the small and medium-sized enterprise
(SME) and retail markets with our digital-only bank Knab.
In the United Kingdom, where we are market leader in workplace
solutions and financial advice platforms, we aim to sharpen
our competitive edge and improve the digital experience for
customers, advisors, and employers.
We regard our global asset manager as an important contributor
to realizing our strategy and we aim to advance its growth.
We are moving toward a global new-technology platform to drive
expenses down and make Aegon Asset Management more
scalable and client focused.
In Aegon’s growth markets, we will continue to expand
our businesses by making the most of the generous scale
and untapped potential of these regions. Our strong local
partnerships are key to this ambition. In Spain & Portugal,
for instance, we have expanded our bancassurance partnership
with Banco Santander following its acquisition of Banco Popular
in 2020. We will invest further in China and Brazil, and generate
growing volumes and earnings by expanding distribution and
entering new pension markets.
Leveraging our capabilities
One of our most important resources is the deep knowledge
and expertise of our employees around the world. We have
a clearly defined workforce strategy and culture, through which
we aim to preserve and develop our human and intellectual
capital. Strong leadership is at the heart of this approach. In line
with our new strategy, regular talent reviews now take place with
every Aegon leader to ensure their competencies and skillsets
directly support their assignment in their respective business
unit. More widely, we are stepping up our efforts to develop our
people, hire new talent where appropriate, and invest in execution
capabilities and skills. Intensifying the organizational rhythm
in this way allows Aegon to shift to a high-performance culture.
Our expertise and capabilities travel across our markets, as what
works for one region or customer group can also work well
in another. A key focus of our strategy is therefore to leverage
business synergies across our company and our different markets.
For example, the link between our Strategic Assets and our
global asset manager is strong. Likewise, our asset management
teams strive to deliver strong investment returns, to support
the sound and effective management of the large back books
of our Financial Assets. Clear strategies and decisive actions
will make these connections even stronger and more powerful
in the years ahead.
In addition, we are speeding up decision-making and installing
clear accountabilities, moving to a concept of ‘accountability
within a clear framework’. Within this new model, the Group
outlines strategy, allocates capital, defines risk appetite, sets
targets, and drives strategy implementation. In addition,
wecentrally determine functional mandates, set policies and
frameworks, and provide shareholder services. Our business
unitsdevelop local strategies and operating plans within the
company’s strategic framework and ensure their imp
lementation.
Maximize
economies
of scale
Reallocate
capital
Leverage
business
synergies
Win with leading
investment solutions
Grow
capital-
light asset
management
Financial
Assets
Strategic
Assets and
growth
markets
Asset
management
Aegon Integrated Annual Report
2021
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Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Maintaining a strong balance sheet
We make sure to maintain a strong balance sheet, so that we can
focus our time and energy on increasing our return on capital
and the return of capital to shareholders. We have a clear capital
management policy in place that informs our capital deployment
decisions. The capital deployment of the company is driven
by the Cash Capital at Holding and is supported by reliable
remittances from the units. To strengthen our balance sheet,
reduce our risk profile, and make Aegon more resilient, we are
reducing our gross financial leverage.
In 2021, Aegon continued to pursue a range of actions
to strengthen its capital position and reduce the volatility
of the company’s solvency ratios. To further reduce our risk
exposure, we launched a lump-sum buy-out program for certain
variable annuities policies, and we are implementing a rate
increase program for long-term care policies. Furthermore,
we have expanded the hedging of our legacy variable annuity
block, which will allow us to more actively consider a broader
range of options for this block of business. We have also
reinsured an additional part of the longevity exposure
in the Dutch Life insurance portfolio and a portfolio of universal
life secondary guarantee policies in the US Life business, with
both actions further improving the risk profile of the company.
Dividends are typically expected to grow in line with sustainable
free cash flows. Additional capital deployment decisions will
consider our deleveraging target, as well as planned management
actions
to improve and de-risk the company. Aegon seeks to return
surplus cash flows to its shareholders over time, unless we invest
it in value-creating opportunities, which are subject to strict
financial and non-financial criteria.
Progress on Aegon's operational
improvement plan
In 2020, we began taking concrete steps to transform
the company to improve our long-term performance and
ensure we continue to create value for our customers,
shareholders, and other stakeholders. We have developed
a rigorous and granular company-wide operational
improvement plan that comprises more than 1,200
specific initiatives. The aim of the plan is to improve
Aegon’s operating performance by reducing costs,
expanding margins, and growing profitably. A total
of 844 initiatives were executed between the launch
of the operational improvement plan in 2020 and the end
of 2021, of which 649 were related to expense savings.
Our expense savings program aims to reduce addressable
expenses by EUR 400million by 2023 compared with
2019. We have delivered on our ambition to achieve half
of our expense reduction target by end-2021, by delivering
addressable expense savings of EUR 244million compared
with the 2019 base year. Meanwhile, we continue to fund
growth initiatives to strengthen key areas of our business,
for example by improving customer service, enhancing user
experiences, and developing new products. As part of this
approach, we continue to make strategic investments
in ourdigital systems and customer portals.
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Our strategy and value creation
Sustainability
At Aegon, we have further embedded sustainability as
acentral pillar within our company strategy. Guided by
ourpurpose, we aim to create long-term value for our
stakeholders through the integration of environmental,
social, and governance (ESG) criteria in our strategy.
Our overarching objective through our sustainability approach
is to contribute to society at large and play our part in addressing
the planet’s greatest challenges.
From January 1, 2021, our newly formed Global Corporate
Sustainability Team has been mandated to strengthen our focus
on company-wide sustainability targets, reflecting Aegon’s shift
from a federated model to a principle of ‘accountability within
aclear framework’. We have set three priorities to achieve this:
1. Streamlining company-wide governance;
2. Identifying thematic priorities based on stakeholder
engagement; and
3. Enhancing our sustainability reporting.
Streamlining company-wide governance
In 2021, we established our Global Sustainability Board (GSB)
to enhance governance and oversight of our sustainability
approach. The GSB’s core function is to steer and strengthen
the sustainability agenda across our country units, and it will
be supported by our local sustainability boards. Key actions put
forward by the agenda include formulating sustainability-focused
commitments, key performance indicators (KPIs), and targets.
The GSB also provides advice and recommendations on specific
topics such as inclusion and diversity and responsible investment,
as well as on products, processes, initiatives, and communications
relating to sustainability. The GSB plays an advisory role to the
Management Board, with the Supervisory Board’s Nomination and
Governance Committee having ultimate oversight.
Identifying thematic priorities
Stakeholders, including investors and representative bodies,
are increasingly engaging with Aegon on sustainability-related
themes. These dialogues have highlighted climate change and
inclusion and diversity as particularly critical issues that will
guide our sustainability agenda in the years to come. We continue
to monitor best practices for broader sustainability issues and
act accordingly, as further described in our ‘Sharing value with
our stakeholders’ section (see page 26). In 2021, Aegon became
a signatory of the UN Global Compact. We aim to embed its
principles into our strategy, culture, and day-to-day operations,
as well as through collaborative projects. As a signatory,
we remain firmly committed to supporting the UN Sustainable
Development Goals, with a focus on the goals that are most
relevant to our business and strategy, and to which we can make
a significant contribution.
Aegon commits to a net-zero
investment portfolio
Coinciding with the ‘COP26’ conference in Glasgow
in November 2021, Aegon announced its company-wide
commitment to transitioning its general account investment
portfolio to net-zero greenhouse gas (GHG) emissions
by 2050. In this context, we joined the Net-Zero Asset
Owner Alliance, a UN-convened group of institutional
investors committed to decarbonization.
To ensure progress toward our 2050 commitment, by 2025,
we aim to reduce by 25% the weighted average carbon
intensity of our corporate fixed income and listed equity
general account assets. This will be followed by additional
targets at five-year intervals, in line with Net-Zero Asset
Owner Alliance requirements.
Aegon will engage with carbon-intensive investee
companies to drive real-world reductions in emissions.
We will update our company-wide responsible investment
exclusion criteria regularly to reflect the latest scientific
findings on climate change, with the most recent update
coming into effect on January 1, 2022.
Our company-wide commitments are supported
by the additional actions and commitments that our country
units have made in our local markets. For instance, Aegon
the Netherlands has included their separate accounts
in their commitment to halve the emissions of their
investments by 2030 and Aegon UK has committed
to net-zero emissions across its default pension funds.
Furthermore, Aegon Asset Management has joined the Net
zero Asset Managers initiative, a group of international
asset managers committed to supporting investing aligned
with the goal of net-zero emissions by 2050.
Aegon Integrated Annual Report
2021
20
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Sustainability
Climate change
As an insurance company, Aegon can support the transition
toa climate-resilient economy and a net-zero world using both
sides of its balance sheet. We finance the upside through our
responsible investment framework, while mitigating the downside
by integrating ESG into our risk management processes, and the
savings and protection solutions we provide. The influence, both
positive and negative, we can have as an investor is particularly
significant, and we have committed to transitioning our general
account investment portfolio to net-zero greenhouse gas (GHG)
emissions by 2050 (see page 20).
Aegon does not operate energy- or resource-intensive processes
as part of its direct business operations. Our operational
activities (gas consumption, electricity consumption, and air
travel) have been carbon-neutral since 2019, which has been
achieved by substituting our energy consumption with renewable
sources and offsetting our remaining carbon emissions.
In developing regions where we have a sizeable operational
presence, we specifically support carbon offset projects that
reflect our own footprint and align with our priority United
Nations Sustainable Development Goals (SDGs), as well as our
purpose of
Helping people live their best lives
. In 2021, this included a Voluntary Emission Reduction project in China focused
on diverting atmospheric methane emissions from agriculture
to local communities as an alternative source of energy to coal,
along with providing employment opportunities in supporting
the associated infrastructure.
In line with the net-zero commitment announced in November
2021, Aegon has set a supporting greenhouse gas emission
reduction target to reduce the carbon footprint of its operational
activities by 25% by 2025 against a 2019 baseline. The target
includes the consumption of natural gas and electricity. In 2021,
the carbon footprint of Aegon’s operational activities reduced
by 54% compared with 2019. While some of these reductions
can be traced to our initiatives to stimulate hybrid working –for
instance reductions in leased space across the US in 2021 –
there has also been a temporary benefit from fewer employees
2021 climate performance indicators
•
Weighted average carbon intensity (WACI) of corporate
fixed income and listed equity: 490 metric tons
CO
2
e/EURm revenue
1
•
No change in WACI against 2019
•
Operational carbon footprint: 24,024 metric tons CO
2
e
2
•
Reduction of operational carbon
footprint against 2019: 54%
•
Green electricity purchased: 99%
Recent steps on our journey to becoming a more inclusive and diverse organization
June 2020
Public statement
on Tra
nsamerica’s
commitment
to r
acial
equityNov 2020
I&D strengthened in Brand and
Marketing Pledge
Mid 2020
Aegon Asset Management
and Aegon UK sign up to
the Race at Work Charter
Dec 2020
I&D strengthened in Vendor
Code of Conduct
June 2021
Our Global CEO Pledge: G20 Alliance for Empowerment
and Progression of Women’s Economic Representation
– Aegon named as Advocate in the G20 Empower Best
Practices Playbook
Dec 2021 / 2022
Increasing the impact and maturity of our
I&D ambition by developing an I&D Strategy
aligned to our key sustainability priorities and
our new Talent Management Strategy
in the office due to the COVID-19 pandemic, which we expect
to reverse over time. Through implementing our hybrid working
policy and other initiatives, we will work toward achieving
our target. Aegon will also look toward expanding the scope
of measurement of our GHG emissions and explore setting
further targets against these in the future.
Finally, Aegon worked with Ortec Finance to perform an extensive
and systematic climate risk assessment for the general and
separate account assets of all business units within Aegon.
The analysis investigated three plausible climate pathways
(orderly, disorderly and failed transitions) to explore potential
future climate policies, interventions, and consequences
of the world failing to mitigate climate change.
1
For details on the methodology used, please see our TCFD disclosure (Methodology) on page 378.
2
For details on the methodology used, please see footnote 1, Society: Operational footprint on page 392.
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
21
Our strategy and value creation
Modelling results indicate resilience of the Aegon general
account portfolio allocation to key systemic climate risk drivers
across all modelled climate scenarios. High allocation of fixed
income assets is the key driver that limits the cumulative climate-
related impact on returns over a 40-year horizon. Continuing
to monitor developments in climate science, policy, technology,
regulation, and consumer sentiment will remain critical for
understanding and adapting to the future.
Inclusion and diversity
Our inclusion and diversity approach is designed to ensure our
policies and actions permeate all areas and levels
of the
company.
Together with the company
’
s leadership, Aegon’s employees and other stakeholders share accountability for building an inclusive
and diverse organization. In 2021
,
we held Strategic People Discussions centered on ensuring inclusion and diversity within
our talent pipeline, with a focus on underrepresented and young
talents. These conversations have created opportunities for
aspiring leaders to participate in mentorship programs,, stretch
assignments, group development programs, and conversations
with Management Board members to raise their profiles.
Alongside diversity and equality, improving openness and inclusion
is a priority across Aegon. We have updated how we measure
these elements in Aegon
’
s Global Employee Survey to enablemore targeted interventions and track our progress. The 2021
survey included additional questions exploring whether people feel
comfortable speaking up and being their authentic selves, along
with openness about learning from mistakes.
In 2022, Aegon will appoint a Global Head of Inclusion & Diversity
to support the development of our inclusion and diversity
strategy across the following three pillars:
1. Workplace
– moving from awareness of unconscious bias to
helping people adopt conscious inclusion.
2. Workforce
– leveraging diversity data to understand
the current context, deliver impactful interventions,
and track progress.
3. Marketplace
– assessing our current level of maturity on
inclusion and diversity – including how we compare with
relevant peers – and determining our level of ambition and
how to achieve it.
Furthermore, Aegon’s new Diversity Policy is intended to address
the legal requirements of the ‘Diversity at the
Top
Act’, effective from January 1, 2022, to improve the designed gender balance
in listed and large Dutch-owned companies. We will also continue
to include a non-financial performance indicator for Management
Board members regarding gender diversity in all senior
management positions (see ‘Performance in 2021’ on page 33).
A further example of Aegon’s approach to inclusion and diversity
from one of our core markets is provided in the long-term value
creation section, on page 28.
Including diverse voices in our
transformation
At Aegon, we believe ideas are central to our transformation
and we value different perspectives. Every initiative
introduced at Aegon originally began as someone’s idea,
and it is crucial we have a continuous stream of such ideas
to fuel our ongoing improvement and growth.
In July 2021, Transamerica’s Heads of Transformation
hosted an ideation session for members of our Employee
Resource Groups (ERGs). The session resulted in 34 new
ideas generated by 23 ERG members, covering topics
ranging from diversifying our intern population to improving
efficiency through increased cross-training. Six ideas from
the session are in the process of being taken forward and
are now at varying stages of implementation.
Inclusion and diversity performance
indicators
At Aegon, we view inclusion and diversity as integral qualities
in a robust, futureproof business. Along with providing a
welcoming and supportive environment for people from
different ethnicities and backgrounds, we strive to maintain a
healthy level of gender diversity atall levels of our organization.
For 2022, we set a target of a minimum of 36% female
representation among senior management. In 2021,
theproportion of female representation
among senior management increased
to34%.
Enhancing our sustainability reporting
The development of sustainability-related legislation and
regulation has advanced significantly in recent years, both in terms
of volume and pace. This has had a bearing on corporate reporting
and disclosure requirements.
In the
European Union, we havewitnessed
the accelerated development of sustainable
-finance-related legislation and regulation following the 2018 launch
the European Commission’s action plan on sustainable finance.
This trend can only be expected to continue in ye
ars
to come
.
Aegon Integrated Annual Report
2021
22
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
In 2021 the process
,
we beganof enhancing our sustainability
reporting with a view to optimizing our ability to adapt to changing
reporting requirements and to report on a voluntary basis. We are
developing
a Target Operating Model, whereby sustainability
reporting
is integrated into our company-wide finance reporting
function, leveraging its existing processes and best practices.
This includes ensuring Aegon is ready for limited assurance for
external non-financial reporting over 2023, given the European
Commission’
s incoming Corporate Sustainability Reporting Directive.
Responsible investment at Aegon
At Aegon
,
we recognize our responsibility to ensure our investments do not negatively affect society
or the
planet.
We apply this ethos
to our own general account investments and use our influence
to encourage similar standards
in the
investment decisions of ourcustomers.
By taking
an active approach to responsible investment,
we seek to minimize risks to our business and explore ways to serve
the interests of our customers and socie
ty
at large
.
Aegon’s Responsible Investment Policy recognizes a broad
range of recurring sustainability and ESG topics, from climate
change to corporate governance. In November 2021, we took
an important step forward in our commitment to transitioning
our general account investment portfolio to net-zero GHG
emissions by 2050 (see page 20).
Key responsible investment activities in 2021
In 2021, we continued to introduce new responsible investment
solutions across our different investment platforms. In the
fixedincome space, Aegon Asset Management and Aegon UK
partnered with the Global Ethical Finance Initiative to launch
theAegon Global Sustainable Sovereign Bond Fund. The launch
coincided with COP26 in November 2021. In the equities space,
Aegon Asset Management launched the Sustainable US Large
Cap Equities strategy. The launch was accompanied by new
multi-asset and real asset solutions that included the
SustainableDiversified Growth Fund, and the Sustainable
RealEstate Securities Fund, respectively.
Asset manager:
Our solutions
Aegon Asset Management (AAM) has a Responsible
Investment Framework that reflects the key elements
of ourResponsible Investment Policy, as well as similar
policies put forward by AAM’s clients. The framework
is structured as follows:
•
ESG integration
– Material ESG factors are fundamental to
our investment decision-making across all AAM portfolios.
By integrating ESG considerations into traditional financial
analysis, the AAM research team arrives at an independent
view of an issuer’s fundamentals.
•
Active ownership
– Aegon actively engages with investee
companies
to help improve their ESG profile andaddress
sustainability issues. We also exercise our shareholder
voting rights to support our engagement efforts and
enhance long-term value creation for allstak
eholders.
•
Solutions
– AAM provides a range of responsible
investment solutions to pursue ESG objectives alongside
financial returns, based on four categories:
1. Exclusion-based strategies (Utilize negative screening
to avoid certain sectors, companies or practices based
on specific criteria);
2. Best-in-class strategies (Seek to outperform by
emphasizing positive screening of issuers with better
or improving ESG practices);
3. Sustainability-themed strategies (Focus on issuers
aligned with sustainability themes in an effort to
generate competitive returns over the long term);
4. Impact investments (Pursue financial returns
alongside measurable positive social and/or
environmental impact).
Further information about Aegon Asset Management’s
activities can be found in the dedicated Responsible
Investment Report published by AAM.
Example: Active engagement with investee companies
Company
Healthcare company
Objectives
Calling on a globally important player to fight the COVID-19 pandemic to assure
its products are available worldwide with equitable pricing.
How we engaged
We challenged the company on the topic, sending an engagement letter, followed
by phone calls and emails.
Outcome
The company announced an advanced vaccine purchase agreement with COVAX for
low- and lower-middle-income countries.
Voting
We supported the shareholder proposal requesting a 'Report on Access to COVID-19
Products'. The report provides shareholders with additional information about access
to the COVID-19 vaccine produced by the healthcare company. It provides information
about the effect of the company's decisions and how the related risks are managed.
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
23
Our strategy and value creation
Value creation
Our inputs
Aegon’s business model
Financial
•
Shareholders’ equity:
EUR 24
.
3 billion
•
Gross financial leverage:
EUR 5
.
9 billion
•
Solvency
II Own Funds:
EUR 19
.
4 billion
•
Solvency
II Capital Required:
EUR 9
.
2 billion
Manufactured
•
Gross premium income:
EUR 15.4 b
illion
•
Gross deposits EUR 235 b
illion
•
Fees and commissions received:
EUR 2
.
8 billion
•
Investment income: EUR 7
.
0 billion
•
Revenue-generating in
vestments:
EUR 1,024 b
illion
Intellectual
•
Internal processes, systems, and
controls (not qu
antified)
•
Actuarial expertise (not q
uantified)
Human
•
Number
of employe
es: 22,272
•
Amount spent
o
n trainingand development: EUR 9
.
5million
•
Number
of tied agents: 4,335
Social and relationship
•
Number
of customers: 31
7million.
•
Brand equity (not q
uantified)
•
Intermediairies, business partners,
and suppliers (not q
uantified)
•
Other key stakeholders such
as
regulators
(not q
uantified)Natural
•
Total energy used
by company
:
77,151 MWhWe
tune in:
We live on a fascinating,
diverse, and fast-changing
planet, and we will only
stay relevant if we are
curious and make every
effort to understand it,
learn fromit, and keep
pace with it.
We step up:
Our purpose is an ambitious
one. We deliver on it through
initiative, action, and
a positive attitude. Where
obstacles exist, we remove
them, and we harness
our collective strengths
to deliver on our promises.
We are a force for good:
We care for our fellow
humans, and we are sincere
in our desire to leave
the planet better than
we found it. We think
beyond today and prove
our integrity through
wordsand actions.
Aegon’s purpose
Helping people
live their best lives
S
o
l
u
t
i
o
n
s
d
e
v
e
l
o
p
m
e
n
t
a
n
d
p
r
i
c
i
n
g
D
i
s
t
r
i
b
u
t
i
o
n
I
n
v
e
s
t
m
e
n
t
s
C
l
a
i
m
s
a
n
d
b
e
n
e
fi
t
s
F
o
r
c
e
f
o
r
g
o
o
d
T
u
n
e
i
n
S
t
e
p
u
p
Aegon Integrated Annual Report
2021
24
Our strategy and value creation
Value creation
The value we created
Outcome for our stakeholders
Financial
•
Dividends to shareholders:
EUR 289million
•
Interest payments to bondholders:
EUR 220million
•
Group Solvency II ratio: 211%
•
Free cash flow: EUR 729million
•
Operating result: EUR 1,9
06million
Manufactured
•
Claims, benefits, and retirement
plan withdrawals: EUR 62 billion
•
Business partners
1)
: EUR 7.7 billion
•
Residential mortgages originated:
EUR 10.9 billion
Intellectual
•
Reduction in addressable expenses
compared with 2019 through
improved efficiency: EUR 21
7million
Human
•
Total employment costs:
EUR 1.9 billion
•
Women in senior management
positions: 34%
•
Employee engagement score: 68
Social and relationship
•
Corporate and local tax paid:
EUR 381million
•
Impact investments: EUR 4.1 b
illion
•
Responsible investment solutions:
EUR 177.7 billion
Natural
•
Weighted average carbon intensity
relating to our general account
investment portfolio: 490 metric
tons CO
2
e/EURm revenue for
corporate fixed income +
listed equity
•
GHG emissions own operations:
24,024 metric tons CO
2
e
•
Carbon offsets purchased:
7,237metric tons
Customers
Aegon’s investment, protection, and retirement solutions
support our customers as they live longer and healthier lives.
Our solutions protect our customers from the unexpected,
help them to manage their long-term savings by accumulating
and using their wealth, and preserve it for future generations.
Employees
A positive view on longevity will fundamentally shift our
company culture and our values and behaviors. Employees
are a key part of our success as a company, and we want
them to share in that success.As our business progresses
and grows, we are better able to provide fulfilling careers,
advancement opportunities, and development.
Business partners
Aegon’s business partners include distributors, joint venture
partners, reinsurers, sourcing partners, and suppliers of goods
and services. Our goal is to cultivate positive long-term
relationships that benefit our business and allow our partners
to develop and grow theirs. To do so, we make sure to offer
fair and competitive rewards for the services they provide.
Investors
Aegon seeks to provide a consistent and attractive return
on investment to its investors around the world, based on a
resilient and sustainable business model. This includes paying
regular capital distributions to our equity investors, who may
also derive value from the performance of our shares, while
our bondholders derive value from regular interest payments.
Society
Our products and services enable individuals to save for their
own retirement, reducing future burdens on public pension
systems and increasing financial stability in our society.
More widely, we strive to add value to the communities where
we operate through tax payments, charitable donations, and
volunteer work. Where possible, we seek to ensure a positive
environmental impact, whether through our direct operations
or our investment activities.
1
Business partners consists of commissions paid to brokers and other intermediaries, premiums paid to reinsurers, and total spend on goods and services.
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
25
Our strategy and value creation
Sharing value with our stakeholders
Aegon strives to create long-term value for a broad range
of stakeholders, including its customers, employees,
business partners, and investors, as well as society at large.
As underpinned by our purpose and our resulting sustainability
approach, we see our business as inherently beneficial to
society and people’s lives. We believe the value we create
is widely shared. However, we also recognize that some
decisions we make may result in the erosion of value for
certain stakeholders. The active identification and
management of potentially negative consequences is,
therefore, an integral part of our decision-making.
To meet the expectations of our stakeholders, we commit
to being a good corporate citizen with a strong ESG foundation.
Fostering an inclusive and diverse workforce and addressing
climate change have been identified as specific strategic
sustainability priorities for our business in the coming years.
Meanwhile, our broader sustainability agenda also encompasses
investing and paying taxes in a responsible way, safeguarding
data privacy and information security, respecting human rights,
and upholding sustainable procurement principles, among
other actions.
We define our stakeholders as any individual or organization
currently or potentially affected by our activities, or with
the potential to influence the environment in which we operate.
In the following pages, we describe our efforts in 2021 to share
value with each of our five main stakeholder groups.
Customers
Delivering long-term value to Aegon’s 31.7million customers
is central to our purpose of
Helping people live their best lives
and provides the foundation for our strategy. As people live
longer, our customers are under increasing pressure to save
more for their own retirement. Low interest rates make this
requirement even more challenging.
There is a growing need for the investment, protection, and
retirement solutions that Aegon can provide, and we are
constantly looking to enhance our customer propositions with
value-adding products and services. At the same time, we seek
to enrich our customers’ lives by improving our levels of customer
service, including through digital tools and platforms, and
by developing direct, close, personal connections.
As well as supporting our existing customers, we are extending
our reach to underserved groups and regions with a low financial
services penetration, by expanding access to our products and
offering solutions that cater to specific user needs. Forexample,
World Financial Group is uniquely positioned to serve small
business owners in the US market, many of whom are first-
or second-generation immigrants who may require financial
advice in their native language.
Enhancing our propositions
In 2021, Aegon continued to expand its offering across its key
markets to be able to cater to customers’ evolving needs even
more closely. In the United States, Transamerica Individual
Solutions rolled out its accelerated underwriting process
to additional products, and extended flexible criteria for
non-medical underwriting. Transamerica Workplace Solutions
launched a health savings account and rejuvenated its Group
Life and Disability proposition, focused on critical illness and
accident products.
In the Netherlands, we enhanced our customer propositions
in important areas, for example by introducing a new
‘green’ mortgage to help people pay for sustainable home
improvements. We also added new features to our banking
services, which included Apple Pay, a refunded VAT savings
proposition, and attractively priced insurance coverages.
Improving customer service
To enhance customer experience and satisfaction, we took steps
to enhance and further professionalize our customer interactions,
by digitalizing and simplifying customer journeys. Our focus
during 2021 was on introducing more opportunities for human
connection in the interactions that truly matter to our customers
and that require empathy or personalized advice. At the same
time, we continued to introduce 24/7 self-service options
to allow customers to complete simple requests by themselves.
Aegon’s digital channels are an important means
of communicating with households and individuals. In 2021,
we continued to strengthen our customer portals across our
different business units, including our Employee Benefits
business in the United States. The focus was on improving
customers’ ability to file claims, receive status updates
for requests, and check the terms and conditions of their
policies. We also took steps to streamline our billing and
disbursement processes.
In our Transamerica Workplace Solutions business, we developed
a digital onboarding functionality for advisors, improved a
‘Connect Desk’ for small and middle-market customers, and
introduced digital disbursements to significantly accelerate
our handling time. We also introduced Transamerica 401Kares,
through which our Managed Advice service is offered to selected
customers as a free trial, allowing them to review their pension
savings and make important investment decisions.
Aegon Integrated Annual Report
2021
26
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Sharing value with our stakeholders
Strengthening engagement and trust
Across Aegon, we are focused on finding new ways to engage
with our customers and build close, personal connections
centered on trust.
In March 2021, Aegon UK partnered with the Initiative for
Financial Wellbeing and Edinburgh University to launch
the Financial Wellbeing Index, which helps advisors and employee
benefits consultants provide personalized, needs-based advice
to end-customers. Meanwhile, in the Netherlands, Knab,
Aegon’s digital banking platform, continued to support local
entrepreneurs through Knab Bieb, an extensive online library
for topics related to finance and entrepreneurship.
Customer satisfaction in each of our core markets, measured
in benchmarked Net Promoter Score
(SM)
(NPS®), should be
in line with or above the average of our industry peers.
In 2021, our efforts were rewarded by solid NPS outcomes.
Our US business, Transamerica, performed in line with the
market average while Aegon UK was above the average.
Aegon the Netherlands was slightly below the market average,
though its score is steadily improving over time. For further details
of Aegon
’
s NPS outcomes, please see page 382 of this
report.
Employees
Aegon is continuously adapting to our evolving operating
environment. It is important we guide and support our employees
through the resulting changes to our business.
The communication of our new vision and strategy at the end
of 2020 clearly articulated the need for transformation and
the demands that this would put on our workforce as we work
to improve our performance and create greater value for our
customers and shareholders. Since then, our employees have
been engaged in defining a rigorous and granular operational
improvement plan comprising more than 1,200 initiatives across
Aegon. At the same time, we have continued to adapt to new
ways of working in light of the ongoing COVID-19 pandemic.
In 2021, we introduced a new hybrid working model to help our
people achieve a healthy and productive balance between office-
based and remote working.
People at the heart of our transformation journey
Key to our transformation is building an organizational rhythm
that empowers employees to deliver positive results. This means
clearly communicating our priorities to employees, ensuring they
understand the need to change, and giving them the tools and
skills to do so. We also depend on our leaders to role-model
the behavior required by our transformation program.
To this end, throughout 2021, Aegon’s business units each
conducted weekly meetings for colleagues responsible for
executing initiatives linked to the operational improvement plan.
The meetings provided an opportunity to report on their progress
and ask for help. To help foster a high-performance culture,
Aegon’s Management Board offered support through regular
recognition calls with initiative owners to discuss what they
contributed and how. Regarding the means of contribution, we
continued to focus on the three priorities set by our Management
Board in 2020: clarity, discipline, and external focus.
A new home for Pension Geeks
In April 2021, Aegon UK acquired Pension Geeks,
a business specializing in connecting people with their
finances through innovative engagement techniques,
communication, and events.
Pension Geeks partners with like-minded companies
to deliver onsite employer events and has also developed
a digital platform for employers focused on pensions and
wellbeing. The platform includes a range of features such
as webinars, a one-to-one chat facility, and a video library
to help employees manage their finances.
The firm is also the creator of Pension Awareness Day.
As part of this yearly initiative, Pension Geeks team
members visit different locations around the United
Kingdom to provide local residents with one-on-one
guidance about their pensions.
Now as part of our family, Pension Geeks will continue
to help employers to encourage their people to engage
with workplace benefits programs. This important
acquisition, in turn, supports our strong company-wide
focus on customer centricity
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
27
Our strategy and value creation
We also provided new tools and programs to help our people
deliver results. A comprehensive program management tool was
introduced in the
context
of Aegon
’s transformation
to encourage
initiative owners to think through business cases and milestones
carefully and manage progress based on KPIs. We also launched
Ability 2 Execute (A2E), an employee-focused capability-building
program delivered through virtual training sessions and online
learning. The program aims to drive engagement with our
transformation journey, build a common language, and equip
our people with core implementation capabilities and skills
(See figure on page 29).
Supporting engagement and wellbeing
We monitor the wellbeing and engagement of our employees
closely, particularly given the twin pressures
of the
transformationprocess and the ongoing pandemic. In 2021, our business units
continued
to introduce local activities aimed at helping employees
deal with work pressure, contributing to our improved employee
wellbeing score of 65
% in the
third quarter of 2021. With this result,
as measured by our Global Employee Survey, we improved
on our score of 61
% at the
startof the
year, though we remainbelow our benchmark
1
of 68%. Our engagement score fell back
to pre in 2021, having peaked in 202
-COVID-
19 levels0
following our initial response
to
t
he
pandemic.
Introducing our hybrid working model
At Aegon, we have developed a
Future Ways of Working
plan that
draws on the learnings from our employee surveys and reflects
the growing shift toward flexible and remote working. One focal
point is our new hybrid working model, adopted in 2021 across
most of our business units. The approach is based on globally
agreed principles – hybrid working, office utilization and location,
and employee benefits – that are translated locally.
We have embraced hybrid working as we believe it helps our
people to have a full professional life. A healthy balance between
working in and out of the office helps us to stay tuned in and
perform at our best. Our managers have a key role in making
the hybrid model work by building teams where people speak
up, self-organize and support each other’s well-being. We will
continue to get together regularly, because it strengthens
collaboration, innovation and networking. To ensure we get
things done regardless of work setting, we ensure we have the
technology and tools in place to help bridge gaps in time or
place, so everyone feels included. Creating opportunities for our
employees to reach a preferred working solution also reinforces
our purpose of
Helping people live their best lives
.Strengthening inclusion and diversity
with Black Professionals Scotland
Inclusion and diversity is a strategic sustainability priority
that will guide Aegon’s sustainability agenda in the years
ahead. We aim to establish Aegon as a leading employer
that is home to a diverse and highly skilled workforce
through interesting and forward-looking work, future-
focused training opportunities, and strong inclusion and
diversity policies.
Our local partnerships directly support our inclusion and
diversity approach. In early 2021, Aegon Asset Management
(AAM) in the United Kingdom partnered with Black
Professionals Scotland (BPS) to further expand recruitment
and engagement to untapped talent. BPS exists to empower
Scotland-based black ethnic minority professionals, school
leavers, and recent university graduates. Members are given
skills and information to support them in their careers.
Alongside helping ethnic minority professionals with their
development, BPS supports organizations in realizing
their inclusion and diversity ambitions.
AAM now advertises all UK vacancies with BPS, and we have
onboarded our first BPS recruit into the Portfolio Risk team
in Edinburgh
.
In October 2021, AAM and BPS team members also took part in events together to celebrate Black History
Month in the United Kingdom. Our budding partnership with
BPS underlines AAM’s commitment to inclusion and valuing
diverse perspectives in the workplace, in line with our
ambition to harness the potential of different talents and
become more representative of the communities we serve.
Aegon Integrated Annual Report
2021
28
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Partners and suppliers
Our global network of partners and suppliers helps us operate
a successful business that creates value for all our stakeholders.
We design our procurement processes to deliver excellent value
for money for our business functions while also contributing to
a sustainable global supply chain.
We are steadily integrating best-practice ESG criteria and
requirements into our supplier selection, development, and
ordering processes. We aim to develop a procurement approach
that prioritizes vendors who go beyond the minimum standards
by respecting and sharing our values and upholding these
along the supply chain. We work closely with our suppliers and,
in doing so, encourage them to make positive changes to their
operations and products for the benefit of the environment
and wider society.
Vendor Code of Conduct
Minimum requirements for conducting business with Aegon
apply to all procurement activities conducted by wholly
or majority-owned companies in which Aegon has management
control. These requirements are set out in our global Vendor
Code of Conduct. In cases where we have an equity interest but
no management control, the partnering company is expected
to use its influence to apply the spirit of the code.
Our partners and suppliers are required to recognize and
build processes to comply with applicable laws and ethical
business practices in jurisdictions where they operate
or conduct business. This includes taking steps to communicate
the Vendor Code of Conduct within their own organizations,
and, in particular, to employees or sub-contractors working
directly with Aegon. More widely, we expect our suppliers
to align with Aegon’s ethics, values, and standards. This includes
adhering to Aegon’s Statement on Human Rights and avoiding
complicity in the abuse or violation of internationally proclaimed
human rights standards. Furthermore, we ask our suppliers
to acknowledge and minimize their environmental impact
wherever possible, and to provide fair compensation for any
ecological damage they cause.
The close attention we pay to diversity also extends
to the
diversityof our supplier portfolio.
In the
United Kingdom, for example, we are a member of Social Enterprise UK, a community interest
company encouraging businesses to spend a total
of GBP illion
1 b
with social enterprises. Aegon UK far exceeded its 2021 target
of GBP 100,000, eventually reaching GBP 150,000. Meanwhile,
Transamerica also took steps to improve supplier diversity in 2021
.
Most notably, its new Supplier Diversity Program is designed
to increase the number of diverse suppliers in our portfolio, and
in 2021 we added two new diverse suppliers
in the
contingentlab
or category.
Program launched in 2021 with participation accelerating
A2E Essentials program to build core transformation capabilities
1
Overall target: 30% of employees across the organization
40% of target achieved 60% of target to be achieved
Leading self
Prioritizing effectively
Personal resilience
Driving impact
Conducting pre-mortems
Creating business value
Influencing others
Structuring communications
Influencing change
2Q 2021 3Q 2021 4Q 2021 1Q 2022 2Q 2022
1
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
29
Our strategy and value creation
Risk management and due diligence
Aegon’s procurement function applies a company-wide
framework within which all elements of third-party risk are
identified and verified against our standards of reliability and
integrity. A risk-based approach is applied to managing our supply
base through a globally standardized segmentation methodology
that considers the inherent risk of each vendor relationship,
as well as the impact of that relationship on Aegon’s operations.
Through our risk management approach, we mitigate potential
risks resulting from our engagements with third parties to an
acceptable level. In 2021, we continued the roll-out of the SAP
Ariba vendor lifecycle management platform to improve our
vendor due diligence processes and prevent the duplication
of efforts to validate suppliers between different business units.
All suppliers seeking qualification for Aegon’s Supplier Register
must meet general requirements regarding their ethical and
professional suitability, as well as specific business, financial,
technical, and organizational criteria.
Third-party risk assessment programs
Aegon works with external experts to adopt market-wide
standards for risk assessment that strengthen and simplify
the evaluation processes and reduce the risk evaluation
requirements for Aegon and its vendors. 2021 was our second
year working with sustainability rating company EcoVadis
to evaluate the ESG risks involved in our partnerships with our
top 250 vendors by spend (representing 80% of Aegon’s total
procurement spend). We now have valid EcoVadis scorecards
for 81 of our top vendor accounts, covering 59% of the spend
of these relationships. We also expanded a program supported
by Aegon’s technology partner, Rapid Ratings, to standardize our
financial assessments of vendors around the world.
Investors
In 2021, Aegon made further progress on realizing its
strategic priorities and financial targets. This enabled us to
accelerate the increase in dividend payments, in keeping with
the ambitions we presented at our 2020 Capital Markets Day.
This puts us on a more linear path to achieving our aim of paying
around 25 eurocents dividend per common share over 2023
to equity investors.
In 2021, Aegon increased its interim dividend by 2 eurocents
to 8 eurocents per common share, and proposed to increase
the final dividend by 3 eurocents to 9 eurocents per common
share. As such, we deliver a total of EUR 348million in dividends
to shareholders over 2021.
At the end of 2021, Aegon had a gross financial leverage
position of EUR 5.9 billion. This delivered EUR 220million value
in the form of interest payments to bondholders.
Managing Aegon’s growing contingent
workforce
Like other major organizations around the world, Aegon
is optimizing the use of non-permanent external resources,
who include contractors, freelancers, and other contingent
workers. In 2021, our Transamerica business took steps
to expand and mature its Contingent Workforce Program,
a practice through which we oversee our relationships
with non-permanent external resources. In 2021, we also
significantly expanded our use of the SAP Fieldglass vendor
management system (VMS) in the United States and
the Netherlands, to connect us with top external talent and
source contingent workers more efficiently and effectively.
The VMS includes built-in financial and security controls
and is supported by a Contingent Labor Tenure Policy
that allows us to better manage this significant area
of expenditure. The VMS is integrated internally with our
key finance systems and processes, data and analytics,
risk, identity, and real estate systems. This provides clear
visibility of the costs associated with attracting and
employing external talent, while helping to maintain high
standards for workers performance throughout Aegon.
Aegon Integrated Annual Report
2021
30
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Value derived from share performance
Aegon’s share price rose by 36% over 2021. The wider European
insurance industry performed less well, with the STOXX Europe
600 Insurance Index ending the year up by 15%. We believe
the relative overperformance was supported by favorable market
movements, progress made on our operational improvement plan,
and management actions to improve our risk profile. Our total
shareholder return for the year amounted to a gain of 41%
(this measure considers payment of dividends as well as share
price performance).
Safeguarding long-term value
We are taking steps to further strengthen our balance sheet. This
allows for attractive and sustainable capital deployment decisions,
which generate value for our investors over the longer term. We are
committed
to reducing our gross financial leverage to between
EUR 5.0 b
illion
and EUR 5.5 billion
until 2023 to further strengthen our balance sheet. Capital deployment decisions are driven by Cash
Capital
at Holding, taking into account our deleveraging target and
the planned management actions to further improve the risk profile
of our company, and are supported by reliable and sustainable
remittances from our country units.
Cash Capital at Holding is used to achieve the financial leverage
target over time and to pay interest to bondholders. At Aegon,
we seek to distribute surplus cash flows (defined as the amount
of cash available from the remittances from country units
after subtracting the holding funding and operating expenses)
to shareholders over time, unless we invest it in value-creating
opportunities. We expect to pay dividends to shareholders in line
with growth in sustainable free cash flow, barring unforeseen
circumstances.
Society
As a provider of pensions and other retirement solutions,
Aegon has a responsibility to help people plan effectively for
old age and to enjoy longer, more active retirements. Financial
security and education, as well as wellbeing and longevity,
are at the heart of our business and go hand in hand with our
purpose of
Helping people live their best lives
. However, the value we create for society goes beyond individuals.
In 2021, the EUR 62 billion we paid in claims, benefits, and
retirement plan withdrawals to our customers helped support
national economies and relieve pressure on social support
systems. Furthermore, our research partnerships and programs
create awareness and insights into longevity and retirement
that benefit society. We also support our local communities
through donations and volunteering, and by paying fair taxes
in the different locations where we operate.
Adapting to the modern retirement landscape
Longer lifespans are putting traditional, state-managed
retirement systems under strain and shifting responsibility from
governments and employers to individuals. By pursuing research,
advocacy, and visibility around financial planning, retirement,
health, and insurance, we aim to increase recognition of this
critical social issue within global policymaking agendas.
Supporting COVID-19
relief efforts in India
In 2021, the Aegon community came together to support
relief efforts amid the unprecedented surge of COVID-19
cases across India and in recognition of the many Aegon
employees who live and work in the country.
Donations totaling EUR 300,000 were made to worthwhile
causes. The Aegon Transamerica Foundation contributed
to Direct Relief, an international humanitarian aid organization
that provides oxygen concentrators, medication, personal
protection equipment, and financial resources to frontline
healthcare providers in India.
A further contribution was made on behalf of Aegon
to the United Nations Children's Fund (UNICEF), which
is working tirelessly to tackle the impact of the pandemic
on India’s children and their families, and boost access
to critical oxygen therapy and accurate testing. With these
swift and coordinated actions, we helped deliver essential
relief and support that saved lives.
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
31
Our strategy and value creation
Aegon is dedicated to developing understanding around trends,
issues, and opportunities related to saving and planning
for retirement, and to the achievement of financial security
in later life. This includes participating in relevant international
projects, such as an Organisation for Economic Co-operation
and Development (OECD) working group on the future of work,
and the Living, Learning, and Earning Longer initiative led
by the World Economic Forum (WEF), to examine the benefits
of an age-inclusive workforce. Our research efforts are channeled
through dedicated institutes operating on the ground in our local
markets. These include the Transamerica Institute in the United
States and the Instituto de Longevidade MAG in Brazil.
Aegon also advocates for people to have access to insurance
and financial services as well as opportunities for flexible
employment in old age, and for governments to provide for their
citizens in an era of increasing longevity. Meanwhile, we maintain
a visible presence in the communities that benefit from our
services through initiatives such as a ‘Silver Starters’ learning
program for entrepreneurs aged 50 and over.
Investing in our communities
Our country units support local causes that align with our
purpose and ambitions, including by way of investments that seek
to serve and strengthen the communities in which we operate.
At the same time, through donations and volunteering, we aim
to drive engagement between employees and their local
communities and promote our purpose and ESG approach
to all stakeholders.
In 2021, Aegon supported approximately 469 charities and
good causes. Our donations amounted to EUR 9.4million,
a 1.3% increase compared with 2020. Much of this investment
was driven by our Charitable Donations Standards, which
require country units to allocate at least 50% of their annual
donations to causes that directly support financial security and
personal wellbeing.
As was the case in 2020, we prioritized helping our most
vulnerable communities navigate the COVID-19 pandemic and
its economic consequences, witha specific focus on people
who needed help handling their finances. Despite ongoing
constraints due to the pandemic, Aegon employees recorded
6,806 volunteer hours in 2021 (equivalent to EUR 0.3million,
based on volunteers’ average salaries). Many initiatives took place
online, and our ‘Volunteer Friday’ program in the Netherlands
was held virtually for the first time.
Responsible tax
We make a valuable economic and social contribution
to the communities in which we operate through our own tax
payments as well as the collection and payment of third-party
taxes. We seek to pay ‘fair taxes’, namely by paying the right
amounts of tax in the right places. Published online, our Global
Tax Policy outlines our approach to responsible tax, which seeks
to align the long-term interests of our customers, employees,
business partners, investors, and wider society. In 2021, we also
began publishing a Global Tax Report to provide a comprehensive
overview of our approach to tax and our tax contributions on a
country-by-country basis.
Aegon Integrated Annual Report
2021
32
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Performance in 2021
Financial markets saw equity markets generally finding
higher levels at the end of the year than before the
COVID-19 pandemic. Interest rates increased considerably in
the United States compared with the low levels seen during
2020, whereas credit spreads remained relatively stable
over the year.
These developments contributed positively to Aegon's financial
results. However, excess mortality mainly induced by the pandemic
continued to have a negative impact on our earnings in the
UnitedStates. Overall, we maintained strong capital ratios for
ourmain businesses above their respective operating levels.
Aegon made steady progress against the medium-term targets
announced in December 2020. Both free cash flows and expense
savings exceeded targets, and we made continued progress
against our medium-term deleveraging goal. We are also ahead
ofschedule with respect to our free cash flow target and above
target with regard to the planned expense savings that were
delivered during the year.
Financial performance
Aegon’
s operating result amounted
to EUR 1,906m
illion in 2021
,
an increase of 11% compared with 2020. All business units
showed improved performance, driven by positive contributions
from business growth, as well as expense savings and favorable
equity markets. These drivers were only partly offset by a more
adverse mortality result in the United States than in 2020,
due to the COVID-19 pandemic. Our net result amounted
to EUR 1,701million in 2021, versus EUR 55million in 2020.
This increase was supported by the higher operating result and
a gain on non-operating items, compared with a loss in non-
operating items in 2020. In addition, a reduction in non-recurring
Other charges contributed to the increase in the net result.
In 2021, we further strengthened our balance sheet,
reduced our risk exposure to financial markets, and improved
the company’s risk profile. Aegon redeemed USD 250million
in floating rate perpetual capital securities in September 2021,
lowering the company’s financial leverage to EUR 5.9 billion
at year end. In our US variable annuity business, we completed
a successful lump-sum buy-out program and expanded our
dynamic hedging program to release capital and increase
the predictability of capital generation. In addition, we executed
plans to reduce our economic interest rate exposure in the United
States and reduced the targeted interest rate risk exposure
by approximately 70%. We have also seen a steady flow
of regulatory approvals in our long-term care rate increase
program, and we have reinsured additional longevity risk
in the Netherlands as well as reducing the risk of volatility
in mortality claims in the United States.
The capital positions of each of Aegon's main business units
ended the year above the units’ respective operating levels, while
the Group Solvency II ratio increased by 15 percentage points
to 211%. Actively managing Aegon’s risks and capital position
has increased the predictability of remittances. Free cash flows
increased from EUR 530million in 2020 to EUR 729million
in 2021, partly supported by the distribution of excess capital
from several units. Based on the steady progress made against
Aegon’s strategic priorities and financial targets, a final dividend
for 2021 of 9 eurocents per common share will be proposed,
bringing the total dividend for the year to 17 eurocents per share.
In 2022, we aim to make further progress on delivering
on our strategic objectives and toward realizing our 2023
financial targets. The performance improvement plan will
be rigorously executed, and we remain on track to reach our
2023 target of EUR 400 million in expense savings, building
on the EUR 244 million achieved so far. The actions taken
to improve our performance will support the delivery of around
EUR 1.2 billion operating capital generation in 2022, barring
unforeseen circumstances. The current geopolitical situation
creates uncertainty and has implications for financial markets
and the global economy. However, we believe that we have
the right strategy to deal with these conditions and will continue
to actively manage our risks and capital position. Please refer
to the Capital and liquidity management section for sensitivities
of our capital position to certain parameters, including lower
equity markets, lower interest rates and US credit defaults. For
2022, we expect free cash flow of between EUR 550 million
and EUR 600 million. We also expect a more linear growth in our
dividend in 2022 compared with the muted near-term growth
outlook that was previously provided and continue to target
a dividend of around 25 eurocents per share over 2023.
Further information on our performance in 2021 can be found
in the Results of Operations section on page 96.
Financial targets 2021-2023
Reduce leverage
Implement expense
savings
Increase free
cash flows
Distribute capital
to shareholders
EUR 5.0-5.5 billion
Gross financial leverage target
EUR 400 million
Lower addressable expenses
vs. 2019
EUR 1.4-1.6 billion
Cumulative free cash flows over
2021-2023
Around EUR 0.25
dividend per share over
2023
Aegon Integrated Annual Report
2021
About Aegon
Governance and risk management Financial information Non-financial information
About Aegon
Governance and risk management Financial information Non-financial information
33
Our strategy and value creation
Performance in 2021
Non-financial performance
In December 2020, Aegon launched its new business strategy,
which touches on a broad range of non-financial elements
and includes a commitment to integrate a strengthened vision
on sustainability. In 2021, we made good progress against
our ambitions by establishing new sustainability governance,
preparing for migration of sustainability reporting to our finance
department, and selecting two priority themes, which are climate
change and inclusion and diversity.
Our new strategy has led to a review of our key non-financial
performance metrics, to ensure a more balanced approach
to our stakeholders and that our priority themes are addressed.
This has led to the retirement of three customer-related KPIs:
number of customers, percentage of customers with two or more
products, and proportion of digitally connected customers.
In their place, Aegon has introduced two new KPIs that align
directly with the priority themes. With regard to climate change,
we have introduced a weighted average carbon intensity metric
for our corporate fixed income and listed equity. For inclusion and
diversity, the percentage of women in senior management is now
included as a KPI.
With these changes, we have taken an important step toward our
sustainability ambitions, though we recognize that there is still
work to be done. As our strategy evolves and our approach
to sustainability matures, we will proactively review our non-
financial KPIs to ensure we continue to monitor and showcase
the most relevant metrics to our stakeholders. The rationale for
our four non-financial KPIs is detailed below.
1. Aegon wants to be there for its customers. This means
providing solutions that create long-term value and
developing products and services that fully meet their needs
and expectations at every stage of their lives. Customer
satisfaction in each of our core markets, which is measured by
benchmarked Net Promoter Score
(SM)
, should be in line with or
above the average of those of our industry peers.
•
Our US business, Transamerica, performed in line with
the market average while Aegon UK was above average.
Aegon the Netherlands performed slightly below the
market average, though its score has been steadily
improving over time.
2. For us to deliver on our promises to all our stakeholders,
it is important that our employees are fully engaged and
motivated to contribute to this task.
•
The employee engagement score in 2021 was 68,
adecrease of 4 points. This decline reflects the challenge
of maintaining engagement during a time when the
company is undergoing significant change, including
challenges due to the COVID-19 pandemic.
3. At Aegon, we value a diverse workforce, because we believe
including different perspectives is critical for richer debates
and innovation.
•
The proportion of female representation among our senior
management increased by 2%-points to 34% in 2021.
4. Aegon seeks to ensure the reduction of the weighted average
carbon intensity of the company’s investment portfolio is
aligned to its net-zero ambitions, for the benefit of wider
society.
•
In 2021, the weighted average carbon intensity of our own
investment portfolio stayed flat compared with 2019.
Weremain on track to meet our target for a 25% reduction
in the carbon intensity of our corporate fixed income and
listed equity investments by 2025.
To further embed the above non-financial KPIs in our operations,
the KPIs were reflected in the remuneration targets set at both
a company-wide and individual level in 2021. The remuneration
targets for our Executive Board members are required to be
comprised of at least 50% non-financial performance indicators,
of which ESG has been a mandatory performance indicator
category since 2020. In 2021, the performance indicators
for Aegon’s Executive Board members included the further
integration of ESG into the company strategy and the increased
presence of women in senior management.
Non-financial targets
Customers
• Customer satisfaction in each of our core
markets (measured by NPS) in line with or
above the average of those of our peers
Employees
• A 70% employee engagement score for
2022, measured through our Global
Employee Survey
• Minimum level of 36% of female
representation amongst our senior
management for 2022
Society
• At least 25% reduction in weighted
average carbon intensity of our corporate
fixed income and listed equity investments
by 2025
Aegon Integrated Annual Report
2021
34
Our strategy and value creation
About Aegon
Governance and risk management Financial information Non-financial information
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information35
Governance and
risk management
2021
36 Boards and Governance
36 Letter from our Supervisory Board Chairman
38 Corporate governance
42 Composition of the Boards
47 Report of the Supervisory Board
55 Remuneration Report
73 Risk and capital management
73 Risk management
78 Capital and liquidity management
84 Regulation and compliance
84 Regulation and supervision
88 Code of Conduct
89 In control statement
Governance and riskmanagement
TOC 2
TAB - Governance and risk
management
TOC-2
“We fully support Aegon’s
leaders as they execute
thesteps needed to adapt
toachanging operating
environment and deliver on
the company’s ambitions.”
William Connelly, Supervisory BoardChairman Aegon
Letter from our Supervisory
Board Chairman
2021 was an important year for Aegon as attention within the company turned to
theexecution of the new strategy and the accompanying plans and targets.
As outlined at the 2020 Capital Markets Day, Aegon’s ambition
is to build an enduring, high-performance company that
continues to add value to our stakeholders, including
by narrowing its strategic focus to markets and business
opportunities in our core perimeter.
The Supervisory Board continues to play an important advisory
role as part of Aegon’s transformation journey, and I believe
we have successfully performed this task over the past year.
The added value of the Board lies in the diverse skills and
talents of each of our different members. On this note, I very
much welcome the recent appointment of Jack McGarry
to the Supervisory Board, who brings awealth of experience
fromthe US insurance industry.
Throughout the year, the Supervisory Board remained in close
consultation with the Executive Board about the measures
taken to support Aegon’s long-term value creation strategy and
transformation. I see clear signs of progress. Multiple expense
savings initiatives have been implemented, putting the company
on track to realize significant cost reductions by 2023.
Adjustments to the company’s portfolio, such as divestments,
were also regularly discussed with Aegon’s leadership
in the context of the strategy implementation.
There is acultural side to our transformation journey, of course.
In 2021, our leaders and employees spent time examining our
culture, values, and behaviors to better understand “who” Aegon
is and the value we create as an organization. This exercise
will help us to meet the changing needs and expectations
of our customers and other stakeholders in the years ahead.
Again,the Supervisory Board is pleased to have been closely
involved in this process.
Confidence in our leadership
We fully support Aegon’s leaders as they execute the steps
needed to adapt to a changing operating environment and
deliver on the company’s ambitions. Indeed, we have full
confidence in those recently joining Aegon’s leadership team.
At Transamerica, Will Fuller has been appointed as President and
Chief Executive Officer (CEO) and Chris Ashe has been appointed
as Chief Financial Officer. The company has also appointed
Allegra van Hövell–Patrizi as CEO of Aegon the Netherlands, and
Elisabetta Caldera as its new Chief Human Resources Officer.
Furthermore, Aegon has recently appointed Astrid Jäkel as Chief
Risk Officer and Deborah Waters as Chief Technology Officer,
with both taking up their duties in early 2022.
A further development taking place at Aegon involves the current
efforts to increase the company’s focus on sustainability, which
are being led by the recently established Global Corporate
Aegon Integrated Annual Report
2021
36
Letter from our Supervisory Board Chairman
About Aegon Non-financial information
Governance and risk management
Financial informationBoards and Governance
Boards and Governance
Letter from our Supervisory Board Chairman
Letter from our Supervisory Board Chairman
Sustainability Team. The strengthened sustainability agenda
recognizes the far-reaching impact of Aegon’s operations and
investment activities, and the company’s desire to help shape
a thriving and sustainable future society.
Accordingly, the Supervisory Board has strengthened its oversight
of Aegon’s policies and performance regarding sustainability.
I am pleased that we are dedicating particular attention
to climate change, and inclusion and diversity, as these have been
highlighted as priority issues by our stakeholders.
Navigating new challenges
In 2021, the COVID-19 pandemic continued to have significant
repercussions for Aegon’s stakeholders around the world. As in
2020, the company was at hand to help Aegon’s customers
and partners navigate the pandemic, including by introducing
new, personalized customer propositions and donating time
and resources to local communities. Similarly, the Supervisory
Board is supportive of the escalation of efforts to help Aegon
colleagues manage the stresses of the pandemic, including
by offering people more flexibility in their working arrangements.
We also keep track of changes in the wider business environment
with the potential to impact Aegon going forward. The financial
services industry is steadily becoming more technology- and
data-driven. This, in turn, creates new complexities in areas
such as cybersecurity and data privacy, and we are pleased
to see Aegon addressing these developments head on through
dedicated IT teams and processes. A further topic demanding
close attention is the so-called “war for talent”, given the critical
shortage of digital talent and professionals in other highly
skilled fields.
Meanwhile, the regulatory landscape is also shifting, as providers
face stricter requirements regarding issues such as customer
due diligence. Among other ongoing developments in this space,
the Supervisory Board is closely monitoring Aegon’s efforts
to prepare for the forthcoming introduction of IFRS 17, anew
reporting standard regarding the accounting of insurance
liabilities, which takes effect from 2023.
In this fast-changing environment, the Supervisory Board
welcomes the development of Aegon’s newly defined
purpose, as well as the accompanying communications and
messaging. This is an important achievement that will help
to guide the company’s strategy in the years to come, as well
as Aegon’s vision to be aleader in investment, protection, and
retirement solutions.
We appreciated the opportunity to be regularly involved
in discussions that contributed to shaping the purpose. Our
conversations with the Management Board during the year also
touched on important HR topics, including the development
of Aegon’s new expected employee behaviors. Looking ahead,
the devastating aggression conducted by the Russian government
against Ukraine is a significant cause for concern, and we will
be paying close attention to developments in our talks with
the Executive Board.
The Supervisory Board is satisfied that it fulfilled its
responsibilities to Aegon and its stakeholders during 2021.
A detailed report on the Supervisory Board and its activities
during the year can be found on page 47 of this Integrated
Annual Report.
Thank you to our stakeholders
On behalf of those on the Board, I would once again like to thank
Aegon employees for their continued efforts as we work toward
our renewed purpose of
Helping people live their best lives
. I would also like to thank all those who invest in Aegon for their
continued trust and confidence.
The Hague, the Netherlands, March 16, 2022
William L. Connelly
Supervisory Board Chairman Aegon
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information37
Letter from our Supervisory Board Chairman
Corporate governance
Aegon is incorporated and based in the Netherlands. As acompany established and
listed in the Netherlands, Aegon must comply with Dutch law and is subject to the
DutchCorporate Governance Code.
Aegon is governed by three corporate bodies:
•
General Meeting of Shareholders
•
Supervisory Board
•
Executive Board
Aegon also has aManagement Board. This works in unison with
the Executive Board and helps to oversee operational issues
and the implementation of Aegon’s strategy. Aegon’s corporate
governance structure is the responsibility of both the Supervisory
Board and the Executive Board. Any substantive change to this
structure is submitted to the General Meeting of Shareholders
for discussion.
The shareholders
Listing and shareholder base
Aegon’s common shares are listed on Euronext Amsterdam
and the New York Stock Exchange. Aegon has institutional and
retail shareholders around the world. More than three-quarters
of shareholders are located in Aegon’s three main markets, the
Netherlands, United States, and the United Kingdom. Aegon’s
largest shareholder is Vereniging Aegon, aDutch association
with aspecial purpose to protect the broader interests of the
Company and its stakeholders.
General Meeting of Shareholders
A General Meeting of Shareholders is held at least once ayear
and, if deemed necessary, the Supervisory or Executive Board
of the Company may convene an Extraordinary General Meeting
of Shareholders. The main function of the General Meeting
of Shareholders is to decide on matters such as the adoption
of annual accounts, the approval of dividend payments and
(re)appointments to the Supervisory Board and Executive
Board of Aegon.
Convocation
General Meetings of Shareholders are convened by public notice
at least 42 days before the meeting. The convocation states
the time and location of the meeting, the record date, the agenda
items, and the procedures for admittance to the meeting and
representation at the meeting by means of awritten proxy.
Those shareholders who alone or jointly represent at least 1%
of Aegon’s issued capital or ablock of shares worth at least
EUR100million may request items be added to the agenda
of aGeneral Meeting of Shareholders. In accordance with
Aegon’s Articles of Association, such arequest will be granted
if it is received in writing at least 60 days before the meeting,
and if there are no important interests of the Company that
dictate otherwise.
Record date
The record date is used to determine shareholders’ entitlements
with regard to their participation and voting rights. In accordance
with Dutch law, the record date is 28 days before the day
of the General Meeting of Shareholders.
Attendance
Every shareholder is entitled to attend the General Meeting
to speak and vote, either in person or by proxy granted in writing.
This includes proxies submitted electronically. All shareholders
wishing to take part must provide proof of their identity and
shareholding and must notify the Company ahead of time of their
intention to attend the meeting. Aegon also solicits proxies from
New York registry shareholders in line with common practice
in the United States.
Voting at the General Meeting
At the General Meeting, each common share carries one vote.
In the absence of aSpecial Cause, Vereniging Aegon casts one
vote for every 40 common shares B it holds.
Supervisory Board
Aegon’s Supervisory Board oversees the management
of the Executive Board, in addition to the Company’s business and
corporate strategy. The Supervisory Board must take into account
the interests of all Aegon stakeholders. The Supervisory Board
operates according to the principles of collective responsibility
and accountability.
Composition of the Supervisory Board
Members of the Supervisory Board are appointed
by the General Meeting of Shareholders, following nomination
by the Supervisory Board itself. Aegon aims to ensure that
the composition of the Company’s Supervisory Board is in
line with Aegon’s diversity policy for the Supervisory Board,
Executive Board and Management Board and is as such well-
balanced in terms of professional background, geography,
gender and other relevant aspects of the diversity policy.
A profile, which is published on
aegon.com
, has been established that outlines the required qualifications of its members.
Supervisory Board members are appointed for afour-year term
and may then be reappointed for another four-year period.
Subsequently, aSupervisory Board member can be reappointed
again for aperiod of two years, and then extended by two
Aegon Integrated Annual Report
2021
38
Corporate governance
About Aegon Non-financial information
Governance and risk management
Financial informationCorporate governance
Corporate governance
years at the most. Supervisory Board members are no longer
eligible for (re)appointment after reaching the age of 70,
unless the Supervisory Board decides to make an exception.
Remuneration of the Supervisory Board members is determined
by the General Meeting of Shareholders. In 2021, no transactions
were concluded between the Company and any
of the
SupervisoryBoard members. Furthermore, the Company did not provide
loans or issue guarantees to any members of the Supervisory
Board. At present, Aegon’s Supervisory Board consists of eight
members, all of whom qualify as independent in accordance with
the Dutch Corporate Governance Code.
Committees
The Supervisory Board also oversees the activities of its
committees. These committees are composed exclusively
of Supervisory Board members and deal with specific issues
related to Aegon’s financial accounts, risk management,
executive remuneration and appointments. These committees
are the:
•
Audit Committee;
•
Risk Committee;
•
Remuneration Committee;and
•
Nomination and Governance Committee.
Executive Board
Aegon’s Executive Board is charged with the overall management
of the Company and is therefore responsible for developing and
executing Aegon’s strategy. Additionally, it is responsible for
managing the Company’s risk profile and overseeing any relevant
sustainability issues. Each member has duties related to his or her
specific area of expertise.
Aegon’s Articles of Association determine that for certain
decisions the Executive Board must seek prior approval from
the Supervisory Board and/or the approval of the General
Meeting of Shareholders. In addition, the Supervisory Board may
also subject other Executive Board decisions to its prior approval.
Composition of the Executive Board
Aegon’s Executive Board consists of Lard Friese, who is Chief
Executive Officer (CEO) and Chairman of the Executive Board, and
Matt Rider, who is Chief Financial Officer (CFO).
The number of Executive Board members and their terms
of employment are determined by the Company’s Supervisory
Board. Executive Board members are appointed by the General
Meeting of Shareholders for afour-year term, following
nomination by the Supervisory Board.
The members of the Executive Board have an engagement
agreement with the Company rather than an employment
contract. The Company’s Remuneration Policy for the Executive
Board limits exit arrangements to amaximum of one year
of the fixed component of the salary.
In 2021, no transactions were concluded between the Company
and either member of the Executive Board. Furthermore,
the Company did not provide any loans to, or issue guarantees
in favor of either of the members of the Executive Board.
Management Board
Aegon’s Executive Board is assisted in its work
by the Company’s Management Board, which had 10 members,
including the members of the Executive Board per December 31,
2021. Aegon’s Management Board is composed of Lard Friese,
Matt Rider, Elisabetta Caldera, Will Fuller, Mike Holliday-Williams,
Allegra van Hövell-Patrizi, Marco Keim, Onno van Klinken, Bas
NieuweWeme and Duncan Russell. At the time of publishing
this 2021 Integrated Annual Report, the Management Board
consisted of 12 members, including Astrid Jäkel as Chief Risk
Officer and Deborah Waters as Chief Technology Officer.
Aegon’s Management Board works in unison with
the Executive Board and helps oversee operational issues and
the implementation of Aegon’s strategy. Members are drawn
from Aegon’s business units and from Aegon’s global functions.
The members have both regional and global responsibilities. This
ensures that Aegon is managed as an integrated international
business. While the Executive Board is Aegon’s sole statutory
executive body, the Management Board provides vital support
and expertise in pursuit of the Company’s strategic objectives.
In the relationship between the Supervisory Board and
the Management Board, the CEO shall be the first point
of contact for the Supervisory Board and its Chairman.
Further, the members of the Boards will act in accordance with
the provisions provided therefore in the Management Board
Charter, the Executive Board Charter, and the Supervisory
Board Charter.
Capital, significant shareholders and exercise
ofcontrol
As apublicly listed company, Aegon is required to provide
the following detailed information regarding any structures
or measures that may hinder or prevent athird party from
acquiring the Company or exercising effective control over it.
The capital of the Company
Aegon has an authorized capital of EUR1,080million, divided
into 6billion common shares and 3billion common shares
B, each with anominal value of EUR0.12. As of December
31, 2021, atotal of 2,106,313,195 common shares and
568,839,440 common shares B had been issued.
Depository receipts for Aegon shares are not issued with
the Company’s cooperation.
As per the Dutch act on conversion of bearer shares, all 16,040
bearer shares outstanding at December 2020 have been
converted into registered shares held by the Company as per
January 1, 2021. Until January 1, 2026, and upon request
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information39
Corporate governance
of aholder of acertificate of abearer share, the Company will
provide the holder of such avalid certificate of abearer share
with aregistered share as areplacement of the bearer share.
Each common share carries one vote. There are no restrictions
on the exercise of voting rights by holders of common shares.
All issued and outstanding shares B are held by Vereniging
Aegon, the Company’s largest shareholder. The nominal
value of the common shares B is equal to the nominal value
of acommon share. This means that common shares B also
carry one vote per share. However, the voting rights attached
to common shares B are subject to restrictions as laid down
in the Voting Rights Agreement, under which Vereniging Aegon
may cast one vote for every 40 common shares B it holds
in the absence of aSpecial Cause.
The financial rights attached to acommon share B are one-
fortieth (1/40
th
) of the financial rights attached to acommon
share. The rights attached to the shares of both classes are
otherwise identical. For the purpose of the issuance of shares,
reduction of issued capital, the sale and transfer of common
shares B or otherwise, the value or the price of acommon
share B is determined as one-fortieth (1/40
th
) of the value
of acommon share. For such purposes, no account is taken
of the difference between common shares and common shares
B in terms of the proportion between financial rights and
voting rights.
Significant shareholdings
On December 31, 2021, Vereniging Aegon, Aegon’s largest
shareholder, held atotal of 301,774,161 common shares and
538,250,640 common shares B.
Under the terms of the 1983 Merger Agreement, as amended
in May 2013, Vereniging Aegon has the option to acquire
additional common shares B. Vereniging Aegon may exercise
its call option to keep or restore its total stake to 32.6%
of the voting rights, irrespective of the circumstances that caused
the total shareholding to be or become lower than 32.6%.
During 2021, two transactions were concluded between
AegonN.V. and Vereniging Aegon. Execution of these
transactions was done in compliance with all requirements
of Best Practice 2.7.5 of the Dutch Corporate Governance Code.
On December 15, 2021, AegonN.V. repurchased 22,643,360
common shares B from Vereniging Aegon for the amount
of EUR2,285,621 based on 1/40
th
of the Value Weight
Average Price of the common shares of the five trading days
preceding this transaction. The repurchase of common shares
B was executed to align the aggregate holding of voting shares
by Vereniging Aegon in AegonN.V. with its special cause voting
rights of 32.6%.
On June 3, 2021, Vereniging Aegon exercised its option rights
to purchase in aggregate 1,983,360 common shares B at
fair value (1/40
th
of the market value of acommon share
in the capital of the Company at the time of issuance) to mitigate
dilution caused by Aegon’s issuance of shares on June 3,
2021 in connection with the Long Term Incentive Plans for
senior management.
Special control rights
As amatter of Dutch corporate law, the common shares and
the common shares B offer equal full voting rights, as they have
equal nominal value (EUR0.12). The Voting Rights Agreement
entered into between Vereniging Aegon and Aegon provides that
under normal circumstances, i.e. except in the event of aSpecial
Cause, Vereniging Aegon is not allowed to exercise more votes
than is proportionate to the financial rights represented by its
shares. This means that in the absence of aSpecial Cause,
Vereniging Aegon may cast one vote for every common share
it holds and one vote only for every 40 common shares B it
holds. In the event of aSpecial Cause, Vereniging Aegon may
cast one vote for every common share and one vote for every
common share B.
A Special Cause may include:
•
The acquisition by athird party of an interest in AegonN.V.
amounting to 15% or more;
•
A tender offer for AegonN.V. shares; or
•
A proposed business combination by any person or group
of persons, whether acting individually or as agroup, other
than in atransaction approved by the Company’s Executive
and Supervisory Boards.
If Vereniging Aegon, acting at its sole discretion, determines that
aSpecial
Cause has arisen, it must notify the General Meeting
of Shareholders
.
In this event, Vereniging Aegon retains full voting rights
on its common shares B for
aperiod limited to six months.
Vereniging Aegon would, for that limited period, command 32.6%
of the
votes at aGeneral Meeting of S
hareholders.
Based on the Voting Rights Agreement, Vereniging Aegon has
aright to, at its own discretion, take the decision to exercise its
full voting rights on common shares B. Vereniging Aegon may
exercise this right unilaterally and independent of AegonN.V.,
and therefore also irrespective of any decisions of the Executive
Board of AegonN.V., including any decision whether or not
to invoke a180 or 250 day response time under the Dutch
Corporate Governance Code or Civil Code.
Issue and repurchase of shares
New shares may be issued up to the maximum
of the Company’s authorized capital, following aresolution
adopted by the General Meeting of Shareholders. Shares may
also be issued following aresolution of the Executive Board,
subject to approval by the Supervisory Board, providing, and
to the extent that, the Board has been authorized to do so by
the General Meeting of Shareholders. A resolution authorizing
Aegon Integrated Annual Report
2021
40
Corporate governance
About Aegon Non-financial information
Governance and risk management
Financial informationthe Executive Board to issue new shares is usually presented
at Aegon’s Annual General Meeting of Shareholders.
Aegon is entitled to acquire its own fully paid-up shares,
providing it acts within existing statutory restrictions.
Shareholders usually authorize the Executive Board to purchase
the Company’s shares under terms and conditions determined
by the General Meeting.
Transfer of shares
There are no restrictions on the transfer of common shares.
Common shares B can only be transferred with the prior approval
of Aegon’s Supervisory Board.
Aegon has no knowledge of any agreement between
shareholders that might restrict the transfer of shares
or the voting rights pertaining to them.
Significant agreements and potential change of control
Aegon
is not party to any significant agreements that would
take effect, alter or terminate as a
result
of achange
of control
following apublic
offer for the outstanding shares
of the Company
,
other than those customary in financial markets (for example,
financial arrangements, loans and joint venture a
greements).
Share plan
Senior executives at Aegon companies and some other
employees are entitled to variable compensation of which part
isgranted in the form of shares. For further details, please see
the Remuneration Report on page 55 and note 50 of the notes to
Aegon´s consolidated financial statements of this Annual Report.
Under the terms of existing share plans the vesting of granted
rights is predefined. The shares shall vest as soon as possible in
accordance with payroll requirements of the relevant subsidiary
after the adoption of the Company’s Annual Report at the
AnnualGeneral Meetings of Shareholders in the year of vesting
of these shares.
Appointing, suspending or dismissing Board members
The General Meeting of Shareholders appoints members of both
the Supervisory and Executive Boards, following nominations
by the Supervisory Board. These nominations are binding
providing at least two candidates are nominated. The General
Meeting of Shareholders may cancel the binding nature
of these nominations with amajority of two-thirds of votes
cast, representing at least one half of Aegon’s issued capital.
The General Meeting may, in addition, bring forward aresolution
to appoint someone not nominated by the Supervisory Board.
In order for the resolution to be adopted, the resolution requires
atwo-thirds majority of votes cast, representing at least one half
of Aegon’s issued capital.
Members of Aegon’s Supervisory and Executive Boards
may be suspended or dismissed by the General Meeting
of Shareholders with atwo-thirds majority of votes cast,
representing at least one half of Aegon’s issued capital,
unless the suspension or dismissal has first been proposed
by the Company’s Supervisory Board in which case
the suspension or dismissal can be resolved by the General
Meeting of Shareholders with an absolute majority of votes and
alimited quorum. A member of the Executive Board may also
be suspended by the Supervisory Board, although the General
Meeting of Shareholders has the power to annul this suspension.
Amending the Articles of Association
The General Meeting of Shareholders may, with
an absolute majority of votes cast, pass aresolution to amend
Aegon’s Articles of Association or to dissolve the Company,
in accordance with aproposal made by the Executive Board and
approved by the Supervisory Board.
Dutch Corporate Governance Code
As acompany based in the Netherlands, Aegon adheres
to the Dutch Corporate Governance Code. The version of the code
applicable to the financial year 2021 is the version that came
into force on January 1, 2017. Aegon endorses the Code and
strongly supports its principles for sound and responsible
corporate governance and long-term value creation. Aegon
regards the Code as an effective means to help ensure that
the interests of all stakeholders are duly represented and taken
into account. It is the responsibility of both the Supervisory Board
and the Executive Board to oversee Aegon’s overall corporate
governance structure.
In general, Aegon applies the best practice provisions set out
in the Code. There is one best practice provision with which
Aegon does not fully apply. In this case, Aegon adheres, as much
as is possible, to the spirit of the Code.
Best Practice 4.3.3
The Dutch Corporate Governance Code recommends that
the General Meeting of Shareholders may cancel the binding
nature of nominations for appointments of members
of the Executive Board and Supervisory Board with an absolute
majority of votes and alimited quorum.
Aegon’s position on Best Practice 4.3.3
Aegon’s Articles of Association provide for alarger majority and
ahigher quorum than those advocated by the Code. Given that
the Company has no specific anti-takeover measures, the current
system is deemed appropriate within the context of the 1983
Merger Agreement under which Aegon was formed. However,
to mitigate any possible negative effects stemming from this,
the Supervisory Board has decided that, in the absence of any
hostile action, it will only make nominations for the appointment
of members to the Executive and Supervisory Boards that are
non-binding in nature.
Corporate Governance Statement
For an extensive review of Aegon’s compliance with the Dutch
Corporate Governance Code, please refer to the Corporate
Governance Statement on Aegon’s corporate website.
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information41
Corporate governance
Composition of the Boards
Members of the Executive Board
Lard Friese (1962, Dutch)
CEO and Chairman of the Executive and Management Boards of AegonN.V.
Lard Friese earned aMaster of Law degree at the University
of Utrecht. He has worked most of his professional career
in the insurance industry, including ten years at Aegon between
1993 and 2003. He was employed by ING as from 2008, where
he held various positions. In July 2014, upon the settlement
of the
Initial Public Offering of NN Group N.V., he became the CEO
of NN Group. During his tenure at NN Group, he led awide range
of businesses in Europe and Asia and created astable platform
for growth and shareholder value.
He has extensive experience in the areas of insurance, investment
management, customer centricity, mergers & acquisitions, and
business transformation. Mr.Friese was appointed CEO Designate
as of March 1, 2020. During the 2020 Annual General Meeting
(AGM), he was appointed as member of the Executive Board
for aterm of four years until the end of the AGM to be held
in 2024. Mr.Friese is Chairman of Aegon’s Executive Board and
Management Board.
Matthew J. Rider (1963, American)
CFO and member of the Executive and Management Boards of AegonN.V.
Matt Rider began his career at Banner Life Insurance Company
and held various management positions at Transamerica,
Merrill Lynch Insurance Group and ING before joining Aegon.
From 2010 to 2013, he was Chief Administration Officer
and amember of the Management Board at ING Insurance,
based in the Netherlands. In this role he was responsible for
all of ING’s insurance and asset management operations,
and specifically for Finance and Risk Management. Mr.Rider
joined Aegon on January 1, 2017, and was appointed as CFO
and member of the Executive Board of Aegon at the Annual
General Meeting of Shareholders of AegonN.V. of May 19,
2017. During the 2021 Annual General Meeting (AGM), Mr.Rider
was reappointed for another term of four years until the end
of the AGM to be held in 2025.
Members of the Management Board
Lard Friese: see above
Matthew J. Rider: see above
Deborah Waters (1968, American)
Chief Technology Officer and member of the Management Board
of Aegon N.V.
Debbie Waters was appointed as Global Chief Technology Officer
and member of the Management Board of Aegon N.V., effective
February 7, 2022. She began her career at aerospace group
Lockheed Martin in 1989 before moving to software consultancy
group Seer Technologies. In 1995, she joined Citigroup Inc.,
where she held various technology leadership positions
in the intervening years. Most recently she served for over five
years as Citi’s Global Head of Private Bank Operations and
Technology. Additionally, Ms. Waters was the Head of Inclusion
and Diversity for Citi’s Institutional Client Group Operations
and Technology.
Former Chief Technology Officer Mark Bloom stepped down
as per June 1, 2021.
Allegra van Hövell-Patrizi (1974, Italian and Belgian)
CEO of Aegon the Netherlands and member of the Management
Board of AegonN.V.
Allegra van Hövell-Patrizi began her career in 1996
at McKinsey
&
Company, specializing in financial institutions. After several years
as apartner there, she joined F&C Asset Management in 2007
as a
member of the
Management Committee. In 2009, she joined
Prudential plc where shewas part
of the
CEO Office and then later became Group Risk Director, and
amember
of the
Group Executive Risk Committee, as well
as the
PUSL Board (within the Prudential
plc Group). Ms.van Hövell-Patrizi joined Aegon
at the
end
of 2015. She was appointed Chief Risk Officer of Aegon
N.V.
and amember
of Aegon
’
s Management Board in January 2016.
Ms.van Hövell-Patrizi was appointed CEO of Aegon
the Netherlands
on June 15, 2021, and following the resignation of Maarten
Edixhoven
as per May 11, 2021. Ms.van Hövell-Patrizi is a
member
of the
Supervisory Board of LeasePlan (not listed) since 2018.
Aegon Integrated Annual Report
2021
42
Composition of the Boards
About Aegon Non-financial information
Governance and risk management
Financial informationComposition of the Boards
Composition of the Boards
Mike Holliday-Williams (1970, British)
CEO of Aegon UK and member of the Management Board of
AegonN.V.
Mike Holliday-Williams started his career with WHSmith in 1991
as agraduate trainee, working as aRetail Manager in many
UK stores and in Business Development. In 1997, he joined
Centrica where he had several general management and
marketing roles in British Gas, before becoming the Residential &
Marketing Director of Centrica Telecoms/One.Tel in 2004.
In 2006, Mr.Holliday-Williams joined RSA, becoming
the UK Managing Director of Personal Lines in 2008, responsible
for MORETH>N, Partnerships and the Broker businesses.
In 2011, he moved to Copenhagen to become the CEO
of RSAGroup’s Scandinavian businesses, Codan A/S and
Trygg-Hansa, he also became amember of the RSAGroup
Executive. In 2014, he moved to Direct Line Group (DLG)
to became MD of the Personal Lines business, joining the Board
of DLG in February 2017.
Mr.Holliday-Williams joined Aegon UK in October 2019, to take
over as CEO. He is amember of Aegon’s Management Board
since March 2020.
Astrid Jäkel (1977, German)
Chief Risk Officer of Aegon N.V. and member of the Management
Board of Aegon N.V.
Astrid Jäkel joined Aegon as Chief Risk Officer (CRO) and member
of the Management Board of Aegon N.V. on March 1, 2022.
Astrid Jäkel has almost 20 years of experience in the European
and global insurance sectors. She joined Aegon from
the international management consultancy firm Oliver Wyman
where she was a partner in the European Insurance and Asset
Management Practice, co-leader of the European Insurance
Financial Effectiveness team as well as a member of the Board
of Oliver Wyman’s Swiss subsidiary. Her consulting work focused
on high-impact risk, capital, asset liability and investment
management topics. Ms. Jäkel worked with leading European
and global insurers on a broad range of projects to help
transform and optimize their risk and balance sheet management
capabilities for market, credit, insurance, and non-financial risks.
Her responsibilities include managing Aegon’s Group Risk and
Actuarial functions, along with maintaining the Group’s Risk
Management framework and overseeing the risk management
capabilities.
Former Chief Risk Officer Allegra van Hövell-Patrizi was
appointed CEO of Aegon the Netherlands on June 15, 2021.
Marco Keim (1962, Dutch)
CEO Aegon International and member of the Management Board
of AegonN.V.
Marco Keim began his career with accountancy firm Coopers &
Lybrand/Van Dien, before moving to the aircraft manufacturer
Fokker Aircraft and NS Reizigers, part of the Dutch
railway company, NS Group. In 1999, he joined Swiss Life
in the Netherlands as aMember of the Board, and was appointed
CEO three years later. Mr.Keim was appointed CEO of Aegon
the Netherlands and member of Aegon´s Management
Board in June 2008. From 2017 to 2020, Mr.Keim headed
Aegon’s operations on mainland Europe. Since January 2020,
Mr.Keim is responsible for Aegon’s business in Central and
Eastern Europe, Spain and Portugal, Asia, and, since January
2022, Brazil. Mr.Keim is aformer member of the Supervisory
Board of Eneco Holding N.V.
Onno van Klinken (1969, Dutch)
General Counsel and member of the Management Board
ofAegonN.V.
Onno van Klinken has over 25 years’ experience providing legal
advice to arange of companies and leading Executive Board
offices. Mr.Van Klinken started his career at Allen & Overy, and
previously worked for Aegon between 2002 and 2006. He then
served as Corporate Secretary for Royal Numico, before it was
acquired by Groupe Danone. His next position was as General
Counsel for the Dutch global mail and express group TNT, where
he served from 2008 until the legal demerger of the group
in 2011. This was followed by General Counsel positions
at D.E. Master Blenders 1753 and Corio N.V. Mr.VanKlinken
rejoined Aegon in 2014 as General Counsel responsible for
Group Legal, Regulatory Compliance, the Executive Board
Office, and Government and Policy Affairs. Mr.Van Klinken has
been amember of Aegon’s Management Board since August
2016. Mr.Van Klinken was appointed member of the Board
of StichtingContinuïteit SBM Offshore in December 2016.
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information43
Composition of the Boards
Elisabetta Caldera (1970, Italian)
Chief Human Resources Officer and member of the Management
Board of AegonN.V.
Elisabetta Caldera started her career in HR in 1994 at Foster
Wheeler and soon moved to ABB Alstom.
In 2004, she joined Vodafone Italy where she was appointed
Human Resources and Organization Director and member
of the Management Board Vodafone Italy. Ms.Caldera moved
to Vodafone Group in the UK as Human Resources Director
for the Global Technology function and finally was appointed
as HRDirector for Europe Cluster & Egypt since 2018.
Ms.Caldera joined Aegon as of June 1, 2021 as Chief HR Officer
and member of Aegon’s Management Board, succeeding
Ms.CarlaMahieu who stepped down as per June 1, 2021.
Ms.Caldera is amember of the Supervisory Board of Falck
Renewable since 2014.
Will Fuller (1970, American)
CEO of Aegon Americas and member of the Management Board
of AegonN.V.
Will Fuller has almost 30 years of experience in financial
services, including life insurance, annuities, retirement plans and
wealth management. Prior to joining Aegon, Mr.Fuller served
as Executive Vice President of Lincoln Financial Group. His
responsibilities included leading growth strategies, product and
distribution innovation, and governance. His previous experience
also includes Merrill Lynch, where he was responsible for product
and distribution for Wealth Management in the Americas.
Mr.Fuller was appointed as amember of Aegon’s Management
Board in March 2021. He has been actively engaged
in the financial services industry, most recently in forming
the Alliance for Lifetime Income. He formerly served
as board member of LL Global, Inc. (LIMRA/LOMA), Forum for
Investor Advice, Money Management Institute, and Insured
Retirement Institute.
Mr.Fuller succeeded Mr.Mark Mullin who stepped down
as perMarch 31, 2021.
Bas NieuweWeme (1972, Dutch)
Global CEO of Aegon Asset Management and member of the
Management Board of AegonN.V.
Bas NieuweWeme was appointed Global CEO of Aegon Asset
Management and Member of the AegonN.V. Management
Board in June 2019. Having obtained aMaster of Laws (2000)
and an Executive MBA in 2007, Mr.NieuweWeme has worked
in global investment management for 20 years.
The majority of this time was spent in various management
positions within ING Investment Management Americas
and VoyaInvestment Management. In 2016, he was named
Global Head of the Client Advisory Group and amember
of the management team at PGIM Fixed Income and Global
Head of the Institutional Relationship Group at PGIM, Prudential
Financial’s global investment management business. He serves
as vice-chairman of the supervisory board of La Banque Postal
Asset Management and is amember of the Board of Aegon
Industrial Fund Management Co., Ltd (China).
He is also amember of the Board of Directors
of The Netherlands-America Foundation (NAF) and amember
of the Leadership Council of AmeriCares, anon-profit disaster
relief and global health organization.
Duncan Russell (1978, British)
Chief Transformation Officer and member of the Management
Board of AegonN.V.
Duncan Russell has worked most of his professional career
in the financial services sector, lastly as CFO and Board member
at Admiral Financial Services, the financial services subsidiary
of Admiral Group, responsible for finance, analytics, funding,
credit risk and pricing.
Before joining Admiral Group, Mr.Russell was Head
of Group Strategy and Corporate Finance at NN Group N.V.,
the Netherlands, where he was responsible for capital
management, treasury, M&A, and the group’s strategy.
Before joining NN Group N.V., Mr.Russell held various positions
at financial services groups in London.
Mr.Russell was appointed Chief Transformation Officer
and member of the Management Board of AegonN.V.
on September 1, 2020.
Aegon Integrated Annual Report
2021
44
Composition of the Boards
About Aegon Non-financial information
Governance and risk management
Financial informationMembers of the Supervisory Board
William L. Connelly (1958, French)
Chairman of the Supervisory Board
Chairman of the Nomination and Governance Committee
Member of the Remuneration Committee
Mr.Connelly started his career at Chase Manhattan Bank,
fulfilling senior roles in commercial and investment banking
in France, the Netherlands, Spain, the United Kingdom, and
the United States. He was appointed to Aegon’s Supervisory
Board in 2017 and became Chairman in May 2018 and his current
term ends in 2025.
He is also chairman of the Supervisory Board Nomination and
Governance Committee and member of the Supervisory Board
Remuneration Committee. Mr.Connelly is also an independent
director at the Board of Directors of Société Générale,
an independent director at the Board of Directors of Singular
Bank S.A. (formerly known as Self Trade Bank S.A., non-listed)
and Chairman of the Board of Directors of Amadeus IT Group S.A.
Mark A. Ellman (1957, American)
Member of the Nomination and Governance Committee
Member of the Risk Committee
Mark A. Ellman is aformer Vice Chairman Global Origination
of Bank of America/Merrill Lynch. Before joining Bank of America
/
Merrill Lynch, he held various roles in the US insurance industry.
These mostly entailed working in corporate finance at large
US financial institutions, where he was engaged in M&A advice
and transactions, together with equity and debt raisings for
insurance companies. He was aManaging Director and Co-Head
of the Global Financial Institutions Group of Credit Suisse First
Boston, and afounding partner of Barrett Ellman Stoddard
Capital Partners.
Mr.Ellman was appointed to Aegon’s Supervisory Board
in 2017, and his current term ends in 2025. He is amember
of the Supervisory Board Risk Committee and the Supervisory
Board Nomination and Governance Committee. Mr.Ellman was
anon-executive director of Aegon USA from 2012 to 2017.
Jack McGarry (1958, American)
Member of the Audit Committee
Member of the Remuneration Committee
Jack McGarry is aformer actuary who spent the majority of his
career at Unum Group, an NYSE-listed provider of workplace
financial protection benefits. He has held various leadership
roles in risk management, in finance, as CEO of Unum’s business
in the United Kingdom, and CEO of Unum’s Closed Block.
His last position at Unum was as Chief Financial Officer.
As CFO, he successfully led the transformation of the finance
organization by outsourcing transactional processes, driving
automation across the organization, implementing accounting
and financial planning & analysis platforms and modelling,
and navigating the company through the implementation
of tax reform. This experience underscores his in-depth
knowledge of the insurance industry and his integral perspective
on managing an insurance company. During the 2021 AGM,
Mr.McGarry was appointed to Aegon’s Supervisory Board, and his
current term ends in 2025. Mr.McGarry is member of the Audit
Committee and member of the Remuneration Committee.
Ben J. Noteboom (1958, Dutch)
Chairman of the Remuneration Committee
Member of the Risk Committee
Ben J. Noteboom worked for Randstad Holding N.V. from 1993
until 2014, where he was appointed member of the Executive
Committee in 2001 and became CEO in 2003. Before joining
Randstad, Mr.Noteboom worked for Dow Chemical in several
international management functions between 1984 and 1993.
He started his career in 1982 at Zurel as management
assistant. He was appointed to Aegon´s Supervisory Board
in May 2015, and his current term ends in 2023. He is Chairman
of the Supervisory Board Remuneration Committee and
amember of the Supervisory Board Risk Committee.
Mr.Noteboom is Chairman of the Supervisory Board of Royal
Vopak N.V. In addition, Mr.Noteboom is amember of the Board
of Directors of VUmc Cancer Center Amsterdam and the Chairman
of Stichting Prioriteit Ordina Groep. Mr.Noteboom is aformer
member of the Supervisory Boards of Wolters Kluwer N.V. and
Royal Ahold Delhaize N.V.
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information45
Composition of the Boards
Caroline Ramsay (1962, British)
Chair of the Audit Committee
Member of the Risk Committee
Mrs. Ramsay gained aMaster’s degree in Natural Sciences
in 1984 at Cambridge. She started her professional career
at KPMG in Ipswich and London, where she qualified
as aChartered Accountant in 1987. During her long career,
Mrs. Ramsay gained substantial experience in Finance and
Audit at large insurance companies. In addition to her strong
financial background, Mrs. Ramsay acquired extensive managerial
expertise in executive roles at Norwich Union plc (now Aviva
plc) and RSA.
Mrs. Ramsay holds various Non-Executive Board positions.
In 2013, she joined the board of Scottish Equitable – and as of
2017 also the boards of Aegon UK plc and Cofunds Ltd. – where
she served as the Audit Committee Chair until May 14, 2020.
Mrs. Ramsay was appointed to Aegon’s Supervisory Board
in May 2020 and her current term ends in 2024. She is Chair
of the Supervisory Board Audit Committee and amember
of the Supervisory Board Risk Committee.
Mrs. Ramsay is senior independent director of the Board of Brit
Syndicates Ltd (non-listed), amember of the Board of Directors
of Aberdeen UK Smaller Companies Growth Trust Plc, and
amember of the Board of Directors of Tesco Underwriting Ltd.
(non-listed). Mrs. Ramsay is amember of the FCA Regulatory
Decisions Committee and Member of the Payment Systems
Regulator’s Enforcement Decisions Committee.
Thomas Wellauer (1955, Swiss)
Member of the Audit Committee
Member of the Remuneration Committee
Thomas Wellauer started his professional career at McKinsey &
Company, where he served as Senior Partner and Practice Leader.
He held various executive management positions at multi-
industries, including financial services, pharmaceuticals and
chemicals. Among others, he served on the executive committees
of Winterthur Insurance, Credit Suisse, Swiss Re, and Novartis.
His most recent position from 2010 to 2019 was Group Chief
Operating Officer of Swiss Re. During his career, Mr.Wellauer also
served as independent director on the boards of several global
companies such as Munich Re and Syngenta.
Mr.Wellauer was appointed to Aegon’s Supervisory Board
in May 2020 and his current term ends in 2024. He is amember
of the Supervisory Board Audit Committee and amember
of the Supervisory Board Remuneration Committee.
Mr.Wellauer is Chairman of the Board of Directors of SIX Group
(non-listed). In addition, he serves as Chairman of the Board
of Trustees of the University Hospital Zurich Foundation
and Chairman of the International Chamber of Commerce
in Switzerland.
Corien M.Wortmann-Kool (1959, Dutch)
Vice Chair of the Supervisory Board
Member of the Audit Committee
Member of the Nomination and Governance Committee
Corien M.Wortmann-Kool is Chair of the Board of Stichting
Pensioenfonds ABP, the Dutch public sector collective pension
fund. Ms.Wortmann-Kool is aformer Member of the European
Parliament and Vice President on Financial, Economic
and Environmental affairs for the EPP Group (European
People’s Party). She was appointed to Aegon’s Supervisory Board
in May 2014, and her current term ends in 2022.
She is Vice Chair of the Supervisory Board, and amember
of the Supervisory Board Audit Committee and the Supervisory
Board Nomination and Governance Committee.
Ms.Wortmann-Kool is amember of the Supervisory Board
of Royal DSM N.V., and member of De Autoriteit Financiële
Markten Capital Markets Advisory Committee. She was vice
president of the European People’s Party until March 2018,
member of the Advisory Council of the Centraal Bureau voor
de Statistiek until June 2018, amember of the Supervisory
Board of Het Kadaster until March 2021. Furthermore, she
was the Chair of the Board of Trustees of Save the Children
Netherlands until January 2022.
Dona D. Young (1954, American)
Chair of the Risk Committee
Member of the Nomination and Governance Committee
Dona D. Young is an executive/board consultant and retired
Chairman, President and Chief Executive Officer of The Phoenix
Companies, which was an insurance and asset management
company at the time of her tenure. She was appointed
to Aegon’s Supervisory Board in 2013, and her current term will
end in 2023.
She is Chair of the Supervisory Board Risk Committee,
and member of the Supervisory Board Nomination and
Governance Committee.
Ms.Young is member and Lead Director of the Board of Directors
of Foot Locker, Inc, serves as amember of the Board of Directors
of Spahn and Rose (non-listed), and as amember of the Board
of Directors of USAA (non-listed). Furthermore, Ms.Young is
amember of the Audit Committee of the Board of Trustees of
Save the Children US (non-listed), member of the Board of Save
the Children International and Save the Children Association
(non-listed) and amember of the Board of the National
Association of Corporate Directors.
Aegon Integrated Annual Report
2021
46
Composition of the Boards
About Aegon Non-financial information
Governance and risk management
Financial information
Report of the Supervisory Board
The Supervisory Board is entrusted with supervising and advising the Executive Board
regarding management of the Company and overseeing Aegon’s strategy and the
general course of its businesses.
Oversight and advice
The Supervisory Board is aseparate independent corporate
body, charged with the supervision of the Executive Board,
of the general course of affairs and strategy of the Company,
and of its businesses. In performing their duties, members
of the Supervisory Board are guided by the interests of Aegon
and the Company’s stakeholders.
The duties of the Supervisory Board with regard to the
activities of members of the Executive Board are published
in the Supervisory Board Charter, which is available on
Aegon’s corporate website,
aegon.com
. The Supervisory Board makes recommendations to the General Meeting of
Shareholders concerning all appointments and reappointments
to, and dismissals from, both the Executive Board and the
Supervisory Board.
In addition, the Supervisory Board determines the remuneration
of individual members of the Executive Board in line with the
Remuneration Policy adopted by the Company’s General Meeting
of Shareholders. Overall accountability for Aegon’s remuneration
governance also resides with the Supervisory Board, which is
advised by its Remuneration Committee. This includes the
responsibility for designing, approving, and maintaining
theAegon Group Global Remuneration Framework, including
theremuneration policies for the Executive Board and Heads
ofGroup Control functions.
Corporate governance
Details of Aegon’s corporate governance structure and
asummary of how the Company complies with the Dutch
Corporate Governance Code can be found on pages 38-41 of
this Annual Report and in the Corporate Governance Statement
published on
aegon.com
.Composition of the Supervisory Board and
Executive Board
Supervisory Board
The composition of the Supervisory Board is discussed regularly
in Board meetings and in particular by the Nomination and
Governance Committee. All members of the Supervisory Board
are considered independent under the terms of best practice
provisions 2.1.7, 2.1.8 and 2.1.9 of the Dutch Corporate
Governance Code. In compliance with the Dutch Corporate
Governance Code, members of the Supervisory Board are
appointed by shareholders for aterm of four years. The option
exists to reappoint members for one additional four-year
term. A Supervisory Board member can then subsequently
be reappointed again for aperiod of two years, which
reappointment may be extended by at most two years. For
areappointment after an eight-year period, reasons will
be provided in the report of the Supervisory Board.
An overview of the composition of the Supervisory Board
in 2021 can be found on pages 42-46 of this Annual Report.
The retirement schedule and other information about members
of the Supervisory Board are available on aegon.com.
During the 2021 Annual General Meeting (AGM), several
members were (re)appointed to the Supervisory Board.
Mr. Jack McGarry was appointed as new Supervisory Board
member for a term of four years until the end of the AGM to be
held in 2025. Mr. William Connelly and Mr. Mark Ellman were
reappointed for another term of four years until the end of the
AGM to be held in 2025. Following two previous 4-year terms,
Ms. Dona Young was reappointed for another term of two years
until the end of the AGM to be held in 2023. In proposing the
reappointment for approval to the AGM, the Supervisory Board
considered the constructive and active way in which Ms. Young
contributes as a member of the Supervisory Board and as Chair of
the Risk Committee. Ms. Young’s extensive knowledge of the
Aegon organization, her experience from other non-executive
positions, and her expertise in the areas of governance, board
succession planning and board composition also supported the
proposal for reappointment.
An induction program for new Supervisory Board members
is in place. The program is regularly updated to reflect changes
in the environment in which Aegon operates, including regulatory
changes. The program is tailored to the needs of individual
Board members.
Executive Board
The Executive Board consists of Mr.Lard Friese, Chief Executive
Officer (CEO) and Chairman of the Executive Board, and
Mr.Matthew J. Rider, Chief Financial Officer (CFO). During
the Annual General Meeting on June 3, 2021, Mr.MatthewJ.Rider
was reappointed as member of the Executive Board for aterm
of four years until the end of the AGM to be held in 2025.
Members of the Executive Board are appointed by shareholders
for aterm of four years, with the option of reappointment for
additional four-year terms. The appointment schedule and other
information about members of the Executive Board are available
on
aegon.com
. Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information47
Report of the Supervisory Board
Report of the Supervisory Board
Report of the Supervisory Board
Board meetings
Attendance overview
The 2021 Supervisory Board members’ attendance overview
is provided in the table below.
Name
Regular
SB meeting
Audit
Committee Member
Risk
Committee Member
Combined
Audit & Risk
Committee
Remuneration
Committee Member
Nomination &
Governance
Committee Member
Additional
SB mtgs.
/
calls
Total no. Mtgs.
7 5 4 1 6 6 2
SB members
1)
Mr.William Connelly
7/7 6/6 v 6/6 Chair 2/2
Mr.Mark Ellman
7/7 4/4 v 1/1 6/6 v 2/2
Mr.Jack McGarry
2)
3/3 2/2 v 1/1 3/3 v 2/2
Mr.Ben Noteboom
7/7 4/4 v 1/1 6/6 Chair 2/2
Ms.Caroline Ramsay
7/7 5/5 Chair 4/4 v 1/1 2/2
Mr.Thomas Wellauer
7/7 5/5 v 1/1 6/6 v 2/2
Ms.Corien Wortmann
7/7 5/5 v 1/1 6/6 v 2/2
Ms.Dona Young
2)
7/7 3/3 4/4 Chair 1/1 6/6 v 2/2
1
2
tenure are taken into account.
Members of the Executive Board and Management Board
regularly attended the Supervisory Board meetings held in 2021.
At the request of the Supervisory Board, other Company
executives attended the meetings to report on specific topics.
Representatives from Aegon’s external auditor PwC attended
the March 2021 Supervisory Board meeting on Aegon’s 2020
Annual Report. PwC also attended all 2021 Audit Committee
meetings, including the combined Supervisory Board Audit
and Risk Committee meeting. Regular Board meetings were
preceded or followed by meetings attended only by members
of the Supervisory Board and the Chief Executive Officer.
Furthermore, the Supervisory Board held meetings without
Executive Board or Management Board members present.
Highlights and activities
Key topics discussed during the 2021 Supervisory Board
meetings were Aegon’s quarterly results and annual reporting,
Aegon’s strategy, the main business risks, IT, regulatory
developments, acquisitions and divestments, human resources
items, the approach to sustainability and responsible
investments, and the ongoing COVID-19 developments.
The Supervisory Board regularly and actively discussed
the long-term value creation strategy and transformation with
the Executive Board and the Management Board, and closely
monitored its execution, the risks involved in its execution,
and any opportunities to further enhance the strategy.
The Company’s strategy is routinely discussed. On the request
of the Supervisory Board, deep dives were provided on strategic
topics and the Supervisory Board was involved in strategic
deliberations and decision making. Plans and projects were
discussed during executive sessions and in regular meetings,
together with the strategic focus for all operating segments.
Focus areas included, amongst others, building and maintaining
clear strategic focus, the improvement of the operational
performance – including the further reduction of addressable
expenses, building strength in Strategic Assets, realizing
growth, reducing the risk profile and the further strengthening
of the balance sheet. The Supervisory Board monitors
the implementation of the strategy by discussing the progress,
risks, opportunities, and achievements on a quarterly basis with
the regional CEOs and the Executive Board. Also, the progress
is reflected in the regular risk reports, the HR updates, and
the financial reporting. The Supervisory Board was informed
about the annual Global Employee Survey, which was
conducted at the end of 2021. The Supervisory Board discussed
the outcome of this survey in detail in the first quarter of 2022.
Acquisitions and divestments were regularly discussed
in the context of the execution of the strategy. The Supervisory
Board supports the active management of the business
portfolio, including acquisitions, the sale of underperforming
businesses, and the disposal of entities no longer consistent
with Aegon’s strategy. During the year, the Board discussed
various M&A and balance sheet transactions, including but not
limited to the completion of the divestment of Stonebridge,
the UK-based provider of accident insurance products,
developments in relation to the sale of the Central Eastern
European business to Vienna Insurance Group AG, the sale
of the US portfolio of fintech and insurtech companies, the wind
down of the Irish corporate insurance entity, the reinsurance
of part of the longevity risk in the Netherlands, and management
actions to release capital and increase the predictability of capital
generation from the US variable annuity business.
Aegon Integrated Annual Report
2021
48
Report of the Supervisory Board
About Aegon Non-financial information
Governance and risk management
Financial informationIn more detail, Supervisory Board discussions included the
following topics in 2021:
•
COVID-19 developments;
•
Strategy, including Aegon’s long-term value creation based
on the three core markets, three growth markets and one
global asset manager, its responsible business strategy and
business reviews;
•
Approach to sustainability and the setting of Group wide
commitments;
•
Acquisitions, divestments, and the strategic direction
of Aegon’s businesses;
•
Executive Board and senior management succession planning;
•
Executive remuneration, including the remuneration
framework;
•
Composition of the Supervisory Board, including the
Board’s effectiveness;
•
Corporate Governance;
•
Human resources, including talent development, results of the
global employee survey, organizational health developments,
cultural change, and inclusion and diversity;
•
Annual and quarterly results, dividends, and the
Company’s Medium Term Plan, including the 2022 budget, the
capital plan and the funding plan;
•
Capital generation and solvency capital positions, including
the impact of COVID-19, management actions, and
developments in the financial markets;
•
Enterprise risk management, cybersecurity and information
security risks, and the risks related to the execution of the
strategy within the Company;
•
Investor relations, including Aegon’s shareholder base, market
analysis and roadshow feedback;
•
Legal, regulatory and compliance topics, including
Aegon’s engagement with regulators;
•
Highlighted topics by Supervisory Board Committees;
•
Regulatory changes at both a regional and global level;
•
Tax policy and tax developments; and
•
Technology, including the technology strategy, IT Security,
technological developments, and innovations.
Results and budget
In February 2021, the Supervisory Board convened to discuss
the fourth quarter 2020 results. In March 2021, the Supervisory
Board, in the presence of PwC, reviewed and adopted
Aegon’s 2020 Annual Report, the Consolidated Financial
Statements of AegonN.V., and the Financial Statements
of AegonN.V. In May, August and November, the Supervisory
Board reviewed Aegon’s first, second and third quarter
2021 results respectively based on the recommendation
of the Audit Committee.
In December 2021, the Supervisory Board and Management
Board reviewed the Company’s Medium Term Plan, which included
the budget and capital plan for 2022. The Boards took note of
the uncertainties and challenges in the coming years as described
in the Plan. These included, among others: ongoing COVID-19
developments, increased regulatory requirements, execution risk,
and developments in the interest rates, credit markets, and equity
markets. The Board discussed Aegon’s capital generation and
capital projections, together with the continued focus on cost
efficiency. The Supervisory Board supported the Medium Term
Plan and approved the Budget for 2022. The Board also approved
the 2022 funding plan and authorized the Executive Board
toexecute on it in 2022. The full-year results reported in this
Annual Report were discussed in the March 2022 meeting
inthepresence of PwC.
Sustainability
Sustainability was further embedded as a central pillar within
the company strategy through integration of ESG topics in the
strategy. Developments were regularly discussed during the
Supervisory Board meetings. In 2021, and on the request of the
Supervisory Board, the Supervisory Board received an educational
session on developments in the sustainability landscape. Through
its Nomination and Governance Committee, the Supervisory
Board is advised and kept apprised of business and regulatory
developments in this area. The Supervisory Board is supportive
of Aegon’s approach to sustainability, and sustainability topics
will receive ongoing attention from the Supervisory Board.
This includes, amongst others, overseeing the progress made
on the sustainability agenda, discussing the further development
of related non-financial controls, and overseeing the progress
on the Net-Zero Asset Owner Alliance commitments.
Legal, compliance and regulatory affairs
In 2021, the Supervisory Board and the Audit Committee
discussed compliance, regulatory and legal topics relating
to the Americas, Europe, UK, Asia, and Asset Management
with management, the General Counsel, the Global Head
of Compliance and the Global Head of Operational and Model
Risk. In particular, the Board discussed the state of the Legal
and Compliance functions, Compliance risks, Fraud and Financial
crime including know your customer and ultimate beneficial
owner requirements, anti-money laundering (AML), and whistle-
blower reports. An overview of the topics discussed in the field
of Risk Management can be found in the Audit Committee and
Risk Committee sections below.
The Chairmen of the Supervisory Board, the Audit Committee
and the Risk Committee held two meetings with the group
supervisor, the Dutch Central Bank (DNB), one in May and one
in November 2021.
Educational sessions
The Board and its Committees received updates and
presentations on topics including sustainability, climate
change, diversity, financial crime and AML, IT strategy, IFRS
17, tax, and cultural change and organizational health
programs. In addition to these updates and presentations
provided by the Company, the members of the Supervisory
Board gathered general information on industry developments
by participating in networks, reading independent reports,
and sharing knowledge with other Board members within and
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information49
Report of the Supervisory Board
outside Aegon. Also, the Board took notice of the trending topics
provided in the reports of the external auditor. These topics
included, for example, reporting on non-financial information,
the approach to sustainability, trends in the US Insurtech, climate
related financial disclosures, risks for the insurance industry, and
the impact of IFRS 17 transformation projects. Furthermore,
the Supervisory Board and Executive Board members were
included in all staff training, such as the Code of Conduct and
Speak up awareness exercises.
Focus items for 2022
In 2022, the Supervisory Board will, amongst others,
focus on the further developments related to the Financial
and Strategic Assets, and the management actions that
support the long-term value creation. Given the fast-moving
IT environment, in particular the areas of information security
and cybersecurity, will receive additional attention this year.
Furthermore, the Board will closely follow the developments
related to the reporting of non-financial information, which
includes sustainability reporting. Regulatory developments,
risk, and compliance will receive appropriate attention.
Throughthe Audit Committee, the Board will also closely follow
the developments regarding the implementation of IFRS 17.
Other items that will receive special attention in 2022 are
cultural change and the wellbeing of employees.
Board review
The Supervisory Board undertakes an internal review of Board
effectiveness on an annual basis. An external assessment
takes place every three to four years. The 2021 (internal)
assessment was based on a survey completed by Supervisory
Board members and Management Board members, as well
as interviews with all Supervisory Board members. The Board
reviewed and assessed how the Board functions as a whole,
the composition of the Board, the quality of information
presented to the Board, the functioning of its Committees, and
the interaction of the Board with the Executive and Management
Board. The results of the assessment were discussed in February
2022, and the Supervisory Board will act on the observations and
recommendations that were listed in the assessment report (e.g.
organizing educational sessions in line with further education
needs, addressing the identified focus areas of supervisors, and
following up on further improvement of meeting materials).
Outside the presence of the Executive Board, the Supervisory
Board reviewed the performance (results) of the individual
members of the Executive Board and Management Board over
the preceding calendar year in February 2022. In addition,
the Executive Board evaluated its own functioning as awhole
and that of the individual Executive Board members as well.
The performance of the members of the Executive and
Management Boards was also discussed regularly during the year.
During these reviews, the Executive Board and the Supervisory
Board also identified areas for which Board members
–or the Board as awhole – could require training or education.
Supervisory Board Committees
The Supervisory Board has four Committees that report into
the Supervisory Board meetings. Supervisory Board members
receive all minutes of the Committee meetings, and the Board
discusses the items reported by the Committees.
The four Committees are the:
•
Audit Committee;
•
Risk Committee;
•
Nomination and Governance Committee; and
•
Remuneration Committee.
The Risk Committee is responsible for supervising the activities
with respect to the Company’s enterprise risk management
framework and internal control systems. The Audit Committee
primarily relies on oversight and advice from the Risk Committee
for these topics, which is in line with the Dutch Corporate
Governance Code.
The Audit Committee
The Committee confirmed that all of its members qualified
as independent according to Rule 10A-3 of the SEC.
The Chair of the Audit Committee qualifies as afinancial expert
according to the Sarbanes-Oxley Act in the United States and
the competence in accounting and auditing according
to the
AuditCommittee Decree 2016 (‘Besluit instelling auditcommissie’),
section 2(3).
Role and responsibilities
As Aegon has both an Audit Committee and aRisk Committee,
the risk management responsibilities outlined in the Dutch
Corporate Governance Code are assigned to the Risk Committee.
With regard to the oversight of the operation of the risk
management framework and risk control systems, including
supervising the enforcement of relevant legislation and
regulations, the Audit Committee operates in close coordination
with the Risk Committee. Certain Board members participate
in both committees and acombined meeting of the Audit and
Risk Committees is scheduled on an annual basis.
The main role and responsibilities of the Audit Committee are
to assist and advise the Supervisory Board in fulfilling its
oversight responsibilities regarding:
•
The integrity of the consolidated quarterly, half-yearly and
full-year financial statements and financial reporting
processes;
•
Internal control systems and the effectiveness of the internal
audit process; and
•
The performance of the external auditors and the
effectiveness of the external audit process, including
monitoring the independence and objectivity of the
external auditor.
Aegon Integrated Annual Report
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The Audit Committee reports to the Supervisory Board on its
activities, identifying any matters about which it considers action
or improvements are needed, and making recommendations
as to the steps to be taken. For more information about
the functioning of the Audit Committee, please see the Audit
Committee Charter on
aegon.com
. Committee meeting attendance
Audit Committee meetings were attended by, amongst others,
the members of the Audit Committee, Aegon’s Chief Financial
Officer, the Head of Corporate Financial Center, the Chief
Risk Officer, the Chief Internal Auditor, and partners of PwC,
Aegon’s external auditor.
Members
of Aegon
’
s Group Risk, Group Legal, Group Compliance,
Investor Relations, Group Tax, Human Resources, Actuarial,
and Business departments regularly attended Audit Committee
meetings. Aside from the Audit Committee meetings, additional
sessions were held with internal and external auditors, and
the Global Head of Compliance, without management being present.
Financial Reporting
In discharging their responsibilities with regards to the 2021
interim and full year financial statements, the Audit Committee:
•
Reviewed and discussed the management letter and follow
up actions with the Executive and the Management Board,
Internal Audit, and PwC;
•
Discussed PwC’s interim report leading to areview opinion
on the interim financial statements;
•
Considered presentations on various topics by local business
unit managers and chief financial officers;
•
Reviewed and discussed areas of significant judgments in the
preparation of the financial statements, including,
in particular: Solvency II, investment valuation and
impairments, accounting changes, economic and actuarial
assumption setting, and model validations; and
•
Reviewed and approved the internal and external audit plans
for 2021 and monitored execution, including progress
in respect of recommendations made.
The Audit Committee was satisfied with the explanations
provided by the Executive and Management Board, Internal Audit,
and PwC, and conclusions reached. Recurring items on the Audit
Committee agenda in 2021 were Solvency II developments,
controls, capital and liquidity, the quarterly legal and compliance
reports, and the IFRS 17 implementation progress. Other items
included tax updates, capital plans, funding plans, the EIOPA
stress test results, the systemic integrity risk assessment,
the Annual Report, the AFM (non-) financial reporting
supervision, management actions focusing on releasing capital
and increasing the predictability of capital generation from
the US variable annuity business, and the performance review
of the internal audit function and external auditor.
Risk management and internal controls
With respect to their oversight of internal controls (other than
those where oversight is carried out via the Risk Committee), the
Audit Committee:
•
Discussed quarterly updates on the activities of the internal
audit function, together with details of progress on internal
audits with the internal auditor. Areas of focus include the
Internal Audit strategy, audit planning process, Internal Audit
charter, Internal Audit functional governance, quality
assurance reviews, issue tracking and resolution, control
environment, and results of audits in the areas of information
and cybersecurity, Solvency II, third party management and
administration partnerships, General Data Protection
Regulation, performance management and integrity;
•
Reviewed the internal control framework, among others with
respect to the Sarbanes-Oxley Act; and
•
Discussed the internal control statement with the
Executive Board.
External audit effectiveness
The external auditor has been appointed by the shareholder for
the period 2021-2023. In 2021, the Audit Committee started the
preparations for the mandatory auditor rotation process in line
with regulations as the current auditor is nearing the maximum
audit term of 10 years, ending after the audit of Aegon’s financial
statements over 2023. Aegon has well-established policies
on audit effectiveness and independence of auditors that set out,
among other things:
•
The review and evaluation of the external auditor and the lead
partner of the external audit team on at least an annual basis;
•
Non-audit services performed by the external auditor; and
•
Rotations of the external auditor and lead partner.
For more information about the policies relating
to the effectiveness and independence of the external auditor,
please see Annexes A, B and C of the Audit Committee Charter
on
aegon.com
. The Risk Committee
Role and responsibilities
The main role and responsibilities of the Risk Committee are
to assist and advise the Supervisory Board in fulfilling its
oversight responsibilities regarding the effectiveness of the
design, operation, and appropriateness of both the Enterprise
Risk Management (ERM) framework and the internal control
systems of the Company and the subsidiaries and affiliates that
comprise the Aegon Group. This includes:
•
Risk strategy, risk tolerance, and risk governance;
•
Product development and pricing;
•
Risk assessment;
•
Risk responses and internal control effectiveness;
•
Risk monitoring; and
•
Risk reporting.
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Furthermore, the Risk Committee regularly reviews risk exposures
as they relate to capital, earnings, liquidity, operations, and
compliance with risk policies. The Company’s risk management
is an important topic for the Supervisory Board.
The Risk Committee works closely with the Audit Committee.
Onecombined meeting was held in December 2021.
The combined meeting focused on the 2022 global risk plan,
model validation, information security, cloud governance and
controls, and system of governance.
For more information about the functioning of the Risk
Committee, please see the Risk Committee Charter
on
aegon.com
. Committee meetings attendance
The Company’s Chief Executive Officer and Chief Risk Officer
attended all the Committee meetings. The Chief Financial
Officer assumed the Management Board responsibilities for Risk
Management (on an interim basis) as per June 15, supported
by the Head of Operational & Model Risk management. Both
attended all the Committee meetings as per this date. The Chair
of the Risk Committee granted the Global Chief Audit Executive
astanding invitation to all the Risk Committee meetings. Other
Management Board members and senior managers attended
the meetings when relevant for the discussion.
Risk management and Internal controls
Recurring items on the Risk Committee agenda in 2021 were risk
exposure information, risk policy compliance monitoring,risks
associated with IT and information security, as well as risks
associated with COVID-19 and strategic change programs in the
company. The Risk Committee assessed the effectiveness of the
design and operation of the ERM framework and internal control
systems in 2021 by:
•
Discussing the quarterly risk dashboard, including all material
group level risks, with the Executive Board, Chief Risk Officer,
and relevant senior managers. The material group level risks
consisted of financial, underwriting, and operational risks,
including cybersecurity and information security risk. Specific
attention was paid to the regulatory roadmap of Aegon the
Netherlands, and to hedging, especially in relation to the
US Variable Annuity book;
•
Assessing aquarterly dashboard that outlined risks with
regards to the execution of the strategic change programs
in each region, and how those risks were monitored and
mitigated;
•
Reviewing the Group risk appetite, which consists of the risk
strategy, risk tolerances and indicators; and
•
Reviewing the risk governance structure and risk
competencies, including the skills and resources necessary
forthe risk function.
The Risk Committee also discussed several regulatory topics,
including the DNB Focus! report and actions in the context
of the Risk Function and the plan to reduce interest rate
risk in the US. The Risk Committee furthermore spent time
on the identification and monitoring of non-financial risks,
assumption and model changes, the actuarial function report,
cloud governance and its control framework, data protection,
the impact of market risk on the annual budget plan, reinsurance
developments, risks related to the performance improvement
program and to third party management, and on a number
of important asset and liability management and hedging topics
across the Group. In addition, the Risk Committee dedicated
time to wider global developments, such as geopolitical
environment, risks associated with the COVID-19 pandemic,
and the development of financial markets in 2021, including
the impact of rising inflation.
The Nomination and Governance Committee
Role and responsibilities
The main role and responsibilities of the Nomination and
Governance Committee are to assist and advise the Supervisory
Board in fulfilling its responsibilities in the areas of Human
Resources Management and Corporate Governance. This includes:
•
Board member and senior management succession planning;
•
Drawing up selection criteria and procedures for the
appointment of Board members, together with supervising
theselection criteria and procedures for senior management;
•
Advising on and proposing nominations, appointments, and
reappointments;
•
Assessing and advising on the approach to sustainability
as part of the corporate strategy and overseeing the
execution thereof;
•
Reviewing and updating the Supervisory Board profile and
charters for the Supervisory Board and its committees;
•
Periodically assessing the functioning of individual members
of the Supervisory Board and the Executive Board;
•
Overseeing the corporate governance structure of the
Company, compliance with the Dutch Corporate Governance
Code and any other applicable corporate governance
legislation and regulations.
Committee meetings attendance
In addition to the committee members, these meetings were
attended in whole or in part by the CEO, the Global Head Human
Resources, and the General Counsel.
Supervisory Board related activities
The Nomination and Governance Committee discussed
the composition of the Supervisory Board and its Committees,
thereby addressing succession planning and diversity. The profiles
of Supervisory Board members, as well as their capabilities,
also in terms of working collectively with other members
of the Supervisory Board, were debated by the Committee.
With the appointment of Mr.McGarry and the re-appointments
of Ms.Young, Mr.Connelly, and Mr.Ellman, awell-balanced
composition in terms of gender diversity, nationality, and
backgrounds has been ensured, which furthermore does
justice to the geographical spread of Aegon’s activities.
With the appointment of Mr.McGarry, the desired criteria
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of acandidate with abackground in US (life) insurance, and
qualifying as afinancial expert, have been met.
The Supervisory Board has noted the new Act on Diversity
and is following up on this Act accordingly when addressing
(re)appointments, if so required. In future searches for anew
Supervisory Board member, the Committee continues to strive
foradiversified composition, also beyond gender diversity.
A Supervisory Board competency overview is published
on
aegon.com
.Executive and Management Board related activities
During 2021, the Nomination and Governance Committee
supported the intention to propose the re-appointment
of Mr.Matt Rider as CFO of AegonN.V. to the 2021 AGM
of shareholders. The Committee also reviewed the composition
of the Management Board and was informed – and consulted on
– the succession of multiple Management Board vacancies, and
on certainappointments of key management.
The Committee was also kept apprised of major organizational
changes, developments in employee engagement, and talent
management. The Committee was thereby informed about
the annual Global Employee Survey, which was conducted
at the end of 2021.
Further to the activities mentioned above, the Nomination and
Governance Committee discussed senior management team
developments and governance matters and structures, also
in relation to the material business units and functions.
The Nomination and Governance Committee also reviewed
the important outside board positions of the members
of the Management and Supervisory Boards and discussed
specific appointments to important outside board positions
where applicable.
Sustainability
Sustainability and ESG were a regular agenda topic
in Committee meetings. In 2021, the Committee was kept
apprised of regulatory and business developments in this
area and discussed at length the regulatory framework and
reporting standards as being developed in both Europe and
the US, and the impact thereof on Aegon. In consultation
with the Committee, an ESG roadshow was held in December
2021 and January 2022, during which input was gathered
by the Head of Sustainability and the Head of Investor Relations
from stakeholders on Aegon’s sustainability approach. As part
of such ongoing dialogue with stakeholders, the feedback from
shareholders, proxy advisors, and interest groups was discussed
with the Committee.
The Committee discussed and supported Aegon’s approach
to sustainability, and in particular the commitment to join
the Net-Zero Asset Owner Alliance, aUN-convened group
of institutional investors committed to transitioning their
portfolios to net-zero greenhouse gas emissions by 2050.
The Supervisory Board was advised
by the
Committee accordingly.
Diversity
Enhancing diversity in the Executive, Management and
Supervisory Boards is an important goal for Aegon. Selection
and appointment are based on expertise, skills and relevant
experience, and the Supervisory Board takes diversity into
account with aview to achieving its aim of having abalanced
Supervisory, Executive and Management Board composition.
In 2017, the Supervisory Board adopted adiversity policy
for the Executive, Management and Supervisory Boards.
The purpose of the diversity policy is to have amore balanced
and diverse composition of the Supervisory Board, the Executive
Board, and the Management Board in terms of nationality,
age, gender and educational, professional, and geographical
background and experience of the individual members.
The Committee strives to have at least 30% female and male
representation in the Supervisory Board, the Executive Board, and
the Management Board.
In 2021, the Committee discussed the New Act on Diversity
aimed at improving gender diversity in (boards of) Dutch
companies and will review the implementation thereof
within Aegon.
In the current Supervisory Board composition, there are three
female members out of eight members in total (meeting
the requirement under Dutch law that at least one third
of the Supervisory Board positions should be filled by women and
at least one third by men). With the appointment of anew Chief
Risk Officer as of March 1, 2022 and the appointment of the new
Chief Technology Officer (as of February 7, 2022), there are four
female members out of twelve Management Board members
in total (– achieving the minimum female presentation that
Aegon strives for in the Management Board).
When identifying candidates for open positions in the Executive
and Supervisory Boards, the Committee actively searches
for female candidates. It also instructs external search firms
to present female candidates. More information on diversity
within the Board is available in the Supervisory Board
Composition and Competency overview and in Chapter 7
(Diversity) of the Corporate Governance Statement – as published
on
aegon.com
.The Remuneration Committee
Role and responsibilities
The main role and responsibilities of the Remuneration
Committee are to advise the Supervisory Board and prepare
decisions to be taken by the Supervisory Board. The Committee
is designated to safeguard sound remuneration policies and
practices within the Company by overseeing the development and
execution of these policies and practices. In order to ensure that
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the remuneration policies and practices take all types of risks
properly into account, in addition to considering liquidity and
capital levels, the Remuneration Committee assesses in particular
the remuneration governance processes, procedures and
methodologies adopted. Furthermore, the Committee ensures
that the overall remuneration policy is consistent with the
longer-term strategy of the Company and the longer-term
interests of its shareholders, investors, and other stakeholders.
This includes:
•
Reviewing the Aegon Group Global Remuneration Framework
and making recommendations on the remuneration policies;
•
Overseeing the remuneration of the Executive Board and
Heads of Group Control functions;
•
Preparing recommendations regarding variable compensation
both at the beginning and at the end of the
performance year; and
•
Preparing the information provided to shareholders
on remuneration policies and practices, including the
Remuneration Report.
The Remuneration Committee also oversaw the further
application, implementation and approval of Aegon’s Group
Global Remuneration Framework and the various policies and
procedures related to it, including the Remuneration Policy for
Material Risk Takers (Identified Staff). The above included:
•
Setting the outcome of the 2020 Group Performance
Indicators and of the 2020 Individual Performance Indicators
for Executive Board members, and allocating variable
compensation related to 2020 where required;
•
Setting the 2021 Individual Performance Indicators for
Executive Board members;
•
Setting the 2021 Group Performance Indicators and targets
for remuneration purposes;
•
Preparing for the 2022 performance indicators;
•
Reviewing and/or approving the ex-ante risk assessments and
ex-post assessments, any exemption requests (e.g.
sign-on arrangements) under the remuneration policies, and
changes to the list of Material Risk Takers (Identified
Staff); and
•
Reviewing the related Remuneration Report.
In addition, the Remuneration Committee discussed
developments with respect to possible new regulations
pertaining to remuneration.
Committee meetings attendance
In addition to the committee members, these meetings were
attended in whole or in part by the CEO, the Global Head Human
Resources, and the General Counsel.
Annual Accounts
This Annual Report includes the Annual Accounts for
2021, which were prepared by the Executive Board and
discussed by both the Audit Committee and the Supervisory
Board. The Annual Accounts are signed by the members
of the Executive Board and the Supervisory Board and will
be placed on the agenda of the 2022 Annual General Meeting
of Shareholders for adoption. The Supervisory Board recommends
that shareholders adopt the annual accounts.
Acknowledgement
The members of the Supervisory Board would like to reiterate
their appreciation for the continued dedication shown
by the Executive Board, management, and all employees
of Aegon to its customers, during another year that was
characterized by challenges and uncertainty.
The Hague, the Netherlands, March 16, 2022
William L. Connelly
Chairman of the Supervisory Board of AegonN.V.
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Remuneration Report
The 2021 Remuneration Report from our Remuneration
Committee, on behalf of the Supervisory Board
Introduction
This report has been prepared by the Remuneration
Committee of the Supervisory Board, which was led
by the Committee’s Chairman Mr.Ben J. Noteboom and was
approved by the Supervisory Board. In the first chapter,
the Remuneration Committee presents an overview
of the business and remuneration highlights in 2021 and
alook ahead to 2022. This is followed by chapter two which
contains ageneral introduction to remuneration at Aegon.
The third chapter is the 2021 Supervisory Board Remuneration
Report, which contains asummary of the Supervisory Board
Remuneration Policy that was applicable in 2021 and
the Supervisory Board remuneration over the recent years.
In chapter four, the 2021 Executive Board Remuneration Report
provides asummary of the Executive Board Remuneration Policy
that was applicable in 2021, the Executive Board remuneration
over the recent years and the 2022 Executive Board
performance indicators.
1. Business and remuneration highlights
This chapter presents an overview of the business and
remuneration highlights in 2021 and alook ahead to 2022.
2021 Business highlights
In 2021, Aegon demonstrated solid progress against its strategic
and financial objectives. The measures that Aegon has taken to
improve its operational performance and reduce its risk profile,
together with support from favorable markets, resulted in free
cash flows of
EUR 729 m
illion for the full year 2021, well ahead of the previous guidance. The operating result for 2021
amounted to
EUR 1,906 m
illion, an increase of 11% compared with last year as a consequence of business growth, expense
savings, and favorable equity markets, despite a more adverse
mortality result in the United States, which was driven by the
COVID-19 pandemic. To date, Aegon has executed 844 out of
approximately 1,200 performance improvement initiatives, split
between 649 expense initiatives and 195 growth initiatives.
Theexpense savings initiatives drove a
EUR 244 m
illion reduction in addressable expenses in 2021 compared with the base year
2019. Aegon’s growth initiatives are aimed at improving customer
service, enhancing user experience, and developing new products.
These growth initiatives contributed
EUR 115 m
illion to the operating result in 2021. The increase of the market consistent
value of new business from
EUR 262 m
illion in 2020 to EUR 538 m
illion in 2021 was mainly driven by the Unites States
due to increasing sales in Life and the decision to stop selling
variable annuities with significant interest rate sensi
tive riders.
Business performance highlights
2021
2020
Free cash flows (in EURmillion)
729 530
Operating result (in EURmillion)
1,906 1,710
Addressable expenses (in EURmillion)
2,903 2,986
Market consistent value of new business (in EURmillion)
538 262
2021 Remuneration highlights
At the Annual General Meeting of Shareholders on June 3,
2021, shareholders were asked to cast an advisory vote
on the Remuneration Report for the second time. The 2020
Remuneration Report was approved with 97.99% of the votes
cast, which was asignificant increase compared to 2019
(83.79%). Following feedback from several large shareholders
regarding the 2019 report, the 2020 report included more
information in the remuneration highlight section and more
information was disclosed on the calculation of variable
compensation for the Executive Board in chapter four.
Aegon continued with shareholder engagement regarding
the remuneration report and made afew updates to this report
to make it more concise and easier to read.
In 2021 Aegon paid out EUR168million in variable
compensation and 22 employees received EUR1million or more
in total annual compensation (i.e. the sum of fixed compensation,
variable compensation and pension contributions paid in 2021).
These employees worked for Aegon’s Corporate Center, Aegon
Americas, Aegon UK and Aegon Asset Management.
For the period during which the individual served as Executive
Board member in 2021, Mr.Friese received EUR1,485,000
in fixed compensation (2020: EUR931,071 for 7.5 months)
and Mr.Rider received EUR968,394 (2020: EUR940,950).
For Mr.Rider this included a5% increase per June 2021.
Mr.Friese’s fixed compensation level was not changed
during 2021. For that same period, Mr.Friese was allocated
EUR3.5million in total compensation (2020: EUR2.0million
for 7.5 months) and Mr.Rider EUR2.3million (2020:
EUR2.0million).
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The 2021 CEO pay ratio was 28.0 (2020: 32.2, 2019: 32.8).
Thisratio was based on the EU-IFRS remuneration expenses for
Mr.Friese and for Aegon’s employees in 2021, which have been
audited. The annual expenses for Mr.Friese’s total compensation
were EUR 2.9million (2020: EUR 3.5million). The average
expenses for the employees’ total compensation were
EUR 105 thousand (2020: EUR 110 thousand), which were
calculated by:
•
The total EU-IFRS remuneration expenses for all employees,
which are the total employee expenses (see Note 14) minus
the CEO remuneration expenses: EUR 1.897million –
EUR 2.9million = EUR 1.894million.
•
Divided by the number of employees in scope, which are the
total number of employees minus employees in joint ventures
and associates (as their expenses are not included in Note
14 given the partial consolidation for these businesses) and
minus the CEO: 22,271 – 4,228 – 1 = 18,043 employees.
The Remuneration Committee took note that certain factors have
influenced the CEO pay ratio. Last year, Mr. Friese’s annualized
annual remuneration expenses were higher because these
included EUR 0.9
m
illion for his sign-on arrangement, while these
expenses were
EUR 0.1
m
illion in 2021. As a result of our
company-wide transformation program, we have seen a
combination of reductions, shifts and increases in our workforce.
Because the CEO pay ratio is influenced by a constantly changing
international employee population, with the majority of employees
based outside the Netherlands, the Committee does not have a
preferred ratio. Instead, all compensation within Aegon (including
for the Executive Board members) should be in line with the
relevant internal and external references for the relative weight
ofthe position, its responsibilities and characteristics as well as
the employee’s qualifications, experience, and
performance.
Looking ahead to 2022
In accordance with the Supervisory Board remuneration policy,
the fees for the Supervisory Board members have been indexed
with 5% per January 2022, in response to the economic
developments in the last three years (2019-2021). The last
change to these fees was in January 2019.
In accordance with the Executive Board remuneration policy,
Mr.Friese’s fixed compensation has been increased by 5%
per January 2022 from EUR1,485,000 to EUR1,559,250.
The increase will keep Mr.Friese aligned with internal and
external compensation levels, economic developments (e.g.
inflation) and changes to the compensation levels of other
senior managers within Europe and in the Netherlands.
There are no changes foreseen to the compensation package
of Mr.Rider in 2022.
Aegon will monitor the development of rules, regulations and
guidance that could affect Aegon’s remuneration policies. This
includes the finalization of the European Committee’s guidelines
on the standardized presentation of the remuneration report.
2. Remuneration at Aegon in general
This chapter contains ageneral introduction to Aegon’s Global
Remuneration Framework, Human Resources Strategy,
Remuneration Principles, the concepts of total compensation
and variable compensation, Risk Management in relation
to remuneration and remuneration of Material Risk Takers.
Global Remuneration Framework
Aegon’s Global Remuneration Framework (GRF) outlines
the Aegon Group Human Resources Strategy, the Aegon Group
Remuneration Principles and the Aegon Group Remuneration
Guidelines, which apply to all Aegon employees, including
the Executive Board members. The GRF has been designed
in accordance with relevant rules, guidelines, and interpretations,
such as the Dutch Financial Supervision Act, the Dutch Civil
Code, the Dutch Corporate Governance Code and the Solvency
II Legal Framework.
Aegon’s remuneration policies are derived from the GRF, which
includes the Executive Board Remuneration Policy and local
business Remuneration Policies. These policies define specific
terms and conditions for the employment of Aegon’s employees
across the various countries and local businesses. All steps in the
remuneration process are governed by the GRF and its underlying
policies. Staff from Human Resources, Risk Management and
Compliance are involved in all steps of the process.
Human Resources Strategy
In order to support the Aegon Strategy and local business
objectives, the Aegon Group Human Resources Strategy contains
the following remuneration-related goals:
•
Attract, retain, motivate, and reward ahighly qualified and
diverse workforce;
•
Align the interests of executives, managers and all other
employees with the business strategy and risk tolerance, the
values and the long-term interests of Aegon;
•
Provide awell-balanced and performance-related
compensation package to all employees, taking into account
shareholder and other stakeholder interests, relevant
regulations, the corporate responsibilities and
Aegon’s purpose, values and behaviors.
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Based on the Human Resources Strategy, Aegon has formulated
the following Remuneration Principles, which are the foundation
for all remuneration policies and practices within the Group.
Aegon’s remuneration is:
•
employee-oriented by fostering asense of value and
appreciation in each individual employee; promoting the
short- and long-term interests and well-being
of Aegon’s employees through fair compensation and
supporting the career development and mobility
of employees;
•
performance-related by establishing aclear link between pay
and performance by aligning objectives and target setting
with performance evaluation and remuneration, reflecting
individual as well as collective performance in line with
Aegon’s long-term interests;
•
fairness-driven by promoting fairness and consistency
in Aegon’s remuneration policies and practices, avoiding
discrimination, and by providing total compensation packages
in line with an appropriately established peer group
at acountry and/or functional level; and
•
risk-prudent (see Risk Management in relation
to Remuneration below).
Risk Management in relation to Remuneration
Remuneration, and specifically variable compensation, may have
an impact on risk-taking behaviors of employees and, as such,
may undermine effective risk management. The GRF therefore
includes additional remuneration rules for Executive Board
members, Material Risk Takers and Control Staff, as their roles
and responsibilities require tailored risk mitigating measures and
governance processes. These rules include mandatory ex-ante
and ex-post risk assessments and related malus and claw-back
provisions.
Both the Risk Management and Compliance functions are
involved in the design and execution of Aegon’s GRF and
remuneration policies, such as reviewing proposed updates
to the GRF and remuneration policies, reviewing the selection
of Material Risk Takers and executing various risk mitigating
measures during the compensation cycle (when the targets are
set, before avariable compensation award is allocated, before
and after deferred variable compensation is paid).
Remuneration of Material Risk Takers
Aegon selects Group Material Risk Takers for the AegonN.V.
legal entity (i.e. the holding company) based on the Solvency
II selection criteria. These positions are defined as
‘the administrative, management or supervisory body, persons
who effectively run the undertaking or have other key functions
and other categories of staff whose professional activities have
amaterial impact on the undertaking’s risk profile’.
Additionally, legal entities within the Group that are directly
subject to the Capital Requirements Directive, Solvency Directive,
the Alternative Investment Fund Managers Directive and/
or the Undertakings for the Collective Investment in Transferable
Securities Directive, select their own Local Material Risk
in accordance with the applicable European Directive, its
guidelines, and local regulatory requirements (where available).
The Group and Local Material Risk Takers are subsequently
subject to remuneration rules outlined in the applicable European
Directive, its guidelines and local regulatory requirements (where
available), such as:
•
a minimum portion of variable compensation must be deferred
and paid in non-cash instruments.
•
the employee’s individual goals are subject to an ex-ante risk
assessment when they are set, which may lead
to adjustments thereof.
•
before variable compensation is allocated and before deferred
variable compensation is paid out (vests), it is subject to an
ex-ante and ex-post risk assessment respectively, which may
result in adownward adjustment (malus).
•
once variable compensation is paid out / has vested, it may
be subject to aclaw-back provision.
Total compensation
Following from the Remuneration Principles, Aegon aims to offer
experienced and competent employees atotal compensation
level which is consistent with the market in which Aegon
operates and competes for similar talent. Total compensation
typically consists of fixed compensation, variable compensation
(where in line with the local market practice), pension and other
benefits. Market survey information from reputable sources
is used to regularly assess the competitiveness of compensation
levels and practices which Aegon offers its employees.
Variable compensation
Variable compensation, if any, is capped at an appropriate level
as apercentage of fixed compensation. For senior management,
variable compensation is usually paid out in upfront cash and
deferred Aegon shares and is subject to malus and claw-back
provisions. In accordance with the Dutch Financial Supervision
Act, Aegon offered its Corporate Center employees variable
compensation up to 100% of fixed compensation in 2021 and
continued to comply with the related requirement that least
75% of its employees within the entire Group were employed
outside the Netherlands. Aegon also obtained shareholder
approval at the Annual General Meeting of Shareholders
of May 20, 2016, to offer variable compensation up to 200%
of fixed compensation to selected senior employees outside
Europe in positions that, based on local market practice, could
receive variable compensation that exceeds 100% of fixed
compensation.Aegon’s capital was not adversely impacted
by the maximum variable compensation that could be paid out.
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About Aegon Non-financial information
Governance and risk management
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Governance and risk management
Financial information57
Remuneration Report
3. 2021 Supervisory Board Remuneration Report
The 2021 Supervisory Board Remuneration Report has been
prepared by the Remuneration Committee of the Supervisory
Board in accordance with the Dutch Civil Code(article art 2:135b)
and the Dutch Corporate Governance Code. The Remuneration
Committee was led by the Committee’s Chairman Ben J.
Noteboom. This report was approved by the Supervisory Board.
This report contains asummary of the Supervisory Board
Remuneration Policy which applied to 2021 and the Supervisory
Board remuneration over the recent years.
Aegon’s Supervisory Board remuneration is subject to various
rules and regulations, including the Dutch Financial Supervision
Act, the Dutch Civil Code, the Dutch Corporate Governance Code
and the Solvency II Legal Framework.
Supervisory Board Remuneration Policy in 2021
Aegon’
s Supervisory Board Remuneration Policy is aimed
at ensuring fair compensation and protecting the independence
of the
Supervisory Board members. The Supervisory Board
Remuneration Policy that has been applied in 2021 was adopted
at the
Annual General Meeting of Shareholders on May 15, 2020.
This policy will be subject to annual reviews
by the
SupervisoryBoard.
The policy remains in place until
anewor revised policy has
been adopted in accordance with the applicable
by the
shareholdersrequirements from the Dutch Civil Code. The Supervisory Board
will submit
aproposal
to the
shareholdersto adopt at an
apolicy
Annual Meeting of Shareholders at least every four years.
The policy contributes to Aegon’s strategy, long-term interests,
and sustainability through the remuneration of the Supervisory
Board members in various ways:
•
The policy provides the Supervisory Board with the means
to attract, motivate, and retain competent, diverse, and
experienced Supervisory Board members for the long-term.
This is essential for executing Aegon’s strategy and
safeguarding and promoting its long-term interests and
sustainability.
•
Supervisory Board members receive fixed remuneration for
their responsibilities which does not depend on the Aegon
results in order to protect their independence when
supervising the manner in which the Executive Board members
implement the long-term value creation strategy. These
responsibilities are part of the membership of the Supervisory
Board and its Committees and the position of (Vice) Chairman
of the Supervisory Board and/or its Committees. The certainty
of the fixed compensation also allows Supervisory Board
members in their supervisory role to focus on the long-term
interest and sustainability of Aegon.
•
The Supervisory Board members receive fixed remuneration for
their activities, such as attending Committee meetings and
additional Supervisory Board meetings, in order to regularly
discuss the Aegon strategy, the implementation of the strategy
and the principal risks associated with it, while taking into account
the broader long-term interests and sustainability of Aegon
.
•
Supervisory Board members are only allowed to privately own
AegonN.V. Shares if this is along-term investment, aligning
their interests with Aegon’s long-term interests.
The Supervisory Board took Aegon’s identity, purpose, and values
into account when developing the policy and its changes:
•
Aegon is an international financial services group based in the
Netherlands, that provides life insurance, pensions, and asset
management. The main operations are in the US, the
Netherlands, and the UK, while there is also significant
presence in Southern and Eastern Europe, Asia, and Latin
America. The policy provides the Supervisory Board with the
means to attract, motivate, and retain Supervisory Board
members from various countries, predominantly based in the
Netherlands and the US. As Aegon is based in the
Netherlands, the policy considers the European Insurance
peers as well as Dutch General Industry peers to be the
relevant external reference for the Supervisory Board
member’s Remuneration. The policy is also influenced by the
European and Dutch rules and regulations on (Executive)
remuneration, which apply to Aegon as aresult of its identity
(i.e. being an Insurance firm in Europe and being alisted and
financial company in the Netherlands).
•
In order to fulfill its company purpose, Aegon has astrategy
to which this policy actively contributes (see above).
•
Aegon’s company values aim to create acompany that is fit
for the future: one that meets customers’ expectations,
is right for adigitally-connected, data-driven world, and can
adapt quickly to changing market conditions. These values are
not explicitly reflected in the policy as aresult of the
fee-based remuneration structure. However, these values are
strongly incorporated in the Supervisory Board Charter.
The Supervisory Board has not taken the compensation
structures and levels at Aegon into account as the fee-based
compensation structure for Supervisory Board members differs
significantly from the Aegon compensation structures and levels.
The Supervisory Board members are entitled to the following
fees (see also the table below):
•
A base fee for membership of the Supervisory Board.
No separate attendance fees are paid to members for
attendance at the regular Supervisory Board meetings;
•
An attendance fee for each extra Board meeting attended,
be it in person or by video and/or telephone conference;
•
A committee fee for members on each of the Supervisory
Board’s Committees;
•
An attendance fee for each Committee meeting attended,
be it in person or through video and/or telephone
conference; and
•
An additional fee for attending meetings that require
intercontinental, continental or US interstate travel between
the Supervisory Board member’s home location and the
meeting location.
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About Aegon Non-financial information
Governance and risk management
Financial information
Base fee for Supervisory Board membership
EUR / year
Chairman
80,000
Vice-Chairman
50,000
Member
40,000
Fee for Supervisory Board committee membership
EUR / year
Chairman of the Audit or Risk Committee
13,000
Member of the Audit or Risk Committee
8,000
Chairman of other committees
10,000
Member of other committees
5,000
Attendance fees
EUR
Committee meeting
3,000
Extra Supervisory Board meeting
3,000
Travel fees
EUR
Intercontinental
4,000
Continental or US interstate
2,000
Each of these fees is afixed amount. Each quarter Aegon pays
the fees that the Supervisory Board members earned during that
period. Where required, Aegon pays the employer social security
contributions in the home country of the Supervisory Board
member. The employee social security contributions in the home
country, if any, are paid by the Supervisory Board member.
The Supervisory Board is allowed to annually index the fees for
economic developments in the Netherlands, however the fees
have not been indexed in 2021.
The Supervisory Board members do not receive any performance
or equity-related compensation, and do not accrue pension
rights with Aegon. These measures are designed to ensure the
independence of Supervisory Board members and to strengthen
the overall effectiveness of Aegon’s corporate governance.
The Supervisory Board regularly assesses the competitiveness
of the Supervisory Board’s remuneration structure and levels
against peer companies with data provided by Willis Towers
Watson. For this purpose, the Supervisory Board selected
aprimary set of peer group companies according to the following
criteria:
•
Industry: Insurance, with apreference for Life Insurance;
•
Size: Average Market Capitalization, Employees, Revenue and
Tot
al Assets;
•
Geographic scope: Preferably companies that operate
globally; and
•
Location: Headquarters based in Europe, excluding UK
(because the non-executive directors typically have different
responsibilities compared to their continental European
counterparts).
Based on these criteria the current peer group consists
of the following 16 European Insurance companies: Ageas,
Assicurazioni Generali, CNP Assurances, Hannover Rueck,
Helvetia, Mapfre, Münchener RE, NN Group, Poste Italiane,
Sampo, Scor, Swiss Life, Swiss Re, Talanx, Vienna Insurance
Group and Zurich Insurance Group. This peer group differs from
the European peer group for the Executive Board as aresult
of excluding the UK companies. The peer group is reviewed each
year and may be updated accordingly. The last update of this peer
group was in 2022, when the peer group size was increased from
12 to 16 (creating amore balanced selection), Hannover Rueck,
Helvetia, Poste Italiane, Sampo, Scor and Vienna Insurance Group
were added, and Allianz and AXA were removed.
In addition, the Supervisory Board selects asecondary peer group
according to the following criteria, in order to monitor alignment
with the General Industry in the Netherlands:
•
Industry: General Industry and listed on the AEX;
•
Size: Average Market Capitalization, Employees, Revenue and
Tot
al Assets;
•
Location: Headquarters based in the Netherlands.
Based on these criteria, the current secondary peer group
consists of the following 12 AEX companies: Akzo Nobel, Ahold
Delhaize, ASML, DSM, ING Group, Heineken, KPN, NN Group,
Philips, Randstad, Signify and Wolters Kluwer. This peer group
is also reviewed each year and was last updated in 2022
(replacing ABN AMRO by Signify). This peer group is identical
to the Dutch peer group for the Executive Board.
The Remuneration Committee may recommend changes
to the fee levels or structure of the Supervisory Board members,
based on the results of acompetitiveness review and economic
developments in the Netherlands. Such recommendations would
be discussed by the Supervisory Board, which can support, revise
or reject them. The Supervisory Board is allowed to annually
index the fees for economic developments in the Netherlands.
For any other change to the level or structure of the fees,
the shareholders will be asked to adopt the proposed changes
at the Annual General Meeting of Shareholders.
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Remuneration Report
The policy contains atemporary derogation clause, with rules
which are in accordance with the Dutch Civil Code. This means
derogation is only allowed in exceptional circumstances to serve
the long-term interest and sustainability of Aegon or to assure
its viability, for alimited period of time, when it stays in line
with the general spirit of the policy and when the details are
disclosed in the next remuneration report. This clause was not
used in 2021.
Information on members of the Supervisory Board and
the composition of its four committees can be found in the report
of the Supervisory Board in this 2021 Integrated Annual Report.
Supervisory Board remuneration in recent years
The table below show the fees and benefits that have been
allocated to and paid for each Supervisory Board member
in the calendar years 2019, 2020 and 2021, in accordance
with the Supervisory Board remuneration policy that applied
at the time. There were no deviations from the policy in these
years. The table also includes the total IFRS expenses that
were recognized for the compensation of the Supervisory Board
members in 2019, 2020 and 2021.
In EUR thousand
Year Base fees
Attendance
fees
1)
Benefits
2)
Total
compensation
William L. Connelly
3)
2021 95 57 10 162
2020 95 45 4 144
2019 95 54 20 169
Mark A. Ellman
2021 53 45 4 102
2020 55 39 4 98
2019 56 39 20 115
Ben J. Noteboom
2021 58 45 4 107
2020 58 39 - 97
2019 58 39 6 103
Corien M. Wortmann - Kool
2021 63 45 4 112
2020 63 48 - 111
2019 63 54 6 123
Dona D. Young
4)
2021 62 51 6 119
2020 66 57 4 127
2019 66 66 26 158
Caroline Ramsay (as of May 15, 2020)
2021 61 39 21 121
2020 38 21 9 68
Thomas Wellauer (as of May 15, 2020)
2021 53 45 13 111
2020 33 21 5 59
Jack McGarry (as of June 3, 2021)
2021 31 24 6 61
Ben van der Veer (up to May 15, 2020)
2020 22 27 - 49
2019 58 54 6 118
Robert W. Dineen (up to Oct 11, 2019)
2019 40 27 12 79
Total compensation
2021 476 351 69 896
2020 430 297 26 752
2019 436 333 96 865
Recognized IFRS expenses
5)
2021 482 357 72 911
2020 459 321 26 806
2019 516 393 111 1,020
1
Mr.Noteboom received an attendance fee of EUR 3,000 for their attendance at the Supervisory Board audit committee call on March 16, 2021. Mr. Connelly
received an attendance fee of EUR 3,000 for his attendance at the combined Supervisory Board audit and risk committee meeting on December 7, 2021.
2
the home countries of Ms. Ramsay (UK) and Mr. Wellauer (Switzerland).
3
Supervisory Board meeting cycle.
4
5
VAT anymore, retroactively as from June 13, 2019. Therefore, Aegon has not paid Dutch VAT anymore on the fees of the Supervisory Board Members as from Q2
2021. Additionally, Aegon reclaimed VAT for the period Q3 2019 - Q1 2021, except for its Supervisory Board members based in the Netherlands for practical
reasons. The 2019 and 2020 amounts were restated in this table for this VAT reclaim. This line also includes expenses or gains related to small exchange rate
differences between the moment Ms. Ramsay’s fees were paid by our UK payroll and the moment these were recharged to Group.
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About Aegon Non-financial information
Governance and risk management
Financial information
The table below presents the total compensation (fees and
benefits) that was awarded and due in the last five calendar
years on an annualized basis and the year-on-year annual change
in total compensation. This compensation was paid in accordance
with the Supervisory Board remuneration policy that applied
at the time and there were no deviations. Additionally, the table
shows the Aegon net result, a proxy of the financial and non-
financial business performance, the inflation in the Netherlands
and the average employee compensation over the same period.
In EUR thousand
Annualized
1)
2017 2018 2019 2020
2021
William L. Connelly (as of May 19, 2017) Compensation
98 119 169 144
162
Change
- 22% 42% (15%) 13%
Mark A. Ellman (as of May 19, 2017) Compensation
114 103 115 98 102
Change
- (9%) 12% (15%) 5%
Ben J. Noteboom Compensation
102 86 103 97 107
Change
- (15%) 20% (6%) 10%
Corien M. Wortmann - Kool Compensation
101 103 123 111 112
Change
- 2% 19% (10%) 1%
Dona D. Young Compensation
116 121 158 127 119
Change
- 4% 31% (20%) (6%)
Caroline Ramsay (as of May 15, 2020) Compensation
- - - 108 121
Change
- - - - 12%
Thomas Wellauer (as of May 15, 2020) Compensation
- - - 94
111
Change
- - - - 18%
Jack McGarry (as of June 3, 2021) Compensation
- - - -
105
Change
- - - - -
Ben van der Veer (up to May 15, 2020) Compensation
106 101 118 131 -
Change
- (5%) 17% 11% -
Robert W. Dineen (up to Oct 11, 2019) Compensation
104 101 101 - -
Change
- (3%) 1% - -
Dirk P.M. Verbeek (up to May 18, 2018) Compensation
100 76 - - -
Change
- (24%) - - -
Robert J. Routs (up to May 18, 2018) Compensation
134 125 - - -
Change
- (7%) - - -
Aegon net result based on EU-IFRS In EURmillion
2,358 741 1,525 55 1,701
Aegon business performance
2)
Target = 100%
121% 106% 79% 57% 123%
Inflation in the Netherlands Consumer Price Index
1.4% 1.7% 2.6% 1.3% 2.7%
Average employee compensation
3)
Total compensation
102 104 115 110 105
Annual change
2% 11% (4%) (5%)
1
Mr.Wellauer (Switzerland).
2
100% as target and 150% as maximum, as used for the allocation of variable compensation in the applicable year.
3
employees divided by the number of employees in scope for these expenses.
4. 2021 Executive Board Remuneration Report
The 2021 Executive Board Remuneration Report has been
prepared by the Remuneration Committee of the Supervisory
Board in accordance with the Dutch Civil Code(article art 2:135b)
and the Dutch Corporate Governance Code. The Remuneration
Committee was led by the Committee’s Chairman Ben J.
Noteboom. This report was approved by the Supervisory Board.
This report contains asummary of the Executive Board
Remuneration Policy that applied to 2021, the Executive Board
remuneration over the recent years and the 2022 Executive
Board performance indicators.
Executive Board Remuneration Policy in 2021
The Supervisory Board has the overall responsibility for
Aegon’s Remuneration Policies, including the Executive Board
Remuneration Policy. The Executive Board Remuneration Policy
that has been applied in 2021 was adopted at the Annual
General Meeting of Shareholders on May 15, 2020. This
policy is subject to annual reviews by the Supervisory Board.
The policy remains in place until anew or revised policy has been
adopted by the shareholders in accordance with the applicable
requirements from the Dutch Civil Code. The Supervisory Board
will submit aproposal to the shareholders to adopt apolicy at an
Annual Meeting of Shareholders at least every four years.
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Remuneration Report
The current policy contributes to Aegon’s strategy, long-term
interests and sustainability through the remuneration of the
Executive Board members in various ways:
•
The policy provides the Supervisory Board with the means
to attract, motivate and retain competent and experienced
Executive Board members for the long-term. This is essential
for executing Aegon’s strategy and safeguarding and
promoting its long-term interests and sustainability.
•
The leading performance indicator categories for successful
execution of Aegon’s strategy are Capital, Growth and
Strategy. To support the execution of Aegon’s strategy, the
policy makes these performance indicator categories
mandatory for the Executive Board member.
•
Aegon strives to create long-term value for its stakeholders
and the communities in which it operates. Due to the nature
of Aegon’s business, value created is often financial, but
it may also be social, economic, or environmental. The policy
directly aligns Executive Board member’s personal long-term
interests with those of Aegon and its shareholders by paying
asignificant part of the Executive Board members’ variable
compensation (two-thirds) in shares, which must be held for
5 years after completion of the performance period. The
pay-out in these restricted shares is combined with prohibiting
Executive Board members using personal hedging strategies
or insurance, which could undermine this long-term alignment
of interests. Additionally, Executive Board members are
aligned with the long-term interest of Aegon, its shareholders
and other stakeholders through the use of mandatory
performance indicator categories of Earnings, Shareholders
and Other Stakeholders.
•
Aegon is committed to doing business responsibly and
in asustainable way. Variable compensation of Executive
Board members can be adjusted downwards (i.e. malus)
or clawed-back in cases where certain performance has not
been achieved in asustainable way. This includes but is not
limited to: significant risk and compliance incidents,
insufficient response to such incidents and/or insufficient
evidence of embedding of good standards of practice, such
as sound and responsible business practices and integrity
of products and services delivered. Additionally, the policy
makes the performance indicator category Environmental,
Social and Governance (ESG), mandatory for Executive Board
members to support this approach to doing business.
Aegon’s Executive Board remuneration is subject to various rules
and regulations, including the Dutch Financial Supervision Act,
the Dutch Civil Code, the Dutch Corporate Governance Code and
the Solvency II Legal Framework. The most prominent
requirements thereof are:
•
The total variable compensation amount that is allocated
to an Executive Board member for aperformance year cannot
exceed 100% of the fixed compensation level.
•
Variable compensation should be based on amix of Aegon
and personal performance, with at least 50% weight on
non-financial performance.
•
A substantial portion of any variable compensation award
should be paid in anon-cash instrument (e.g. Aegon shares)
and should be deferred for at least 3 years. Additionally,
awarded shares should be restricted for 5 years. With a3-year
vesting period, this requires an additional holding period
of 2-years.
•
Aegon can claw-back any variable compensation which has
been paid (cash and shares) in specific circumstances such
as amaterial financial restatement or individual gross
misconduct.
These are also the main reasons why Aegon operates one
Executive Board variable compensation plan per year, with
asingle variable compensation award which is subsequently split
into cash and shares, rather than operating separate Short-Term
Incentive (cash) and Long-Term Incentive (share) Plans.
The Remuneration Committee may recommend policy changes
to the Supervisory Board. In that case, the Remuneration
Committee will conduct scenario analyses to determine
the long-term effects on the level and structure of compensation
granted to each Executive Board member, and reports their
findings to the Supervisory Board. The Supervisory Board can
subsequently decide on referring the proposed policy changes
to the Annual General Meeting of Shareholders for adoption.
The policy contains atemporary derogation clause, with rules
which are in accordance with the Dutch Civil Code. This means
derogation is only allowed in exceptional circumstances to serve
the long-term interest and sustainability of Aegon or to assure
its viability, for alimited period of time, when it stays in line
with the general spirit of the policy and when the details are
disclosed in the next remuneration report. This clause was not
used in 2021.
Total compensation
Total compensation for Executive Board members is defined
in the Executive Board Remuneration Policy as acombination
of fixed compensation, variable compensation, pension and other
benefits. The Supervisory Board determines and regularly reviews
the appropriate selection of remuneration elements and their
(maximum) remuneration level for Executive Board members
to ensure the structure remains competitive and provides proper
and risk-based incentives in line with Aegon’s risk appetite. The
fixed and variable compensation elements and their levels are
reviewed at least once ayear. The pension arrangements and
other benefits and their levels are reviewed at least every four
years. In its review, the Supervisory Board takes the specific role,
responsibilities, experience and expertise of Executive Board
members into account as well as internal and external reference
information:
•
The internal references are the compensation structure and
levels of the members of the Management Board
of AegonN.V. and the annual compensation changes of the
general employee population and senior managers within
Europe and the Netherlands specifically.
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About Aegon Non-financial information
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Financial information •
The external references are compensation trends in the
market, economic developments (e.g. inflation) as well
as quantitative assessments of the competitiveness against
apeer group of insurance companies in Europe and apeer
group of companies based in the Netherlands.
•
Additionally, the Remuneration Committee conducts
ascenario analysis in case of apolicy change to determine the
long-term effect on the remuneration structure and level
of each Executive Board member, and reports their findings
to the Supervisory Board.
The European Insurance peer group was selected by the following
criteria:
•
Industry: Insurance, with apreference for Life Insurance;
•
Size: Average market capitalization, employees, revenue and
total assets;
•
Geographic scope: Preferably companies which
operate globally;
•
Location: Headquarters based in Europe.
Based on these criteria, the current peer group consists
of the following 16 European Insurance companies: Ageas,
Assicurazioni Generali, Aviva, CNP Assurances, Helvetia, Legal &
General, Mapfre, Münchener Re, NN Group, Poste Italiane, Scor,
Swiss Life, Swiss Re, Talanx, Vienna Insurance Group and Zurich
Insurance Group. The last update of this peer group was in 2022,
when Helvetia, Poste Italiane, Scor and Vienna Insurance Group
were added, and Allianz, AXA, Prudential and RSA Insurance
Group were removed. This peer group differs from the European
peer group for the Supervisory Board, as the latter excludes
UK companies where non-executive directors typically have
different responsibilities compared to their continental European
counterparts.
The Dutch peer group was selected by the following criteria:
•
Industry: General Industry and listed on the AEX;
•
Size: Average Market Capitalization, Employees, Revenue and
Tot
al Assets;
•
Location: Headquarters based in the Netherlands.
Based on these criteria, this peer group consists of the following
12 AEX companies:, Akzo Nobel, Ahold Delhaize, ASML, DSM, ING
Group, Heineken, KPN, NN Group, Philips, Randstad, Signify and
Wolters Kluwer. This peer group is also reviewed each year and
was last updated in 2022 (replacing ABN AMRO by Signify).
The Supervisory Board will review both peer groups annually
and will amend them as necessary, within the above-mentioned
selection criteria, to ensure they continue to provide areliable
basis for comparison. Any change to the peer group will
be disclosed in the Remuneration Report.
The Remuneration Committee may recommend changes
to the compensation levels of the Executive Board members
in accordance with Remuneration Policy, based on the results
of this annual total compensation review and on discussions
with the Executive Board members regarding their remuneration
level and structure. Such recommendations would subsequently
be discussed by the Supervisory Board, which can approve, revise
or reject them.
The Supervisory Board discussed and approved the 2021
total compensation for the Executive Board, after taking
the Remuneration Committee’s review into consideration.
Fixed compensation
The fixed compensation for the Executive Board members is paid
in monthly instalments. The policy allows the fixed compensation
to be paid in cash and in shares. All Executive Board members
received their 2021 fixed compensation in cash.
The Supervisory Board may offer permanent or temporary gross
monthly fixed allowances when the Supervisory Board considers
this an appropriate alternative for other remuneration elements.
Variable compensation
Executive Board members are eligible for variable compensation
with atarget level of 80% of the fixed compensation level
(excluding allowances, if applicable), with athreshold level
of 50% and amaximum opportunity of 100% of fixed
compensation level.
The variable compensation award is based on performance
against aset of performance indicators, weights and target levels
that have been set by the Supervisory Board at the start of the
performance year. The performance indicators contribute
to Aegon’s strategy, long-term interests and sustainability, within
Aegon’s risk tolerance and should comply with the
following rules:
•
It contains amix of financial and non-financial performance
indicators, with at least 50% weight allocated to the
non-financial performance indicators in accordance with
article 1:118.3 of the Dutch Financial Supervision Act;
•
The maximum weight for unadjusted financial indicators
is determined by the Global Remuneration Framework and
is currently set at 50%.
•
It contains amix of Aegon and personal performance
indicators, which can range in weight between 50-80% and
20-50% respectively, depending on the Aegon priorities
of theperformance year.
•
At least 20% of the indicators has aretrospective 3-year
performance horizon, while the remainder has a1-year
performance horizon;
•
The indicators should coverthe following mandatory
performance indicator categories: Shareholders, Capital,
Earnings, Growth, Stakeholders, ESG and Strategy.
The Remuneration Committee and the Executive Board members
prepare aproposal for the performance indicators, weights and
target levels. These are subsequently reviewed by Aegon’s Risk
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Remuneration Report
Management team (i.e. the first ex-ante risk assessment) before
the Supervisory Board approves these, to ensure that:
•
The performance indicators and weights are in line with
the policy;
•
The financial performance indicators are consistent with the
risk tolerance statements;
•
The non-financial performance indicators are consistent with
risk tolerance levels, regulatory requirements, reasonable
stakeholder expectations and are supporting sound and
responsible business practices and integrity of the products
and services delivered.
The Remuneration Committee sends the proposal and
the ex-ante risk assessment to the Supervisory Board, which
can approve, revise or reject the proposal. After approval,
the Executive Board members are granted their conditional
variable compensation awards for the plan year. This conditional
award equals their at target variable compensation level, split
between 33.33% upfront cash and 66.67% deferred Aegon
shares. The grant price for the shares is equal to the volume
weighted average price on the Euronext Amsterdam stock
exchange for the period December 15 to January 15 at the start
of the plan year.
After the completion of the performance period, the
Remuneration Committee prepares arecommendation for the
allocation of avariable compensation award to each Executive
Board member. This recommendation is based on the actual
performance results compared to target levels and takes
asecond ex-ante risk assessment by the Risk Management team
into account. This risk assessment looks into whether there are
reasons for adownward adjustment of the intended variable
compensation award (malus) which were not take into account
yet, such as:
•
Significant risk or compliance incident(s);
•
Insufficient response to risk incident(s), compliance
incident(s), regulatory fine(s) and/or insufficient execution
of risk mitigating measures in response to these incidents;
•
Breaches of laws and regulations;
•
Insufficient evidence of embedding good standards
of practice;
•
Significant deficiencies or material weaknesses relating to the
Sarbanes-Oxley Act; and
•
Reputation damage due to risk events.
In this assessment possible risk mitigating behaviors are
also taken into account, such as remaining within risk limits,
risk reduction, risk avoidance, risk transfer and risk response
by the Executive Board member.
The Remuneration Committee sends its recommendation and
the second ex-ante risk assessment to the Supervisory Board,
which can approve, revise or reject the recommendation. This
Supervisory Board decision includes validating that, when taken
together, the results of the performance indicators represent
afair reflection of the overall performance of the Executive
Board member over the performance year.
The allocated variable compensation award is subsequently split
between 33.33% upfront cash (i.e. paid in the year following
the performance year) and 66.67% deferred shares. These shares
are deferred for a3-year period after allocation after which they
cliff-vest. Before vesting, the Risk Management team executes
an ex-post risk assessment which looks into whether there are
reasons for adownward adjustment of the originally allocated
variable compensation award (malus) which were not taken into
account yet. This risk assessment takes the same criteria into
consideration as the second ex-ante risk assessment. Based
on this assessment, the Remuneration Committee subsequently
prepares arecommendation how to pay-out the deferred portion
(i.e. unchanged or adjusted downward). The Remuneration
Committee sends its recommendation and the ex-post risk
assessment to the Supervisory Board. The Supervisory Board can
approve, revise or reject the recommendation.
Claw-back provision
Aegon’s Supervisory Board can claw-back variable compensation
that has already been paid to the Executive Board member
in case of amaterial financial restatement or individual gross
misconduct, after considering arisk assessment by Aegon’s Risk
Management team which looks into whether in hindsight the paid
amount should have been lower or nil. Examples of misconduct
are, but not limited to, asignificant breach of laws and/
or regulations, use of violence, either verbally or physically,
involvement with fraud, corruption or bribery, significant issues
due to evident dereliction of duty and/or discrimination of any
kind (for example age or gender).
Pension arrangements
The Executive Board members are entitled to pension
contributions that equal 40% of their fixed compensation level,
which consists of the following three parts:
•
Participation in Aegon’s defined contribution pension plan for
NL-based employees, for their eligible earnings up to EUR
110,111 (2021 threshold set by Dutch law).
•
Participation in Aegon’s defined contribution pension plan for
NL-based employees, for their fixed income above
EUR 110,111.
•
An additional gross allowance for pension to make the sum
of these three pension contributions equal to 40% of their
fixed compensation level.
The Executive Board members receive pension contributions
that are somewhat higher compared to NL-based employees
of similar age (ca. 10-15% difference). This is done to achieve
acompetitive total compensation level. Please note
the Supervisory Board will consider discontinuing the additional
gross allowance for new Executive Board members, while
ensuring their total compensation level stays competitive,
and including this as apolicy change in the next update
of the Executive Board Remuneration Policy.
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Financial information
Other benefits
Other benefits include non-monetary benefits (e.g. company car),
social security contributions by the employer, and tax expenses
borne by Aegon.
Aegon does not grant Executive Board members personal loans,
guarantees or other such arrangements, unless in the normal
course of business and on terms applicable to all employees, and
only with the approval of the Supervisory Board.
Terms of Engagement
Members of the Executive Board are appointed for four years
and may then be re-appointed for successive mandates also for
aperiod of four years. Executive Board members have aboard
agreement with AegonN.V., rather than an employment contract.
Members of the Executive Board may terminate their board
agreement with anotice period of three months. The Supervisory
Board may terminate the board agreement by giving six months’
notice if it wishes to terminate the agreement.
The Supervisory Board may entitle Executive Board members
to atermination payment up to or equal to the total annual
fixed compensation level. This payment is not allowed in case
of early termination at the initiative of the Executive Board
member (unless due to imputable acts or omissions of Aegon),
imputable acts or omissions by the Executive or failure of Aegon
as acompany during the appointment term of the Executive
Board members. Mr.Friese and Mr.Rider have atermination
clause included in their board agreement. Mr.Wynaendts was not
entitled to atermination payment when his board agreement was
terminated in 2020.
Executive Board remuneration in recent years
In this section you will find more details related
to the remuneration that has been allocated and paid
to the Executive Board members. It covers the allocated
remuneration (2019-2021), the calculation of the 2021 variable
compensation, the pay-out schedule of variable compensation
(2019-2025), the recognized IFRS expenses for remuneration
(2019-2021), the remuneration that was awarded and due
in 2020 and 2021, and the annualized total compensation
overview (2017-2021).
Allocated remuneration (2019-2021)
The first table shows the remuneration that has been allocated
to the Executive Board members, for the performance years
2019, 2020 and 2021, in accordance with the Executive Board
remuneration policy that applied at the time. There were
no deviations from the policy in these years.
Allocated compensation
Fixed Variable Total
In EUR thousand
compensation compensation Pension Other Benefits compensation
Lard Friese
2021
1,485 1,359 594 77 3,515
2020
1)
931 634 373 49 1,987
Matt Rider
2021
2)
968 884 387 67 2,306
2020
941 640 376 67 2,024
2019
931 743 373 77 2,123
Alex Wynaendts
2020
3)
496 302 337 97 1,233
2019
1,314 1,048 1,302 252 3,916
All Executive Board members
2021
2,453 2,243 981 144 5,821
2020
1)
2,368 1,577 1,086 213 5,244
2019
2,245 1,791 1,675 329 6,039
1
arrangement of EUR 1,228 thousand that Mr. Friese received when joining Aegon in March 2020.
2
3
2019, Mr. Wynaendts participated in a defined benefit arrangement. This arrangement included a back service liability which reflected the increase of his fixed
compensation in 2016 and 2018, as well as low interest rates and the final settlement made in May 2019. Additionally, Mr. Wynaendts was entitled to a gross
payment of 28% of his fixed compensation level as part of a grandfathered pension arrangement.
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Calculation of 2021 variable compensation
Subject to the adoption of the annual accounts at the General
Meeting of Shareholders on May 31, 2022, Mr.Friese has
been awarded EUR1,359 thousand in conditional variable
compensation for the 2021 performance year (92% of fixed
compensation) and Mr.Rider EUR884 thousand (91% of fixed
compensation). The following table shows how these awards
compare to their minimum, target and maximum variable
compensation opportunity levels and how the awards will
be paid out.
2021 variable compensation
Minimum Target Maximum
Result
Pay-outLard Friese
In % of fixed compensation
50% 80% 100% 92%
In total (EUR thousand)
743 1,188 1,485
1,359
Split in 33.33% cash and 66.67% shares
In cash (EUR thousand)
247 396 495 453 Paid upfront in 2022
In shares
1)
150,340 240,544 300,680
275,182
Deferred for 3 years (2025)
Matt Rider
In % of fixed compensation
50% 80% 100%
91%
In total (EUR thousand)
484 775 968 884 Split in 33.33% cash and 66.67% shares
In cash (EUR thousand)
161 258 323 295 Paid upfront in 2022
In shares
1)
98,039 156,863 196,078 178,961 Deferred for 3 years (2025)
1
period December 15, 2020 to January 15, 2021. After vesting in 2025, these shares are subject to an additional 2-year holding period.
The 2021 variable compensation awards for both Executive
Board members were based on amix of 70% Group performance
and 30% personal performance, for which the results are
summarized in the first table below. The Group performance
is initially measured on a50-100-150% performance scale,
which is used internally to fund the employee bonus pools.
The total Group performance result on this scale (123%)
is subsequently converted in aresult on the 50-80-100% scale
that applies to the variable compensation of the Executive Board
members (which equals 89%). Their personal performance results
are directly scored on the 50-80-100% scale. The second and
third table below, contain more detailed information
on the
Groupand personal performance indicators respectively.
For Aegon bonus pools
Lard Friese Matt Rider
2021 performance indicators
Weight Target Outcome
Result
1)
Weight Result
2)
Weight Result
2)
Group performance
Free cash flows
3)
20% 400 685 150%
70% 89% 70% 89%
Relative total shareholder return
10% Rank 5 Rank 11 0%
Operating result
10% 1,394 1,906 150%
Addressable expenses
10% 2,933 2,903 110%
Market consistent value of new business
10% 319 538 150%
Transformation program: Earnings contribution
10% 100% 115% 138%
Transformation program: Timely initiative execution
10% 100% 102% 105%
Transformation program: Timely milestone completion
10% 100% 116% 139%
Transformation program: Timely health milestone completion
10% 100% 117% 142%
Personal performance
Strategic Roadmap development
10% 100% 5% 100%
Execution of capital initiatives in line with Strategic Roadmap
10% 100% 5% 95%
Women in senior management
5% 80% 5% 80%
ESG strategy development
5% 100%
Finance strategy execution
15% 100%
Total performance result
123% 92% 91%
1
2
50-80-100% performance scale (89%).
3
result (EUR 729 million).
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2021 Aegon performance indicators
Definition
Free cash flows Free cash flows represent cash flows from remittances from the units less the Holding funding
and operating expenses. The 2021 target was based on the 2021-2023 target which was
disclosed at the Capital Market Day in December 2020.
Relative total shareholder return Aegon’s position relative to 7 US and 7 non-US peers when looking at Total Shareholder Return
for aretrospective 2-year performance period (2020-2021). These peers were selected for
being the most similar to Aegon based on their index listing, industry classification, 5-year
monthly Beta, Market Capitalization and Total Revenue
1)
.
Operating result Operating result reflects our profit from underlying business operations and excludes
components that relate to accounting mismatches that are dependent on market volatility,
updates to best estimate actuarial and economic assumptions and model updates or relate to
events that are considered outside the normal course of business. The 2021 target was based
on the 2021 budget.
Addressable expenses Represents the adjusted operating expenses excluding deferable expenses. The 2021 target
was based on the 2021-2023 target which was disclosed at the Capital Market Day in
December 2020.
Market consistent value of new business Represents how much value the sale of new insurance policies is generating for the company.
This value represents the present value of our best estimate of incoming premiums and
outgoing claims, benefits and expenses related to these new sales. The 2021 target was based
on the 2021 budget.
Transformation program:
Earningscontributions
Measures the expected run-rate earnings contribution for performance improvement initiatives
that moved to the execution phase in 2021, compared to the 2021 targets in the
transformation program.
Transformation program:
Timelyinitiativeexecution
Measures whether performance improvement initiatives moved to the execution phase in time,
compared to the 2021 targets in the transformation program.
Transformation program:
Timelymilestonecompletion
Measures the timely milestone completion of the performance improvement initiatives,
compared to the 2021 targets in the transformation program.
Transformation program:
Timelyhealthmilestone completion
Measures the timely organizational health milestone completion of the performance
improvement initiatives, compared to the 2021 targets in the transformation program.
1
AG, 5) ASR Nederland NV, 6) Brighthouse Financial Inc, 7) MetLife Inc, 8) Prudential Financial Inc, 9) Lincoln National Corp, 10) Assicurazioni Generali SpA, 11)
Aegon NV, 12) Prudential PLC, 13) Baloise Holding AG, 14) Unum Group and 15) Athene Holding Ltd / Helvetia Holding. The Athene Holding Ltd / Helvetia
Holding result is a blend of the initial peer Athene and the back-up peer Helvetia, which replaced Athene per March 9, 2021, in accordance with our plan rules,
following the merger with Apollo announced by Athene.
Lard Friese Target Result
10% Strategic
Roadmap
Development
Develop Strategic Roadmap for
strategic assets and assets outside of
the core perimeter.
100%. Building on the Aegon strategy, extensive roadmaps were delivered for
various strategic assets (invest in profitable growth by expanding customer base
and increasing margins) and assets outside of the core perimeter (tight capital
management, bias to exit and restructuring).
10% Execution of
capital initiatives
in line with
Strategic
Roadmap
Complete management actions in
relation to financial assets and assets
outside of the core perimeter.
100%. The organization and governance to manage US and NL financial assets
were significantly strengthened. Reduced Aegon’s risk profile by actions in the US
related to long-term care rate increases, lump-sum buy-out program and the
dynamic hedging of the legacy Variable Annuities portfolio, resulting in alower
cost of capital. Reduced risk profile and strengthened capital position of NL Life.
On assets outside the core perimeter, prepared and supported the closing of the
announced sale of CEE and Turkey to VIG, sold Stonebridge, ended funding of
GoBear and sold US portfolio of fintech and insurtech companies.
5% Women in
Senior
Management
Increase the number of women in
Aegon’s senior management layer
worldwide to at least 34%.
80%. At the end of 2021, 34% of the people in Aegon’s senior management layer
were women.
5% ESG Strategy
Development
Further integrate ESG into Group
Strategy.
100%. Announced Group-wide commitment to transition general account
investment portfolio to net-zero greenhouse gas emissions by 2050, joined the
Net-Zero Asset Owner Alliance, set aclear 2025 reduction target, and committed
to regularly engage with most carbon intensive companies in our portfolio.
Established new sustainability governance, prepared migration of sustainability
reporting, selected two priority sustainability themes (climate change and
inclusion & diversity) and embedded these priorities in the redefined purpose and
behaviors.
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Matt Rider Target Result
5% Strategic
Roadmap
Development
Support development of Strategic
Roadmap for strategic assets and
assets outside of the core perimeter.
100%. Building our the Aegon strategy, supported the delivery of extensive
roadmaps for various strategic assets (invest in profitable growth by expanding
customer base and increasing margins) and assets outside of the core perimeter
(tight capital management, bias to exit and restructuring).
5% Execution of
capital initiatives
in line with
Strategic
Roadmap
Support completion of management
actions in relation to financial assets
and assets outside of the core
perimeter.
95%. Supported actions that significantly strengthened the organization and
governance to manage US and NL financial assets. Reduced Aegon’s risk profile by
actions in the US related to long-term care rate increases, lump-sum buy-out
program and the dynamic hedging of the legacy Variable Annuities portfolio,
resulting in alower cost of capital. Reduced risk profile and strengthened capital
position of NL Life. On assets outside the core perimeter, prepared and supported
the closing of the announced sale of CEE and Turkey to VIG, sold Stonebridge,
ended funding of GoBear and sold US portfolio of fintech and insurtech companies.
5% Women
inSenior
Management
Increase the number of women in
Aegon’s senior management layer
worldwide to at least 34%.
80%. At the end of 2021, 34% of the people in Aegon’s senior management layer
were women.
15% ESG Strategy
Development
Complete the 2021 milestones from
the Finance Strategy.
100%. Completed the maximum number of milestones. Implemented
organizational efficiencies, completed scheduled IFRS 17 implementation actions,
transitioned back to quarterly reporting, improved management reporting and ran
effectively operating control environment.
Pay-out schedule variable compensation (2019-2025)
The following tables show for each current and former Executive
Board member how much variable compensation has been paid
in shares and cash respectively in 2019, 2020 and 2021 and
how much conditional variable compensation is scheduled to be
paid-out in the coming years. The vesting price of the shares
were: EUR4.287 on May 17, 2019, EUR2.079 on May 15, 2020,
and EUR3.934 on June 3, 2021. In 2020, the pay-out schedule
of variable compensation changed from tranche-vesting to cliff-
vesting. Shares allocated for plan years up to and including
2019 are subject to an additional three-year holding period
after pay-out. Shares for the plan years from 2020 onwards are
subject to an additional two-year holding period after pay-out.
Years of vesting
Shares by plan year
VWAP
1)
2019 2020 2021 2022 2023 2024 2025 Total
Lard Friese
2020
EUR 4.083 - - - - - 103,580 - 103,580
2021
EUR 3.293 - - - - - 275,182 275,182
Total number of shares
- - - - - 103,580 275,182
Matt Rider
2017
EUR 5.246 9,508 9,508 9,508 - - - - 28,524
2018
EUR 5.405 28,110 14,054 14,054 14,054 - - - 70,272
2019
EUR 4.162 - 35,693 17,847 17,847 17,847 - - 89,234
2020
EUR 4.083 - - - - - 104,547 - 104,547
2021
EUR 3.293 - - - - - - 178,961 178,961
Total number of shares
37,618 59,255 41,409 31,901 17,847 104,547 178,961
Alex Wynaendts
2015
EUR 6.106 15,110 - - - - - - 15,110
2016
EUR 5.128 20,361 20,361 - - - - - 40,722
2017
EUR 5.246 21,866 21,866 21,866 - - - - 65,598
2018
EUR 5.405 39,314 19,656 19,656 19,656 - - - 98,282
2019
EUR 4.162 - 50,345 25,174 25,174 25,174 - - 125,867
2020
EUR 4.083 - - - - - 49,346 - 49,346
Total number of shares
96,651 112,228 66,696 44,830 25,174 49,346 -
Darryl Button
2015
EUR 6.106 11,811 - - - - - - 11,811
2016
EUR 5.128 14,808 14,808 - - - - - 29,616
Total number of shares
26,619 14,808 - - - - -
1
instance for the 2021 plan year, this is the VWAP for the period December 15, 2020 to January 15, 2021.
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Years of vesting
Cash by plan year (in EUR)
2019 2020 2021 2022 2023 Total
Lard Friese
2020
- - 211,431 - - 211,431
2021
- - - 452,981 - 452,981
Total cash
- - 211,431 452,981 -
Matt Rider
2017
49,878 49,878 49,878 - - 149,634
2018
151,931 75,964 75,964 75,964 - 379,823
2019
- 148,560 74,278 74,278 74,278 371,394
2020
- - 213,404 - - 213,404
2021
- - - 294,589 - 294,589
Total cash
201,809 274,402 413,524 444,831 74,278
Alex Wynaendts
2015
92,261 - - - - 92,261
2016
104,412 104,412 - - - 208,824
2017
114,710 114,710 114,710 - - 344,130
2018
212,490 106,243 106,243 106,243 - 531,219
2019
- 209,548 104,772 104,772 104,772 523,864
2020
- - 100,725 - - 100,725
Total cash
523,873 534,913 426,450 211,015 104,772
Darryl Button
2015
78,431 - - - - 78,431
2016
74,674 74,674 - - - 149,348
Total cash
153,105 74,674 - - -
The Executive Board members have atime-based shareholding
requirement of 5 years after the initial allocation of their
variable compensation in shares (i.e. a3-year deferral period
before vesting and an additional 2-year holding period after
vesting). Additionally, Mr.Friese and Mr.Rider voluntarily agreed
to aminimum shareholding requirement of 100% of their
fixed compensation level, once they have reached that level.
For this purpose, both vested and unvested shares that have
been allocated as compensation will be included in the count,
with the unvested share allocations valued at what they would
be worth after tax. For the vested share allocations, this tax has
already been deducted and paid. After the allocation of the 2021
variable compensation award, Mr.Friese will hold 87% of his
fixed compensation in shares and Mr.Rider 124%, based
on the share price on March 1, 2022.
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Recognized IFRS expenses of remuneration (2019-2021)
The following table contains the recognized IFRS expenses
of the remuneration of the Executive Board members
in the calendar years 2019, 2020 and 2021. These numbers
deviate from the above-mentioned allocated remuneration
amounts, as the deferred parts of variable compensation and
Mr.Friese’s sign-on arrangement are expensed over multiple
calendar years, and the shares are included at their fair value
instead of the grant price.
IFRS expenses for compensation
Fixed Variable
In EUR thousand
compensation compensation Pension Other Benefits Total
Lard Friese
2021
1)
1,576 692 594 77 2,939
2020
1)
1,869 282 373 49 2,572
Matt Rider
2021
968 583 387 67 2,005
2020
941 528 376 67 1,912
2019
931 627 387 77 2,022
Alex Wynaendts
2020
2)
496 497 337 97 1,427
2019
1,314 976 1,243 252 3,786
All Executive Board members
2021
2,545 1,275 981 144 4,944
2020
3,306 1,307 1,086 213 5,911
2019
2,245 1,604 1,630 329 5,808
1
These were EUR 91 thousand in 2021 and EUR 938 thousand in 2020.
2
Awarded and due remuneration (2020-2021)
In line with the European guidelines on the standardized
presentation of the remuneration report, you find
the remuneration that was awarded and due to the Executives
in the calendar years 2020 and 2021 in the table below. These
amounts were awarded and due in accordance with the Executive
Board remuneration policy that applied at the time and there
were no deviations.
Fixed Variable One-off Pension Total Ratio Fixed/Variable
3)
In EUR thousand
Salary Benefits Upfront
1)
Deferred
2)
Lard Friese 2021
4)
1,485 77 211 - 255 594 2,622 82% / 18%
2020
5)
931 49 - - 565 373 1,918 71% / 29%
Matt Rider 2021
968 67 213 363 - 387 1,999 71% / 29%
2020
941 67 223 175 - 376 1,782 78% / 22%
1
vesting. For example, the upfront cash and shares of the 2020 variable compensation award that were paid in 2021.
2
shares are valued at their price at vesting. For example, the deferred cash and shares of the 2017-2019 variable compensation awards that were paid in 2021.
3
divided by the Total.
4
to December 31). The one-off item concerns the payments of the 2020 sign-on arrangement that were deferrred for one year (EUR 105 thousand in cash and
37,980 shares at avesting price of EUR 3.934).
5
concerns the upfront payments of the 2020 sign-on arrangement (EUR 427 thousand in cash and 66,526 shares at avesting price of EUR 2.079).
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Annualized total compensation overview (2017-2021)
The table below shows the total compensation that was awarded
and due in the last five calendar years on an annualized basis and
the year-on-year annual change in total compensation. Please
note that therefore several amounts have been annualized,
while in practice these were pro-rated for the period during
which the individual served as Executive Board member. These
amounts were awarded and due in accordance with the Executive
Board remuneration policy that applied at the time and there
were no deviations. Additionally, the table shows the Aegon
net result, aproxy of the financial and non-financial business
performance, the vesting price of the Aegon shares, the inflation
in the Netherlands and the average employee compensation over
the same period.
In EUR thousand
Annualized
2017 2018 2019 2020
2021
Lard Friese Awarded and due
- - - 2,719
2,748
Change
- - - - 1%
Matt Rider (as of May 19, 2017) Awarded and due
1,357 1,670 1,799 1,824
2,052
Change
- 23% 8% 1% 12%
Alex Wynaendts Awarded and due
4,431 4,969 3,806 3,268
-
Change
- 12% (23%) (14%) -
Aegon net result (EU-IFRS) In EURmillion
2,358 741 1,525 55
1,701
Aegon business performance
1)
Target = 100%
121% 106% 79% 57% 123%
Vesting price Aegon shares In EUR
4.423 5.848 4.287 2.079 3.934
Inflation in the Netherlands Consumer Price Index
1.4% 1.7% 2.6% 1.3% 2.7%
Average employee compensation
2)
Total compensation
102 104 115 110 105
Annual change
2% 11% (4%) (5%)
1
100% as target and 150% as maximum, as used for the allocation of variable compensation in the applicable year.
2
employees divided by the number of employees in scope for these expenses.
2022 Executive Board performance indicators
Looking ahead to the 2022 performance years, the 2022
performance indicators for Mr.Friese and Mr.Rider will be based
again on amix of 70% Group performance and 30% personal
performance. The first table below shows the weight that
is assigned to each performance indicator. The second table
contains asummary of the performance indicator definitions.
2022 performance indicator weights
For Aegon bonus pools
Lard Friese Matt Rider
Group performance
Free cash flows
20%
70% 70%
Relative total shareholder return
10%
Operating result
10%
Addressable expenses savings
10%
Market consistent value of new business
10%
Transformation program: Earnings contribution
10%
Transformation program: Timely initiative execution
10%
Transformation program: Timely milestone completion
10%
Employee engagement
10%
Personal performance
Strategic Roadmap development
10% 5%
Execution of capital initiatives in line with Strategic Roadmap
10% 5%
Sustainabiity integration and execution
5% 5%
Women in senior management
5% 5%
Finance strategy execution
10%
Total weight
100% 100% 100%
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2022 performance indicators Definition
Free cash flow
Free cash flows represent cash flows from remittances from the units less the Holding funding
and operating expenses. For 2022 it will be measured on a retrospective 2-year performance
period (2021-2022). The 2021-2022 target is based on the 2021-2023 cumulative free cash
flows target that was disclosed at the Capital Market Day in December 2020 and the updated
guidance in February 2022.
Relative total shareholder return
Aegon’s position relative to 7 US and 7 non-US peers when looking at Total Shareholder
Return for a retrospective 3-year performance period (2020-2022). These peers were selected
for being the most similar to Aegon based on their index listing, industry classification, 5 year
monthly Beta, Market Capitalization and Total Revenue
1)
.
Operating result
Operating result reflects our profit before tax from underlying business operations and
excludes components that relate to accounting mismatches that are dependent on market
volatility, updates to best estimate actuarial and economic assumptions and model updates or
events that are considered outside the normal course of business. The 2022 target is based on
the 2022 budget.
Addressable expenses savings
Addressable expenses are expenses reflected in the operating result, excluding deferrable
acquisition expenses, expenses in joint ventures and associates and expenses related to
operations in CEE countries. For 2022 it will be measured on a retrospective 2-year perfor-
mance period (2021-2022). The 2021-2022 target is based on the 2021-2023 savings target
that was disclosed at the Capital Market Day in December 2020.
Market consistent value of new business
Represents how much value the sale of new insurance policies is generating for the company.
This value represents the present value of our best estimate of incoming premiums and
outgoing claims, benefits and expenses related to these new sales. The 2022 target is based
on the 2022 budget.
Transformation program: Earnings contributions
Measures the expected cumulative run-rate earnings contribution for performance
improvement initiatives that moved to the execution phase during the retrospective 3-year
performance period 2020-2022, compared to the cumulative 2020-2022 target in the
transformation program.
Transformation program: Timely initiative execution
Measures whether performance improvement initiatives moved to the execution phase in time,
compared to the 2022 targets in the transformation program.
Transformation program: Timely milestone completion
Measures the timely milestone completion of the performance improvement initiatives,
compared to the 2022 targets in the transformation program.
Employee Engagement
Increase Aegon’s employee engagement to at least 70% in 2022 (+2% compared to 2021).
Strategic Roadmap Development
Further evolve the Strategic Roadmap for strategic assets and non-core assets in 2022.
Execution of capital initiatives in line with
Strategic Roadmap
Complete management actions in relation to financial assets and non-core assets in 2022.
Sustainability integration and execution
Complete milestones in 2022 related to further integrating our ESG priorities in Aegon’s
strategy, sustainability reporting and reaching our 2025 carbon emission reduction target.
Women in Senior Management
Increase the number of women in Aegon’s senior management layer worldwide to at least
36% in 2022 (2% increase compared to 2021).
Finance Strategy Execution
Complete the 2022 milestones from the Finance Strategy.
1
AG, 5) ASR Nederland NV, 6) Brighthouse Financial Inc, 7) MetLife Inc, 8) Prudential Financial Inc, 9) Lincoln National Corp, 10) Assicurazioni Generali SpA, 11)
Aegon NV, 12) Prudential PLC, 13) Baloise Holding AG, 14) Unum Group and 15) Athene Holding Ltd / Helvetia Holding. The Athene Holding Ltd / Helvetia
Holding result is a blend of the initial peer Athene and the back-up peer Helvetia, which replaced Athene per March 9, 2021, in accordance with our plan rules,
following the merger with Apollo announced by Athene.
Aegon Integrated Annual Report
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72
Remuneration Report
About Aegon Non-financial information
Governance and risk management
Financial information
Risk management
As an insurance group, Aegon manages risk for the benefit of its
customers and other stakeholders. The Company is exposed
to arange of underwriting, operational and financial risks.
Aegon’s risk management and internal control systems are
designed to ensure that these risks are managed effectively and
efficiently in away that is aligned with the Company’s strategy.
For Aegon, risk management involves:
•
Understanding risks that the Company faces;
•
Maintaining agroup-wide framework through which the
risk-return trade-off associated with these risks can
be assessed;
•
Maintaining risk tolerances and supporting policies to limit
exposure to aparticular risk or combination of risks; and
•
Monitoring risk exposures and actively maintaining oversight
of the Company’s overall risk and solvency positions.
This section provides adescription of Aegon’s risk
management framework.
Enterprise Risk Management (ERM) framework
Aegon’s ERM framework is designed and applied to identify risks
that may affect Aegon and manage individual and aggregate
risks within Aegon’s set risk tolerances. The ERM framework
covers the ERM components as identified by the Committee
of Sponsoring Organizations of the Treadway Commission
(COSO). The ERM framework applies to all of Aegon’s businesses
for which it has operational control.
Risk strategy, risk appetite statement and
risktolerances
The setting of the risk strategy starts with the principle that
taking arisk should be based on serving acustomer’s need.
The competence to manage the risk is assessed and Aegon’s risk
preferences are formulated, taking into account Aegon’s risk
capacity. The process results in atargeted risk profile, reflecting
the risks Aegon wants to keep on the balance sheet, and the risks
Aegon would like to avoid.
Aegon’s risk appetite statement and risk tolerances are
established to assist management in carrying out Aegon’s
strategy within the boundaries of the resources available to
Aegon. Aegon’s risk appetite statement is to:
“Fulfil our promises towards our customers and other
stakeholders by delivering sustainable and growing long-term
free cash flow through strong resilience in solvency and liquidity,
with ahealthy balance in exposures, and by running aresponsible
business with effective controls.”
Following from the risk appetite statement, risk tolerances are
defined on:
•
Solvency, including Cash Capital at Holding and capital
generation, to ensure that Aegon remains solvent even under
adverse scenarios.
•
Liquidity, to ensure that Aegon remains liquid even under
extreme scenarios.
•
Risk balance, to ensure ahealthy balance of risk exposures
that supports delivering on our capital generation and return
on capital targets.
•
Responsible business with effective controls, which
acknowledges an acceptable level of operational risk and
stresses alow tolerance for (lack of) actions which could lead
to material adverse risk events that result in breaking
promises or not meeting reasonable expectations
of customers, legal breaches or reputational damage.
The tolerances are further developed into measures, thresholds
and indicators that have to be complied with to remain within
the tolerances.
Risk universe
Aegon’s risk universe is structured to reflect the type of risks
to which the Company is exposed. The identified risk categories
are financial risk (e.g. interest rate risk and credit risk),
underwriting risk (e.g. longevity and policyholder behavior), and
operational risk(e.g. fraud, business disruption and non-financial
risks, including sustainability risks like climate change). Specific
risk types are identified within these risk categories. These
risks, internal or external, may affect the Company’s operations,
earnings, share price, value of its investments, or the sale
of certain products and services. In the context of Aegon’s risk
strategy, arisk appetite is set for the three identified risk
categories (see table below).
Risk category Description Appetite
Underwriting
The risk of incurring losses when actual experience deviates from Aegon’s best
estimate assumptions on mortality, longevity, morbidity, policyholder behavior,
P&C claims and expenses used to price products and establish technical
provisions.
Medium to high - Underwriting risk is Aegon’s
core business and meets customer needs.
Financial
The risk of incurring financial losses due to movements in financial markets and
the market value of balance sheet items. Elements of financial risk are credit
risk, investment risk, interest rate risk and currency risk.
Low to medium - Accepted where it meets
customer needs and the risk return profile is
acceptable.
Operational
The risk of losses resulting from inadequate or failed internal processes and
controls, people and systems or from external events, such as processing errors,
legal and compliance issues, natural or man-made disasters, and cybercrime.
Low - Accepted as anecessary condition of
conducting business, but mitigated as much as
possible in an economically efficient manner.
Aegon Integrated Annual Report
2021
About Aegon Non-financial information
Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information73
Risk management
Risk and capital management
Risk and capital management
Risk management
Risk management
Risk identification and risk assessment
Aegon has identified arisk universe that captures all known
material risks to which the Company is exposed. To assess all
risks, Aegon maintains adocumented, consistent methodology
for measuring risks. The risk metrics are embedded in Aegon’s key
reports and are used for decision making.
Risk response
Aegon distinguishes the following risk responses:
•
Risk acceptance when the exposure is within the set risk
tolerance; and
•
Risk control, transfer or avoidance when the exposure exceeds
the established risk tolerance or if cost-benefit analysis
supports further actions.
Risk monitoring and reporting
Risks are monitored regularly and reported internally on at least
aquarterly basis. The impact of key financial, underwriting,
and operational risk drivers on earnings and capital is shown
in the quarterly risk dashboards for the various risk types, both
separately and on an aggregate basis.
Risk exposures are compared with the measures and indicators
as defined by Aegon’s risk tolerance statements. Reporting also
includes compliance and incident reporting. Finally, the main
risks derived from Aegon’s strategy and day-to-day business
are discussed, as well as forward looking points for attention.
If necessary, mitigating actions are taken and documented.
Risk control
A system of effective controls is required to mitigate the risks
identified. In Aegon’s ERM framework, risk control includes risk
governance, risk policies, internal control framework, model
validation, risk embedding, risk culture and compliance.
Most significant risks
The most significant risks Aegon faces in terms of exposures and
required capital are:
•
Financial markets risks (particularly related to credit, equity,
and interest rates);
•
Underwriting risk (particularly related to longevity and
policyholder behavior); and
•
Operational risks (particularly related to reputation and
continuity of operations).
Description of risk types
Financial risk
Credit risk
Credit risk is the risk of economic loss due to the deterioration
in the financial condition of counterparties, either through fair
value losses on traded securities or through defaults on traded
securities, loans, and mortgages. Having awell-diversified
investment portfolio means that Aegon can accept credit spread
risk to earn aliquidity premium on assets that match liabilities.
The focus is on high-quality securities with low expected defaults
because Aegon has alow appetite for default risk.
Equity market risk and other investment risks
Aegon runs the risk that the market value of its investments
changes. Investment risk affects Aegon’s direct investments
in the general account, indirect investments for the account
of policyholders and agreements where Aegon relies
on
counterparties, such as reinsurance and derivative counterparties.
Aegon has alow preference for investments in equity securities
via the general account. Equity investments generate an equity
risk premium over the long run, but in combination with ahigh
capital charge result in arelatively low return on capital. Aegon
has experience and expertise in managing complex investment
guarantees and leverages this capability by providing customers
access
to a
range of investment strategies and guaranteed benefits.
Interest rate risk
Aegon is exposed to interest rates as both its assets and
liabilities are sensitive to movements in long- and short-term
interest rates, as well as to changes in the volatility of interest
rates. Aegon accepts interest rate risk in order to meet customer
needs. However, as no spread is earned on this interest rate risk,
Aegon prefers to mitigate the risk to the extent possible.
Currency exchange rate risk
As an international company, Aegon conducts business
in different currencies, and is therefore exposed to movements
in currency exchange rates. Foreign currency exposure exists
primarily when policies are denominated in currencies other than
the issuer’s functional currency. Currency risk in the investment
portfolios backing insurance and investment liabilities is managed
using asset liability matching principles. Assets allocated
to equity are held in local currencies to the extent shareholders’
equity is required to satisfy regulatory and self-imposed capital
requirements. Currency exchange rate fluctuations therefore
affect the level of shareholders’ equity as aresult of converting
local currencies into euro (EUR), the Group’s reporting currency.
The Company holds its capital base in various currencies
in amounts that correspond to the book value of individual
business units.
Liquidity risk
Aegon needs to maintain sufficient liquidity to meet short-
term cash demands, not only under normal conditions, but also
in the event of acrisis. To that end, Aegon has put astrong
liquidity management strategy in place. The Company considers
extreme liquidity stress scenarios, including the possibility
of prolonged ‘frozen’ capital markets, an immediate and
permanent rise in interest rates, and policyholders withdrawing
liabilities at the earliest conceivable date. In addition,
the Company has liquidity stress planning in place.
Please refer to note 4 ‘Financial Risk’ to Aegon’s financial
statements.
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2021
74
Risk management
About Aegon Non-financial information
Governance and risk management
Financial informationUnderwriting risk
Underwriting risk relates to the products sold by Aegon’s
insurance entities and is the risk of incurring losses when actual
experience deviates from Aegon’s best estimate assumptions on
mortality, morbidity, policyholder behavior, P&C claims and
expenses. Aegon has a preference to selectively grow
underwriting risk, but this must work hand-in-hand with a strong
underwriting process. Aegon’s earnings depend, to a significant
degree, on the extent to which claims experience is consistent
with assumptions used to price products and establish technical
provisions. Changes in, among other things, morbidity, mortality,
longevity trends and policyholder behavior may have a
considerable impact on the Company’s income. Assumptions used
to price products and establish technical provisions are reviewed
on a regular basis. Please refer to note 3 ‘Critical accounting
estimates and judgment in applying accounting policies’ to
Aegon’s consolidated financial statements for further
information.
Operational risk
Like other companies, Aegon faces operational risk resulting from
operational failures or external events, such as processing errors,
inaccuracies in models used, negative behavior by personnel,
non-compliance to laws and regulations, and natural or man-
made disasters, including climate change. In addition, major
programs or organizational transformations may also increase
potential for operational risks. Aegon’s systems and processes
are designed to support complex products and transactions, and
to help protect against such issues as system failures, business
disruption, financial crime, and breaches of information security.
Aegon monitors and analyses these risks, and retains flexibility
to update and revise where necessary. Aegon’s operational
risk universe distinguishes eight risk types: business risk; legal,
regulatory, conduct and compliance risks; tax risk; financial
crime risk; processing risk; information technology and business
disruption risk; people risk; and facility risk. These level 1 risk
types are split out into more granular level 2 risk types. The more
granular risk types include, amongst others, information security
risk, conduct risk, fraud risk, Environmental, Social & Governance
(ESG) risk, and pandemic risk. The impact of COVID-19 on our risk
management system is highlighted below.
Pandemic risk - COVID-19
COVID-19 impacts the company through financial markets and
underwriting developments (mortality rates), and also leads
to operational risks. From the onset of the COVID-19 pandemic,
targeted control assessments were conducted across all
regions to monitor the operational risk impact of the pandemic.
The assessments showed that the controls continued to operate
effectively. The assessments covered the impact on core business
processes, the working from home environment and the related
information security risk, service levels to customers, and
the health of employees. In addition, ongoing attention is being
directed at third party risk with the aim to monitor financial
health, security and capacity aspects as well as to provide support
where needed, to avoid negative knock-on effects for Aegon.
Business environment scan
In addition to the management of described risk types, Aegon
performs abusiness environment scan. The aim is to identify
emerging, fundamental/structural trends, risks and opportunities
in our operating environment, which could have significant
impact on value creation and Aegon’s financial strength,
competitive position, or reputation. It is acritical, cross functional
exercise that looks beyond impact alone to assess the potential
of topics to influence value creation. The scan is performed
as acheckon the ongoing appropriateness of the risk universe,
to ensure completeness of Aegon’s risk assessment as well as to
provide input for ongoing strategy development.
The business environment scan is performed on abiennial basis,
with annual updates for significant changes.
Topic identification, mapping and selection are based on desk
research, interviews with internal and external experts and
management selection. Outcomes can be used for materiality
reporting, as input for Aegon’s strategy process and for possible
follow-up in terms of further analysis, tracking or as aglobal
project. For the 2021 outcomes of Aegon’s business environment
scan, please refer to on the dedicated section on page 10.
Risk governance framework
Aegon’s risk management is based on clear, well-defined risk
governance. The goals of risk governance are to:
•
Define roles and responsibilities, and risk reporting procedures
for decision makers;
•
Institute aproper system of checks and balances;
•
Provide aconsistent framework for managing risk in line with
the targeted risk profile; and
•
Facilitate risk diversification.
Governance structure
Aegon’s risk management framework is represented across all
levels of the organization. This ensures acoherent and integrated
approach to risk management throughout the Company. Similarly,
Aegon has acomprehensive range of company-wide risk policies
that detail specific operating guidelines and limits. These policies
include legal, regulatory, and internally set requirements, and are
designed to keep overall risk-specific exposures to amanageable
level. Any breach of policy limits or warning levels triggers
remedial action or heightened monitoring. Further risk policies
may be developed at alocal level to cover situations specific
to particular regions or business units.
Aegon’s risk management governance structure has four layers:
•
The Supervisory Board and the Supervisory Board Risk
Committee (SBRC);
•
The Executive Board and the Management Board;
•
The Group Risk & Capital Committee (GRCC) and its sub-
committees; and
•
The Regional Risk & Capital Committees.
Aegon Integrated Annual Report
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Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information75
Risk management
The SBRC reports to the Supervisory Board on topics related
to the ERM framework and the internal control system.
The formal responsibility regarding the effectiveness and
design, operation, and appropriateness of the ERM and internal
control system rests, however, with the Audit Committee
of the Supervisory Board. The Audit Committee works closely
together with the SBRC with regard to the oversight of, and
reports on, the effectiveness of the ERM framework and the risk
control systems of the Company. The Audit Committee relies
on the findings of the SBRC. The SBRC oversees Aegon’s ERM
framework, including risk governance and measures taken
to ensure risk management is properly integrated into
the Company’s broader strategy.
For adescription of the main roles and responsibilities of the
SBRC see the section on the Risk Committee on page51 of
theReport of the Supervisory Board in this Annual Report.
It is the responsibility of the Executive Board and
the Group’s Chief Risk Officer (CRO) to inform the Supervisory
Board of any risk that directly threatens the solvency, liquidity,
or operations of the Company.
Aegon’s Executive Board has overall responsibility for risk
management. The Executive Board adopts the risk strategy,
risk governance, risk tolerance and material changes in risk
methodology and risk policies. The Group’s CRO has astanding
invitation to attend Executive Board meetings and adirect
reporting line to the Supervisory Board to discuss ERM and
related matters, and is amember of the Management Board.
The Management Board oversees abroad range
of strategic and operational issues. While the Executive
Board is Aegon’s statutory executive body, the Management
Board provides vital support and expertise in safeguarding
Aegon’s strategic goals. The Management Board discusses and
sponsors ERM, in particular the risk strategy, risk governance, risk
tolerance and the introduction of new risk policies.
The Executive Board and Management Board are supported
by theGroup Risk & Capital Committee (GRCC). The GRCC
is Aegon’s most senior risk committee. It is responsible for
managing Aegon’s balance sheet at the global level, and is in
charge of risk oversight, risk monitoring and risk management
related decisions on behalf of the Executive Board and
in line with its charter. The GRCC ensures risk-taking is within
Aegon’s risk tolerances; that the capital position is adequate
to support financial strength, credit rating objectives
and regulatory requirements, and that capital is properly
allocated. The GRCC informs the Executive Board about any
identified (near) breaches of overall tolerance levels which
threaten the risk balance, as well as any potential threats
to the Company’s solvency, liquidity, or operations.
The GRCC has three sub-committees: the ERM framework,
Accounting and Actuarial Committee (ERMAAC), the Non-
Financial Risk Committee (NFRC) and the Model Validation
Committee (MVC).
The purpose of the ERMAAC is to assist the GRCC, Executive
Board and Management Board with financial risk framework
setting and maintenance across all group-level balance sheet
bases, including policies, standards, guidelines, methodologies,
and assumptions.
The purpose of the NFRC is to assist the GRCC, Executive Board
and Management Board with non-financial risk framework setting
and maintenance, including policies, standards, guidelines and
methodologies, and to act as formal discussion and exchange
of information platform on matters of concern regarding non-
financial risk management.
The MVC is responsible for approving all model validation
reports across Aegon. This is an independent committee that
reports into the GRCC and the Executive Board to provide
information on model integrity and recommendations for further
strengthening of models.
Aegon’s regions have a risk, or risk and capital committee,
and an audit committee established. The responsibilities and
prerogatives of the committees are aligned with the Group-level
committees and further set out in their respective charters, which
are tailored to local circumstances.
In addition to the four layers described above, Aegon has
an established company-wide risk function. It is the mission
of the Risk Management function to ensure the continuity
of the
Company through safeguarding the value of existing business,
protecting Aegon’s balance sheet and reputation, and through
supporting the creation of sustainable value for all stakeholders.
In general, the objective of the Risk Management function is to
support the Executive Board, Management Board, Supervisory
Board, and regional and business unit boards in ensuring that
the Company reviews, assesses, understands, and manages its
risk profile. Through oversight, the Risk Management function
ensures the company-wide risk profile is managed in line with
Aegon’s risk tolerances, and stakeholder expectations are
managed under both normal business conditions and adverse
conditions caused by unforeseen negative events.
The following roles are important in order to realize the objective
of the Risk Management function:
•
Advising on risk-related matters including risk tolerance,
riskgovernance, risk methodology and risk policies;
•
Supporting and facilitating the development, incorporation,
maintenance and embedding of the ERM framework and
sound practices; and
•
Monitoring and challenging the implementation and
effectiveness of ERM practices.
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76
Risk management
About Aegon Non-financial information
Governance and risk management
Financial informationIn the context of these roles, the Risk Management Function has
the following responsibilities:
Enterprise Risk Management (ERM) Framework
•
The overarching ERM Framework supports Aegon’s corporate
strategy and enables management to effectively deal with
uncertainty and the associate risk-return trade-offs.
Global Risk Appetite (GRA)
•
The GRA is linked to and supports Aegon’s strategy and
purpose and translates into risk tolerances and risk limits.
Risk Identification and Assessment
•
All material risks are captured and classified in Aegon’s risk
universe. An emerging risk process is in place to ensure that
risk universe remains up-to-date and complete. Risk
assessment includes risk measurement across valuation and
reporting metrics and feeds into Aegon’s risk strategy,
including risk preferences and risk profile considerations.
Risk Governance
•
A risk governance framework is in place across all levels of the
company, including formal committees, committee charters,
memberships across relevant functions, and escalation
procedures.
Policies and Standards
•
Risk policies and standards set out requirements, roles and
responsibilities and processes to manage risks across the
risk universe.
Risk Embedding
•
The ERM Framework is embedded in Aegon’s key business
areas. The Own Risk Self-Assessment (ORSA) unites the risk
and capital management and the business planning processes
across Aegon and aligns to its strategy. The risk strategy
is aligned with the business strategy, the strategy execution
is closely monitored, and risks are timely identified to help
steer towards strong delivery in asafe and timely manner.
Risk Oversight
•
Major business (and risk) decisions are risk-based; properly risk
informed and, where relevant, challenged by the Risk
Management function to protect the balance sheet and proper
customer conduct.
Risk Monitoring and Reporting
•
Risks across the risk universe are monitored and reported.
•
Risk culture is embedded across the company.
•
Awareness of employees, management, and leadership
of relevant risks and how risks are managed.
Aegon’s Group and business unit’s risk management staff
structure is fully integrated. Business unit CROs have either
adirect reporting line to the Group CRO or one of the regional
CROs that reports directly to the Group CRO.
Keeping ERM framework up-to-date and effective
Aegon continuously works on keeping its ERM framework up-to-
date, effective and fit-for-purpose. The annual risk development
plan outlines priorities for the year and rationalizes activities
that align with Aegon’s strategy and vision. Policies, charters
and other governance documents are regularly reviewed and
updated where necessary. Also, activities such as the Business
Environment Scan provide an internal and external perspective
on the risk universe and will signal where updates are required.
As an example, non-financial risk management, including
sustainability, is of increasing importance, and climate risk
has been incorporated more explicitly in our Operational Risk
taxonomy and other business processes. In addition, internal
processes like policy attestation verify compliance with policies.
Non-compliance requires remediating action plans, which
are actively monitored to ensure execution. Aegon conducts
an internal System of Governance review on aregular basis,
as required by Solvency II legislation. The review includes design
and effectiveness assessment of Aegon’s risk management
system. Identified weaknesses and improvement areas following
from such reviews are reported, discussed and acted on.
Internal control system
Aegon has developed an internal control system that serves
to facilitate its compliance with applicable laws, regulations
(e.g. Sarbanes-Oxley Act and Solvency II), and administrative
processes, and the effectiveness and efficiency of operations
with regard to its objectives, in addition to the availability and
reliability of financial and non-financial information. The overall
internal control system ensures appropriate control activities
for key processes and the documentation and reporting
of administrative and accounting information. A key element
of the internal control system is to facilitate action planning and
embed continuous improvement regarding the internal control
environment throughout the organization. The internal control
system is embedded through policies and frameworks such
as ERM Framework, Model Validation Framework, Operational
Risk Management (ORM) Framework, and Information Technology
Framework. Aegon’s internal control system is considered
more encompassing in scope than the Integrated Framework
issued by COSO on which criteria for the internal control
system are based.
In relation to the Information Technology Framework, as some of
our core processes and systems shift from legacy on-premises
environment to the cloud, Aegon has established astrategy to
manage cloud risk. This includes defining key elements of cloud
governance, cloud security strategy, as well as integrating cloud
control requirements into our IT Control Framework.
In 2021, risk management and internal control topics were
discussed by the relevant management committees and bodies,
including the Management Board, the Executive Board, the Risk
Committee of the Supervisory Board, and the Audit Committee
of the Supervisory Board. From analysis of internal and external
audit reports and risk reviews, no material weaknesses were
observed, and no significant changes or major improvements
were made or planned to the risk management and internal
control systems following from the review.
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Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information77
Risk management
Capital and liquidity
management
Guiding principles
The management of capital and liquidity is of vital importance
for Aegon, for its customers, investors in Aegon securities and
for Aegon’s other stakeholders. In line with its risk tolerance,
the goal of Aegon’s capital and liquidity management is to
promote strong and stable capital adequacy levels for its
businesses, in addition to maintaining adequate liquidity
to ensure that the Company is able to meet its obligations.
Aegon follows anumber of guiding principles in terms of capital
and liquidity management:
•
Promoting strong capital adequacy in Aegon’s businesses and
operating units;
•
Managing and allocating capital efficiently in support of the
strategy and in line with its risk tolerance;
•
Maintaining an efficient capital structure, with an emphasis
on optimizing Aegon’s cost of capital;
•
Maintaining adequate liquidity in both the operating units and
the Holding to ensure that the Company is able to meet its
obligations by enforcing stringent liquidity risk policies; and
•
Maintaining continued access to international capital markets
on competitive terms.
Aegon believes that the combination of these guiding principles
strengthens the Company’s ability to withstand adverse market
conditions, enhances its financial flexibility, and serves both
the short-term and the long-term interests of the Company, its
customers and other stakeholders.
The management and monitoring of capital and liquidity
is firmly embedded in Aegon’s Enterprise Risk Management
(ERM) framework.
Management of capital
Aegon’s capital management framework is based on adequate
capitalization of its operating units, Cash Capital at Holding
and leverage.
Capital adequacy of Aegon’s operating units
Aegon manages capital in its operating units at levels sufficient
to absorb moderate shocks without impacting the remittances
to the Group. These moderate shocks could be caused by various
factors, including general economic conditions, financial markets
risks, underwriting risks, changes in government regulations,
legal and arbitration proceedings. To mitigate the impact of such
factors on the ability of operating units to pay remittances
to the Group, Aegon established an operating level of capital
in each of the units: 150% Solvency Capital Requirement (SCR)
for Solvency II units and 400% Risk-Based Capital (RBC) Company
Action Level (CAL) in the US. Aegon manages capital in the units
to their respective operating levels over-the-cycle.
After investments have been made in new business to generate
organic growth, capital generated by Aegon’s operating units
is available for distribution to the holding company. In addition
to an operating level, Aegon established aminimum dividend
payment level of capital in each of the units: 135% SCR for
Solvency II and 350% RBC CAL in the US. As long as the capital
position of the unit is above this minimum dividend payment
level, the unit is expected to pay remittances to the Group.
When the operating unit’s capital position approaches
the minimum dividend payment level, capital management tools
will be used to ensure that units will remain well capitalized.
The frequent monitoring of actual and forecasted capitalization
levels of its operating units is an important element
in Aegon’s capital framework in order to actively steer and
manage towards maintaining adequate capitalization levels.
The regulatory capital requirement, minimum dividend
payment level, operating level and actual capitalization for
Aegon’s main operating units at December 31, 2021, are included
in the following table:
Capital requirements
Regulatory capital
requirement
Minimum dividend
payment level Operating level Actual capitalization
US RBC ratio
100% 350% 400% 426%
NL Life Solvency II ratio
100% 135% 150% 186%
Scottish Equitable Plc (UK) Solvency II ratio
100% 135% 150% 167%
For more details on the capital ratios and the movement thereof
reference is made to note 43 ‘Capital management and solvency’
to Aegon’s consolidated financial statements.
Improving risk-return profile
Aegon continues to take measures to improve its risk-return
profile. In 2021, several actions were taken to strengthen
the capital position and reduce the volatility of the local
capital positions.
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Capital and liquidity management
The Dutch life business reinsured an additional part of its longevity
exposure with Reinsurance Group of America, Incorporated
(RGA).
The reinsurance agreement provides protection against
the longevity risk associated with of pension
EUR7billion
liabilities. This transaction improves the risk profile
of the
DutchLife business and releases capital at attra
ctive
terms.In 2020 Aegon initiated to materially reduce economic
aprogram
interest rate risk of 2021, Aegon had
in the
US. Per the endalmost fully executed its interest rate management plan, mainly
by lengthening the duration of its asset portfolio and expanding
its forward starting swap program. Furthermore, Aegon has
taken actions to improve its risk-return profile by further hedging
the legacy variable annuities block
in the
US
and reducing its economic exposure to equity markets and interest rates through
alump
-sum buy-out program, which allows Aegon to more actively
consider abroad
range of options for this block of business
.
As a
result
of these actions, at December 31, 2021, the targetedinterest rate risk exposure has reduced by approximately 70%
since inception
of the
program.
To reduce the risk of volatility in mortality claims on its statutory
capital position
in the
US, Aegon entered into an agreementwith Wilton Re in December 2021 to reinsure
aportfolio
of universal life secondary guarantee policies with approximately
USD 1. of statuto
4billion
ry
reserves.
Aegon has an active global reinsurance program designed
to optimize the risk-return profile of other insurance risks.
In addition, Aegon monitors the risk-return profile of new
business written, withdrawing products that do not create value
for all stakeholders including policyholders and shareholders.
Cash Capital at Holding and liquidity management
Liquidity management is afundamental building block
of Aegon
’
s overall financial planning and capital allocation processes. Liquidity is managed both centrally and
at the
operatingunit level and is coordinated centrally
at
AegonN.V..
The ability
of the
holding company to meet its cash obligations depends on the
amount
of liquid assets on its balance sheet
and on the
ability
of the
operating units to pay remittances
to the
holding company. In order to ensure the holding
company’
s ability to fulfil its cash obligations, to maintain
sufficient flexibility to provide capital and liquidity support
to Aegon
’
s operating units, and to provide stability in externaldividends,
the Company manages Cash Capital at Holding, including
Aegon’
s centrally managed (unregulated) holding companies, to an
operating range
of EUR0.
5 to
1.5billion
.
The main sources of liquidity in Cash Capital at Holding are
remittances from operating units and divestitures. In addition
,
contingent internal and external liquidity programs are maintained
to provide additional safeguards against extreme unexpected
liquidit
y stresses.
Aegon uses the cash flows from its operating units to pay for
holding expenses, including funding costs. The remaining free cash
flow
is available to execute
the Company to strengthen
’
s strategythe balance sheet through deleveraging, to make capital injections
into units as required
,
to make acquisitions, to fund dividends on itsshares, and to return capital to shareholders if possible, all subject
to maintaining targeted Cash Capital at Holding. Aegon aims to pay
out asustainable
dividend to enable equity investors to share in its
performance.
When determining whether to declare or propose
adividend
,
Aegon’
s Executive Board balances prudence with offering
an attractive return to shareholders. This is particularly important
during adverse economic and/or financial market conditions.
Furthermore, Aegon’s operating units are subject to local insurance
regulations that could restrict remittances to be paid
to the
holdingcompany. There is no requirement or assurance that Aegon will
declare and pay any dividends.
On December 31, 2021, Aegon held
abalance
of EUR1.3billion
in Cash Capital at Holding, compared
to EUR1.1billion
on December 31, 2020. Details
on the
movement are included
in note 43‘Capital management and solvency’
to Aegon
’
s consolidated financial statements.Liquidity management
The Company
’
s liquidity risk policy sets guidelines for its operating companies and the holding in order to achieve
aprudent
liquidity profile and to meet cash demands under extreme
conditions. Aegon’s liquidity is invested
in accordance with
the Company
’
s internal risk management policies. Aegon believes that its working capital, backed by its external funding programs
and facilities, is ample for the Company
’
s present r
equirements.
Aegon maintains
aliquidity
policy that requires all business units to project and assess their sources and uses of liquidity over
atwo
-year period under normal and severe business and market
scenarios. This policy ensures that liquidity is measured and
managed consistently across the Company, and that liquidity stress
management plans a
re
in place.
Aegon’
s operating units are engaged in life insurance and
pensions business, which are long-term activities with relatively
illiquid liabilities and generally matching assets. Liquidity consists
of liquid assets held in investment portfolios, in addition to inflows
generated
by premium payments and customer deposits.
Leverage
Aegon uses leverage in order to lower the cost
of capital that
supports businesses
in the
Aegon Group, thereby contributing to amore effective and efficient use of capital
.
In managingthe use of leverage throughout the Group, Aegon has
implemented aLeverage Use Framework as part of its broader
Enterprise Risk Management framework.
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Capital and liquidity management
Financial leverage
Aegon defines gross financial leverage as debt or debt-
like funding issued for general corporate purposes and for
capitalizing Aegon’s business units. Gross financial leverage
includes hybrid instruments, subordinated and senior debt.
Aegonaims to reduce its gross financial leverage to arange
of EUR5.0 – 5.5billion by 2023. This reduction of leverage will
strengthen the balance sheet, reduce Aegon’s risk profile and
make Aegon more resilient.
The following are metrics that Aegon assesses in managing
leverage:
•
Gross financial leverage ratio;
•
Fixed charge coverage;
•
Various rating agency leverage metrics; and
•
Other metrics, including gross financial leverage divided
by operating capital generation.
Aegon’s gross financial leverage ratio is calculated by dividing
gross financial leverage by total capitalization. Aegon’s total
capitalization consists of the following components:
•
Shareholders’ equity, excluding revaluation reserves and cash
flow hedge reserves, based on IFRS as adopted by the EU;
•
Non-controlling interests and shares related to Long Term
Incentive Plans that have not yet vested; and
•
Gross (or total) financial leverage.
Aegon’s fixed charge coverage is ameasure
of the Company’s ability to service its financial leverage. It is
calculated as the sum of operating result and interest expenses
on financial leverage divided by interest payments on financial
leverage. The fixed charge coverage includes the impact
of interest rate hedging.
Operational leverage
Although operational leverage is not considered part
of Aegon’s total capitalization, it is an important source
of liquidity and funding. Operational leverage relates primarily
to financing Aegon’s mortgage portfolios through securitizations,
warehouse facilities, covered bonds, and theuse of aFederal
Home Loan Bank (FHLB) facility.
Funding and back-up facilities
The majority of Aegon’s financial leverage is issued
by AegonN.V., the parent company. A limited number of other
Aegon companies have also issued debt securities, but for
the most part these securities are guaranteed by AegonN.V.
AegonN.V. has regular access to international capital
markets under aUSD 6billion debt issuance program. Access
to the capital market in the United States is made possible
by aseparate shelf registration.
Aegon also has access to domestic and international money
markets through its EUR2.5billion commercial paper programs.
As at December 31, 2021, Aegon had no amounts outstanding
under these commercial paper programs (2020: EUR72million).
To support its commercial paper programs and need for Letters
of Credit (LOCs), and to enhance its liquidity position, Aegon
maintains backup credit and LOC facilities with international
lenders. The Company’s principal arrangements comprise
aEUR2billion syndicated revolving credit facility and an LOC
facility of USD 2billion. The syndicated revolving credit facility
matures in 2025. The LOC facility matures in 2026. In addition,
Aegon also maintains various shorter-dated bilateral backup
liquidity facilities in addition to committed and uncommitted
LOC facilities.
Rating agency ratings
Aegon’s objective is to maintain very strong financial strength
ratings in its main operating units, and this plays an important
role in determining the Company’s overall capital management
strategy. Aegon maintains strong financial strength ratings from
several international rating agencies for its main operating units,
and astrong credit rating for AegonN.V.
December 31, 2021
AegonN.V. Aegon USA Aegon theNetherlands Aegon UK
S&P Global
1)
Financial strength
- A+ A+ A+
Long-term issuer
A- - - -
Senior debt
A- - - -
Subordinated debt
BBB - - -
Moody's Investors Service
1)
Financial strength
- A1 - -
Long-term issuer
A3 - - -
Senior debt
A3 - - -
Subordinated debt
Baa1 - - -
Commerical paper
2)
P-2 - - -
A.M. Best
1)
Financial strength
- A - -
1
2
commercial paper rating on AegonN.V. on January 28, 2022.
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Financial information
Aegon Group Solvency Ratio
The Solvency II regulatory framework determines the regulatory
capital requirements for EU-domiciled insurance and reinsurance
entities. In Aegon’s Non-EEA (European Economic Area) regions,
(re)insurance entities domiciled in third-countries deemed either
provisionally or fully equivalent (US life insurance entities,
Bermuda, and Brazil), the capital requirement is based on local
capital requirements. For more information about Solvency II and
recent developments, please refer to section ‘Regulation and
supervision’.
As at December 31, 2021, the estimated Solvency II ratio
of Aegon Group amounted to 211%, an increase of 15%-points
since December 31, 2020. This was mainly due to the positive
impact from operating capital generation, management actions
including the longevity reinsurance for Aegon Levensverzekering
N.V. (NL Life) in December 2021 and model and assumption
changes - including an increased
L AC-
DT factor for NL Life. There was apartial offset from other one-time items, aslight
negative impact from markets, external dividends and the impact
of deleveraging. For more details, please refer to note43
‘Capital management and solvency’ to Aegon’s consolidated
financial statements.
December 31, 2021
1)
December 31, 2020
Group Own Funds
19,431
18,582
Group SCR
9,226 9,473
Group Solvency II ratio
211% 196%
1
Sensitivities
Aegon calculates sensitivities of its Solvency II ratios as part
of its capital management framework. The following table
provides an overview of the sensitivities (downward and upward)
to certainparameters and their estimated impact on the Solvency
II ratio.Please note that the sensitivities listed in the tables
below represent sensitivities to Aegon’s position at the balance
sheet date. The sensitivities reflect single shocks – except for
the US credit default shock which also includes assumed rating
migration – where other elements remain unchanged. Real
world market impacts (e.g. lower interest rates and declining
equity markets) may happen simultaneously, which can lead
to more severe combined impacts and may not be equal
to the sum of the individual sensitivities presented in the table.
The Solvency II ratio sensitivities assume deferred tax asset (DTA)
admissibility.Under certain adverse scenarios – in particular
asevere equity market down shock – aloss of statutory surplus
could lead to part of DTAs becoming inadmissible under
the US RBC framework. While this would increase the sensitivity
of the Solvency II ratio relative to the published sensitivities,
the DTAs would still be recoverable over time.
Group Americas
1)
NL Life SE Plc
Scenario
2021
20202021
20202021
20202021
2020Equity markets
(25%) (8%) (11%) (24%) (29%) (2%) (5%) 2% (5%)
Equity markets
+25% 2% 7% 14% 20% (1%) 1% (3%) (1%)
Interest rates
-50bps (0%) 0% 1% (3%) 7% 9% (2%) (1%)
Interest rates
+50bps (1%) 1% 0% 4% (8%) (8%) 1% 1%
Curve steepening
+10bps (2%) n.a. n.a. n.a. (7%) n.a. n.a. n.a.
Govt spreads excl EIOPA
VA
-50bps 0% 3% n.a. n.a. (3%) 3% 4% 5%
Govt spreads excl EIOPA
VA
+50bps 0% (2%) n.a. n.a. 6% (2%) (4%) (5%)
Non-govt spreads excl
EIOPA VA
2)
-50bps (1%) 0% (3%) (1%) 11% 9% (9%) (10%)
Non-govt spreads excl
EIOPA VA
2)
+50bps (1%) 0% 4% 1% (11%) (10%) 1% 6%
US Credit Defaults
3)
~+200 bps (17%) (18%) (38%) (38%) n.a. n.a. n.a. n.a.
UFR
-15bps (2%) (2%) n.a. n.a. (6%) (6%) n.a. n.a.
Longevity
4)
+5% (5%) (7%) (8%) (12%) (8%) (10%) (2%) (3%)
Mortgage spreads
-50bps 2% 2% n.a. n.a. 6% 6% n.a. n.a.
Mortgage spreads
+50bps (2%) (2%) n.a. n.a. (6%) (6%) n.a. n.a.
EIOPA VA
-5bps
0%
0%
n.a.
n.a.
1%
(1%)
n.a.
n.a.
EIOPA VA
+5bps (0%) 0% n.a. n.a. (1%) 1% n.a. n.a.
1
Thesensitivities are presented on aSolvency II basis, after application of the conversion methodology to US regulated (life) companies.
2
3
4
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Capital and liquidity management
Equity Sensitivities
The Group is exposed to the risk of a fall in equity markets.
This is mainly a consequence of indirect equity exposure
in the Americas.
In the Americas, equity sensitivities are primarily driven
by the variable annuity (VA) business, where base contract
fees are charged as a percentage of underlying funds, many
of which are equity based. While guaranteed benefits are fully
hedged for equity risk, the indirect equity exposure associated
with the base contract fees is not. The asymmetry between
the impacts of up and down shocks is caused by reserve flooring
in the variable annuity business. At market levels per year-end
2021, an equity down shock would result in reserves increasing.
However, an equity up shock would not result in a similar release
of reserves, as reserves are floored at the cash surrender value
of the policies.
Interest Rates Sensitivities
The solvency ratio of the Group is not very sensitive to movements
in interest rates given the asset liability management and hedging
programs that are in place.
In the Americas, a decrease in interest rates leads to higher
reserves for variable annuities and universal life products, which
are offset by payoffs from interest rate hedging programs.This
offset from hedging has increased in 2021 due to the expansion
of the dynamic hedge program to all variable annuity contracts.
NL Life hedges interest rate exposure on an economic basis,
which results in an over-hedged position on a Solvency II basis.
This results in NL Life’s solvency ratio being exposed to rising
interest rates.In addition, the curve steepening scenario was
added in 2021 to show the impact of a steepening of the interest
rate curve at the longer end, given that NL Life hedges on an
economic basis.
For SE Plc, exposureto lower interest rates leads to higher
required capital on mortality, expense and policyholder
lapse risks which is partly offset by gains on the swaps held
in the general account.
Spread Sensitivities
The non-government spread sensitivities include shocks
on mortgages, corporates bonds and structured instruments.
For NL Life the spread sensitivities reflect an internal model
feature that mitigates volatility caused by the basis risk
between the EIOPA VA reference portfolio and NL Life’s own
asset portfolio.
Overall, the Group is exposed to the risk of widening credit
spreads across non-government, government, and mortgage
instruments, which result in lower asset valuations. The solvency
ratio of the Americas is positively impacted by widening spreads,
which results in a higher discount rate used for valuing employee
pension plan liabilities. For variable annuities, widening credit
spreads also lead to lower liabilities, as - since the expansion
of the dynamic hedge program in 2021 - an illiquidity premium
is used in valuing the liabilities. There is a partial offset, again
for variable annuities, from a lower value of separate account
fixed income assets resulting in an addition to reserves reflecting
a higher cost of guarantees.
The Group as a whole has little exposure to changes in
government spreads. The exposure in the Americas is negligible,
and there are offsetting risks in NL Life and SE Plc. The solvency
ratio of NL Life is exposed to government spreads narrowing
because the resulting increase of SCR outweighs the resulting
lower Own Funds in terms of ratio impact. The solvency ratio of
SE Plc is exposed to spread widening which would have a
negative impact on the valuation of fixed income assets.
Exposure to government spread sensitivities is driven by NL Life
and SE Plc. NL Life is exposed to spreads narrowing compared
to spreads widening last year. This sign change is due to higher
interest rates, the sale of sovereigns over the year, and
the change in composition of the Solvency II ratio over the year
(more Own Funds but materially lower SCR). SE Plc is exposed
to spreads widening due to the reduction in the value of fixed
income assets.
Group is exposed to mortgage spreads widening, due to exposure
in NL Life, which has an adverse impact on the asset valuation.
The Americas credit defaults sensitivity reflects the combined
impact of credit defaults and adverse credit rating migrations
on assets held in the general account portfolio.
Longevity Sensitivities
All main business units contribute to the Group risk that
people will live longer than the expectations embedded in our
provisions. The exposure has decreased since last year, driven
by improved premium deficiency reserve sufficiency in the
LTC
business in the US, and additional longevity reinsurance that was
implemented in NL Life.
Capital quality
Solvency II distinguishes between basic Own Funds and ancillary
Own Funds. Aegon’s total Own Funds are comprised of Tier 1,
Tier 2 and Tier 3 basic Own Funds. Aegon does not currently
have ancillary Own Funds. Tier 1 basic Own Funds are divided
into unrestricted Tier 1 capital and restricted Tier 1 capital.
The latter category contains Own Funds instruments subject
to the restrictions of the Solvency II Delegated Regulation,
which includes grandfathered Tier 1 Own Funds instruments.
Based on agreements with its supervisory authorities, Aegon
applies afungibility and transferability restriction with respect
to charitable trusts within the Americas. These restrictions,
applied to Aegon’s basic Own Funds, result in Aegon’s
Available Own Funds.
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Available Own Funds
Unrestricted Tier 1 capital consists of Aegon’s share capital,
share premium and the reconciliation reserve. The reconciliation
reserve includes deductions to account for foreseeable dividends
thatmeet the IFRS definition of aliability or have been approved
by the Board, but that have yet to be distributed to Aegon’s
shareholders, and restrictions related to Aegon’s with-profits
fund in the UK for which the excess of Own Funds over its capital
requirement is ring-fenced for policyholders, and therefore
unavailable to Aegon’s shareholders.
Restricted Tier 1 capital consists of Aegon’s junior perpetual
capital securities, perpetual cumulative subordinated bonds,
and perpetual contingent convertible securities. Aegon’s Tier2
capital consists of subordinated notes, which include SolvencyII
compliant notes and grandfathered dated notes. Aegon’s Tier
3 capital under the Solvency II framework consists of Aegon’s
deferred tax asset position under Solvency II. For more details
reference is made to note 43 ‘Capital management and solvency’.
The grandfathered restricted Tier 1 and Tier 2 capital instruments
are grandfathered to count as capital under Solvency II for up to
10 years as of January 1, 2016. All call dates are listed in note 31
‘Other equity instruments’ and note 32 ‘Subordinated borrowings’
to Aegon’s consolidated financial statements.
Eligible Own Funds
Under Solvency II regulation, restrictions apply to the eligibility
of restricted Tier 1, Tier 2 and Tier 3 capital. As aresult, it is
possible that part of the Own Funds overflows to another tier
or that it is not considered eligible in determining the Group
Solvency II ratio.
The table below shows the composition of Aegon’s Available and
Eligible Own Funds, taking into consideration tiering restrictions.
For more details on tiering restrictions, reference is made to note
43 ‘Capital management and solvency’ to Aegon’s consolidated
financial statements.
The Available Own Funds are equal to the Eligible Own Funds
per December 31, 2021. No overflow from restricted Tier 1 to
Tier2 Own Funds is applied per year end 2021 and 2020.
December 31, 2021
December 31, 2020
Available Own Funds Eligible Own Funds
Available Own Funds Eligible Own Funds
Unrestricted Tier 1
14,044 14,044 12,972 12,972
Restricted Tier 1
2,364 2,364 2,571 2,571
Tier 2
2,348 2,348 2,340 2,340
Tier 3
675 675 700 700
Total Tiers
19,431 19,431 18,582 18,582
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Capital and liquidity management
Regulation and supervision
Individually regulated Aegon companies are each subject
to prudential supervision in their respective home countries and
therefore are required to maintain aminimum solvency margin
based on local requirements. In addition, the Group as awhole
is subject to prudential requirements on agroup basis, including
capital, internal governance, risk management, reporting and
disclosure requirements, pursuant to Solvency II and the Financial
Conglomerates Directive.
Solvency II
Introduction
The Solvency II framework imposes prudential requirements
at group level as well as on the individual EU insurance
companies in the Aegon Group. Insurance supervision is exercised
by local supervisors on the individual insurance companies
in the Aegon Group and, in addition, by the group supervisor
at group level. The Dutch Central Bank (DNB) is Aegon’s Solvency
II group supervisor. Solvency II contains economic, risk-based
capital requirements for insurance companies in all EU member
states, as well as for groups with insurance and/or reinsurance
activities in the EU. The Solvency II approach to prudential
supervision can be described as a‘total balance sheet-approach,’
and takes material risks to which insurance companies are
exposed into account, as well as the interaction between risks.
The Solvency II framework is structured along three pillars.
Pillar 1 comprises quantitative requirements (including
technical provisions, valuation of assets and liabilities, solvency
requirements and own fund requirements). Pillar 2 requirements
include governance and risk management requirements,
and requirements for effective supervision. Pillar 3 consists
of disclosure and supervisory reporting requirements. These
three pillars should not only be considered in isolation, but
also in terms of how they interact with one another. More
complex risks, for instance, require astronger risk management
and governance structure or could lead to higher capital
requirements.
Pillar 1
Solvency II requires EU insurance companies to determine
technical provisions at avalue that corresponds with the present
exit value of their insurance obligations towards policyholders
and other beneficiaries of insurance and reinsurance contracts.
The calculation of the technical provisions should be based
on market consistent information where possible.
The value of the technical provisions is equal to the sum of abest
estimate and arisk margin. The discount rate at which technical
provisions are calculated and other parameters to determine
the technical provisions may have an important effect
on the amount of own funds (the excess of assets over liabilities)
that insurance undertakings are required to maintain as well
as volatility thereof. The Solvency II framework contains several
measures - in particular the volatility adjustment and matching
adjustment - that should help to reduce volatility of the Solvency
II balance sheet.
Insurers and reinsurers are required to hold eligible own funds
in addition to the assets held to cover the technical provisions
in order to ensure that they are able to meet their obligations
over the next 12 months with aprobability of at least 99.5%
(i.e. the ability to withstand a1-in-200-year event). The buffer
that insurance companies are required to hold is the Solvency
Capital Requirement (SCR). Insurance companies are allowed
to: (a) use astandard formula to calculate their SCR; (b)
use aself-developed internal model; for which the approval
of the supervisory authorities is required); or (c) use apartial
internal model (PIM); acombination of the standard formula
and an internal model; also requires approval of the supervisory
authorities. An internal model should better reflect the actual
risk profile of the insurance company than the standard formula.
Aegon, as agroup, uses aPIM.
In addition to the SCR, insurance companies should also calculate
aMinimum Capital Requirement (MCR). This represents alower
level of financial security than the SCR, below which the level
of eligible own funds held by the insurance company is not
allowed to drop. An irreparable breach of the MCR would lead
to the withdrawal of an insurance company’s license. Insurance
companies are required to hold eligible own funds against
the SCR and MCR. Own funds are divided into three tiers based
on their quality. More details can be found in the Capital and
Liquidity Management section.
Pillar 2
Under Pillar 2, insurance companies are required to set up and
maintain an adequate and effective system of governance, which
includes an appropriate internal organization, arisk governance
system and an effective assessment of the risk and solvency
position of the Company, including aprospective assessment
of risks, through the Own Risk and Solvency Assessment
(ORSA) process. In general, the system of governance
should be proportionate to the nature, scale and complexity
of the insurance company. A number of risks that insurance
companies face can only be addressed through proper
governance structures, rather than quantitative requirements.
Management is ultimately responsible for the maintenance of an
effective governance system. An example of such arisk, that
has gained more prominence, is climate risk, which is addressed
in the ORSA process.
The Supervisory Review Process (SRP), which is part of Pillar2,
allows supervisory authorities to supervise the ongoing
compliance of undertakings with Solvency II requirements.
Possible enforcement measures include: the imposition of capital
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Regulation and compliance
Regulation and supervision
Regulation and supervision
add-ons; the requirement to submit and execute arecovery plan;
and ultimately, the revocation of an insurance license.
Pillar 3
Solvency II includes detailed reporting and disclosure
requirements. These requirements include non-public supervisory
reporting on aregular basis through regular supervisory reports
(RSR), complemented by detailed quantitative reporting
templates (QRTs) reported on aquarterly basis, which contain
detailed financial data and are partly public.
In addition, it is arequirement to publish aSolvency and Financial
Condition Report (SFCR) on an annual basis.
Group supervision
Many of the Solvency II requirements that apply to the individual
insurance undertakings apply, with the necessary modifications,
also at group level. These requirements include group solvency
requirements, group reporting and disclosure requirements,
and requirements regarding the system of governance, risk
management and internal control framework at group level.
Entities that are not subject to solo supervision under Solvency II
(such as entities in other financial sectors, non-financial entities,
and regulated and non-regulated entities in third countries) may
be affected indirectly by the Solvency II group requirements.
Entities in other financial sectors are, in most cases, taken into
account in the group solvency calculation, applying the capital
requirements of that specific financial sector and either by using
the Deduction and Aggregation method or the Accounting
Consolidation method, which is the default method under
Solvency II.
The difference between these two methods primarily affects
the extent to which diversification can be taken into account
in the group capital requirements. Under the Accounting
Consolidation method the group is essentially treated as one
economic unit together with the Solvency II entities, whereas
the Deduction and Aggregation method requires the group
to aggregate entities, rather than to fully consolidate entities for
the purpose of the group capital requirements. However, the level
of diversification under the Accounting Consolidation method
also depends on the type of entity.
Subject to certain conditions, entities in other financial sectors
may be included in accordance with the Accounting Consolidation
method. In particular, this may be the case when the group
supervisor is satisfied as to the level of integrated management
and internal control regarding these entities. This applies for
example to Aegon Bank in the Netherlands. Furthermore, DNB
may require groups to deduct any participation from the own
funds eligible for the Group Solvency ratio.
As explained in Note 43 ‘Capital management and
solvency’to Aegon’s consolidated financial statements, Aegon
uses acombination of the two aggregation methods defined
within the Solvency II framework to calculate the Group
Solvency ratio.
For insurance entities domiciled outside the EEA for which
provisional or full equivalence applies, such as the United
States, Aegon uses the Deduction and Aggregation method,
based on local regulatory requirements to translate these into
the Group Solvency position. US insurance entities are included
in Aegon’s group solvency calculation in accordance with local
US Risk-Based Capital (RBC) requirements. Aegon’s current
method is applied since July 1, 2017 and received approval from
DNB. Details are included in Note 43 ‘Capital management and
solvency’ to Aegon’s consolidated financial statements.
Aegon’s UK insurance subsidiaries continue to be included
in the Group Solvency II calculation in accordance with Solvency
II standards, including Aegon’s approved Partial Internal Model.
Solvency II group supervision is exercised by acombination
of the supervisory authorities of the local insurance entities
and the group supervisor. An important role in the cooperation
between the supervisory authorities in the context of group
supervision is played by the college of supervisors, in which
the local and group supervisors are represented. This college
is chaired by the group supervisor.
At international level, the International Association of Insurance
Supervisors (IAIS) is developing arisk based global Insurance
Capital Standard (ICS). The IAIS’ ultimate goal, by adate yet to be
determined, is asingle ICS that includes acommon methodology
by which it achieves comparable outcomes across jurisdictions.
Ongoing work is intended to lead to improved convergence over
time on the key elements of the ICS towards this ultimate goal.
According to the IAIS the key elements include valuation, capital
resources and capital requirements. In 2019, the IAIS adopted
ICS Version 2.0, which is being used during afive-year monitoring
period for confidential reporting to group-wide supervisors
and discussion in supervisory colleges, not as aformal capital
requirement. From 2025 onwards, it is currently envisaged that
local jurisdictions will formally enact the ICS, which is described
as aminimum standard. In Europe, and consequently for
Aegon, this may entail that ICS standards will be incorporated
in the Solvency II framework.
Solvency II review
On September 22, 2021, the European Commission published its
legislative proposal for amendments to the Solvency II Directive,
following extensive preparatory work in previous years
by the European Commission and EIOPA. The Solvency II Directive
proposal will be supplemented by alegislative proposal to amend
the Solvency II Delegated Regulation, which will be published
in alater stage. The co-legislators at European level will assess
the legislative proposals in order to arrive at final text, resulting
in amendments to the Solvency II Directive and the Solvency
II Delegated Regulation.
Aegon Integrated Annual Report
2021
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Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information85
Regulation and supervision
Sustainability and Solvency II
In March 2018, the European Commission adopted its Action
Plan on Sustainable Finance. This action plan is part of broader
efforts to connect finance with the European and global economy
for the benefit of the planet and wider society. Specifically,
the Action Plan aims to: (1) reorient capital flows towards
sustainable investment in order to achieve sustainable and
inclusive growth, (2) manage financial risks stemming from
climate change, resource depletion, environmental degradation
and social issues; and (3) foster transparency and long-termism
in financial and economic activity.
On August 1, 2022, amendments to Solvency II will enter
into effect, integrating sustainability risks in the governance
of insurance and reinsurance undertakings. The amendments
relate to the inclusion of sustainability risk in the risk
management areas, to be covered in the risk management
system, in particular in relation to underwriting and reserving and
investment risk management, as well as in the corresponding
risk management policies. In addition, the identification
of emerging risks and sustainability risks is included as part
of the tasks of the risk management function, and as risks that
form part of the calculation of the overall solvency needs and
consequently of the ORSA process. Furthermore, sustainability
risk is made explicitly part of the opinion of the actuarial
function on the underwriting policy, made explicitly part
of the remuneration policy (i.e. information how the remuneration
policy takes into account the integration of sustainability risks
in the risk management system). Lastly, the amendments relate
to the integration of sustainability risk in the prudent person
principle, as well as the integration of the potential long-term
impact of investment strategy and decisions on sustainability
factors (for example climate change).
In addition, the proposal to amend the Solvency II Directive,
following the Solvency II 2020 review, includes an additional
provision that will require insurers to identify and assess climate
change risk as part of the assessment of their overall solvency
needs, as well as amandate to EIOPA to explore by 2023
adedicated prudential treatment of exposures to assets and
activities associated with environmental and social objectives and
to regularly review the standard formula parameters pertaining
to catastrophe risk.
We refer tothe non-financial information section of this
Integrated Annual Report for adescription of the changes
to the disclosure requirements, applicable to AegonN.V., relating
to non-financial information, including sustainability-related
disclosures.
Financial conglomerate supervision
Since 2009, Aegon has been subject to supplemental group
supervision by DNB in accordance with the requirements
of the EU’s Financial Conglomerate Directive. This includes
supplementary capital adequacy requirements for financial
conglomerates and supplementary supervision on risk
concentrations and intra-group transactions in the financial
conglomerate. Due to the introduction of the Solvency II group
supervisory requirements – which include similar, and to alarge
extent overlapping – supplemental group supervision pursuant
to the Financial Conglomerates Directive has become significantly
less relevant.
Recovery and resolution and systemic risk
G-SII designation, the Holistic Framework for the
assessment and mitigation of systemic risk in the
insurance sector, and ComFrame
In 2015, Aegon was designated by the Financial Stability Board
(FSB) as aGlobal Systemically Important Insurer (G-SII), based
on an assessment methodology developed by the International
Association of Insurance Supervisors (IAIS). In 2019,
in recognition of the fact that the Holistic Framework (see below)
provides an enhanced approach to assessing and mitigating
systemic risk in the global insurance sector, the FSB decided
to suspend the identification of G-SIIs. In November 2022,
the FSB is expected to review the need to either discontinue
or re-establish an annual identification of G-SIIs.
Due to its G-SII status, Aegon was subject to an additional
layer of direct supervision at the group level. In accordance
with these requirements, Aegon submitted aliquidity risk
management plan, asystemic risk management plan, and an ex-
ante recovery plan to DNB and to the crisis management group
(CMG) that was established. These requirements, which are
included in the Holistic Framework, continue in practice. Aegon
continues to update these plans on an annual basis. In addition,
the Aegon Group’s Resolution Authority (the Dutch Central Bank)
is responsible for the development of Aegon’s resolution plan.
In November 2019, the IAIS adopted the Holistic Framework for
the assessment and mitigation of systemic risk in the insurance
sector. Some of the provisions of the Holistic Framework are
included in the IAIS Insurance Core Principles (that apply to all
insurers), while others are included in ComFrame (the Common
Framework for the Supervision of Internationally Active Insurance
Groups, or IAIGs).
The Holistic Framework consists of an enhanced set
of supervisory policy measures and powers of intervention,
an annual IAIS global monitoring exercise, and an assessment
of consistent implementation of supervisory measures.
ComFrame establishes supervisory standards and
guidance focusing on the effective group-wide supervision
of IAIGs. ComFrame is acomprehensive and outcome-focused
framework that provides supervisory minimum requirements
tailored to the international activities and sizes of IAIGs.
ComFrame builds on the Insurance Core Principles that are
applicable to the supervision of all insurers. The provisions
of both ComFrame and the Insurance Core Principles
must be implemented in local legislation in order to have
abinding effect.
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2021
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Regulation and supervision
About Aegon Non-financial information
Governance and risk management
Financial informationRegardless of what happens to G-SII or G-SII designation, Aegon
would still be subject to ComFrame and ICS, to the extent these
would be implemented in local legislation. In Europe, the relevant
international standards are expected to be implemented
in the Solvency II Framework through the Solvency II Review.
The European Commission’s proposal to amend the Solvency
II Directive includes anumber of macro-prudential tools.
The legislative proposal to introduce aEuropean Insurance
Recovery & Resolution Directive (IRRD), which is discussed briefly
below, is expected to include IAIGs based in the European Union.
Recovery and resolution
Dutch Act on Recovery & Resolution for Insurers
On January 1, 2019, the Dutch Act on Recovery & Resolution for
Insurers (R&R Act) came into force in the Netherlands, replacing
the previously applicable intervention regime. The R&R Act
has introduced arevised regulatory framework for recovery
and resolution of Dutch insurance companies, and provides
for arange of measures to be taken by these companies and
the Dutch Central Bank, in order for these insurance 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.
The R&R Act allows DNB to require aDutch insurance
company or agroup in certain circumstances, to remove,
ex-ante, impediments to effective resolution of aDutch
insurance undertaking, such as the revision of financing
arrangements, the reduction of exposures, the transfer of assets,
the termination or limitation of business activities, the prohibition
of starting certain new business activities, changes to the legal
or operational structure of the group, or the securing certain
critical business lines.
The powers under the R&R Act may also extend
to the level of the group and to entities, other than
in insurance entities in the Netherlands, that are part
of the group, such as AegonN.V.. The powers include the transfer
of the undertaking to athird party, the transfer to abridge
institution and the transfer of certain specific assets and/
or liabilities. In addition, abail-in tool was introduced, that allows
for the write-off or conversion of rights of creditors, including
policyholders and beneficiaries, while respecting the principle
that they should not be worse off through resolution, including
the application of the bail-in tool, than they would be in ordinary
insolvency proceedings.
As part of the Solvency II review, the European Commission has
recently proposed to introduce arecovery and resolution regime
at European level, based on minimum harmonization, which
means that local regimes should meet minimum standards, set
at European level. It is expected that the R&R Act already meets
these minimum standards to asignificant extent.
Bank Recovery and Resolution Directive
Furthermore, to parts of the Aegon Group, in particular Aegon
Bank N.V., the framework of the EU Directive on the recovery
and resolution of credit institutions and investments firms (the
“Bank Recovery and Resolution Directive”) is applicable. The Bank
Recovery and Resolution Directive also contains provisions that,
in certain specific circumstances, where both Aegon Bank N.V.
and AegonN.V. fail or are likely to fail, could be applied to mixed
financial holding companies such as AegonN.V., including
the right of bail-in of creditors.
Intervention by the Dutch Minister of Finance
Lastly, under Part 6 of the Dutch Financial Supervision Act,
the Dutch Minister of Finance may intervene immediately,
when the stability of the financial system is threatened
by the situation of afinancial institution, in which case legal
or statutory provisions, applicable to the financial institution,
might be superseded. The intervention measures available
to the Minister of Finance, include in particular the right
to expropriate assets of the financial institution, as well
as securities and/or other financial instruments issued by or
with the cooperation of the financial institution. The exercise
of this power may significantly impact the rights of the owners
or holders of these assets, securities and/or financial
instruments.
Aegon Integrated Annual Report
2021
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Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information87
Regulation and supervision
Code of Conduct
Aegon’s Code of Conduct embodies the Company’s values and
helps ensure that all employees act ethically and responsibly and
is available at
aegon.com
. It prescribes amandatory set of standards for how Aegon
employees should conduct business, comply with all applicable
laws and regulations, and exercise sound judgment in reaching
ethical business decisions in the long-term interests of our
stakeholders.
Aegon’s Code of Conduct applies to all directors, officers and
employees of all Aegon companies around the world (regardless
of the contractual basis of their employment), including associate
companies and joint ventures that are majority owned and/
or controlled by AegonN.V.. Companies in which Aegon does not
hold amajority stake will be expected to either adopt the Aegon
Code of Conduct or to implement an equivalent code.
All Aegon employees must certify that they have read and
understood the Code of Conduct, and agree to abide by it.
Employees are also required to follow mandatory training
on aregular basis to help embed the principles of the Code
in the way they work.
Aegon Speak Up: Reporting misconduct
Breaching laws and regulations, the Code of Conduct, or internal
policies and procedures may have serious consequences
for the Company and its staff, our customers, shareholders
and business partners, and may also have serious impact
on the financial system or the public interest. At Aegon,
our ambition is to be atrusted long-term partner to all our
stakeholders, and therefore, we would like to be made aware
of any suspected unlawful, unethical or otherwise improper
conduct that could be harmful to the Company and its
stakeholders. Effective detection and resolution of such conduct
will help sustain our business and ensure long term value
creation for all stakeholders.
Aegon has introduced Aegon Speak Up to demonstrate its
commitment to staff and other stakeholders that it encourages
escalation of any concerns regarding potential misconduct and
will not tolerate reprisal for making agood faith report.
Aegon Speak Up provides asafe environment for anyone
who wishes to raise aconcern about suspected or observed
misconduct that involves Aegon.
For this purpose, Aegon has contracted with an independent
third party to host asecure reporting channel for employees and
others to report potential misconduct. Reports can be submitted
online or via toll-free telephone lines in all of the countries
in which Aegon conducts business (24 hours aday, seven days
aweek). Reporters can choose to remain anonymous. If an issue
is found upon investigation, appropriate management action
is taken to resolve the issue and prevent it from happening again
to the extent feasible.
It is important that reporters feel supported and protected
by the company for bringing issues to the attention
of management that may be harmful to the reputation and
integrity of the Company, its employees, or other stakeholders.
Aegon has established specific measures to provide support, and
to address situations that present arisk of reprisal. Reporters
who believe they have experienced retaliation are encouraged
to immediately bring the issue to the attention of the Group
Compliance Officer.
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2021
88
Code of Conduct
About Aegon Non-financial information
Governance and risk management
Financial informationCode of Conduct
Code of Conduct
In control statement
Internal risk management and control systems
In accordance with best practice provision 1.4.3 of the 2016 Dutch Corporate
Governance Code, the Executive Board of AegonN.V. states that it is responsible for
designing, implementing, and maintaining internal controls, including proper accounting
records and other management information suitable for running the business on agoing
concern basis.
Aegon’s internal audit function assists the Executive Board
in maintaining effective controls by independently and
objectively evaluating the adequacy and effectiveness
of the organization’s internal control and risk management
systems. Criteria established under ‘Internal Control -
Integrated Framework’, the Treadway Commission’s Committee
of Sponsoring Organizations (COSO, 2013 framework),
are used by Aegon’s internal audit function to analyze and
make recommendations to the Executive Board concerning
the effectiveness of the Company’s internal control framework.
Based on risk assessments performed, the Executive Board,
under the supervision of the Supervisory Board and its Audit
Committee, is responsible for determining the overall internal
audit work and for monitoring the integrity of the financial
statements of AegonN.V..
In addition, the Executive Board is responsible for
Aegon’s enterprise risk management under the supervision
of the Supervisory Board and its Risk Committee. Through
oversight and framework setting, Aegon’s risk management
function ensures that the Group-wide risk profile is managed
in line with Aegon’s risk tolerances, and stakeholder
expectations are managed both under normal business
conditions and adverse conditions caused by unforeseen events.
The Executive Board is informed in atimely manner of risks
to the Company’s economic/statutory solvency, reputation,
reliability of financial reporting or operations.
The risk management function develops and monitors compliance
with risk policies and risk frameworks. The risk management
function also advises on risk-related matters including risk
tolerance, risk governance, risk methodology and risk policies;
supports and facilitates the development, maintenance and
embedding of the ERM framework and sound practices; and
monitors and challenges the implementation and effectiveness
of ERM practices. Finally, both the Compliance functionand
the Operational & Model Risk Management function play key
roles in monitoring the Company’s adherence to external rules
and regulations and internal policies.
In preparing the consolidated financial statements,
Aegon’s directors and management have adopted agoing
concern basis on the reasonable assumption that the Company
is and will be able to continue its normal course of business
in the foreseeable future.
Relevant facts, circumstances and risks relating
to the consolidated financial position on December 31, 2021,
were assessed in order to reach the going concern assumption.
The main areas assessed were financial performance, capital
adequacy, financial flexibility, liquidity, and access to capital
markets, together with the factors and risks likely to affect
Aegon’s future development, performance, and financial position.
Commentary on these areas is set out in the ‘Capital and liquidity
management’, ‘Risk management’,‘Results of operations’
and‘Business Overview’ sections in this Annual Report.
Management concluded that the going concern assumption
is appropriate on the basis of the financial performance
of the Company, its continued ability to access capital markets,
adequate solvency ratios, and the level of leverage and Cash
Capital at Holding.
Aegon’s risk management and control systems provide
reasonable assurance for the reliability of financial reporting
and the preparation and fair presentation of Aegon’s published
financial statements. They cannot, however, provide absolute
assurance that amisstatement of Aegon’s financial statements
can be prevented or detected.
On the basis of the above, Aegon’s Executive Board states the
following with respect to risks to the Company’s financial
reporting:
•
The report provides sufficient insights into any failings with
regards to the effectiveness of the internal risk management
and control systems;
•
Aegon’s risk management and control systems provide
reasonable assurance that the Company’s financial reporting
does not contain any material inaccuracies;
•
Based on the current state of affairs, it is justified that the
financial reporting is prepared on agoing concern basis; and
•
The report states those material risks and uncertainties that
are relevant to the expectation of the Company’s continuity
for the period of twelve months after the preparation
of the report.
Aegon Integrated Annual Report
2021
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Governance and risk management
Financial informationAbout Aegon Non-financial information
Governance and risk management
Financial information89
In control statement
In control statement
In control statement
The statements in this section are not statements in
accordance with the requirements of Section 404 of the
USSarbanes-Oxley Act.
Responsibilities for the financial statements and
the Annual Report
The Executive Board is responsible for preparing the financial
statements and the Annual Report in accordance with Dutch law
and the International Financial Reporting Standards, as adopted
by the European Union (EU-IFRS).
As required by section 5:25c of the Dutch Financial Supervision
Act (Wet op het financieel toezicht (Wft)), the Executive Board
confirms that, to the best of its knowledge:
•
The AegonN.V. financial statements have been prepared
in accordance with applicable accounting standards and give
atrue and fair view of the assets, liabilities, financial condition
and profit or loss of the Company and the undertakings
included in the consolidation as awhole; and
•
The report of the Executive Board gives atrue and fair view
of the position at the reporting date of the Company, the
development and performance of the business during the
financial year, and the undertakings included in the
consolidation as awhole, together with adescription of the
principal risks and uncertainties that the Company faces.
Statement of materiality, significant audiences,
andresponsibility
Materiality: Every year, Aegon identifies its material topics.
Theseare the topics that, Aegon believes, will have the most
impact on its business in the years ahead, not only on our
financial performance, but also its ability to continue creating
long-term value for the societies in which Aegon operates.
This report looks in detail at these topics, and at how Aegon,
as afinancial services company, is meeting the challenges and
opportunities they represent for its business. Its material topics
are also built into Aegon’s annual strategy cycle.
Significant audiences: This report is intended first and foremost
for investors. Aegon believes it is important that financial
markets price in fully social, business and environmental risk.
Forthis to happen, management must disclose these risks, and
work to understand the connection between value creation and
longer-term financial performance. Legislators are already
moving in this direction, with the adoption of the EU Directive on
Non-Financial Reporting and the publication of recommendations
from the Financial Stability Board’s Task Force on Climate-
Related Financial Disclosures. Aegon is not only afinancial
services provider, it is also an investor. Consequently, this report
also examines the efforts Aegon has made to embed social,
environmental, and economic factors into its own investment
decision-making.
Responsibility: Aegon’s Executive Board bears
ultimate responsibility for this report and its contents.
Thisis Aegon’s ninth integrated report – but the fourth time
Aegon published acombined integrated and Annual Report.
Aegon supports the IIRC and GRI in their push for more
complete and relevant corporate reporting. Disclosure is only
part of the story. For Aegon, integrated reporting is also about
understanding both the financial and non-financial factors
affecting its business, and using that understanding to drive
better, more integrated decision-making.
The Hague, the Netherlands, March 16, 2022
The Executive Board of AegonN.V.
Lard Friese, CEO
Matthew J. Rider, CFO
Aegon Integrated Annual Report
2021
90
In control statement
About Aegon Non-financial information
Governance and risk management
Financial information
Aegon Integrated Annual Report
2021
About Aegon Governance and risk management
Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information91
Financial
information
2021
Financial information
Financial information
TAB - Financial information
Aegon Integrated Annual Report
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About Aegon Governance and risk management
Financial information
Non-financial informationTOC 3
Table of contents
Financial information
94 Selected financial data
96 Results of operations
97
•
Results 2021 worldwide
101
•
Results 2021 Americas
105
•
Results 2021 The Netherlands
109
•
Results 2021 United Kingdom
112
•
Results 2021 International
116
•
Results 2021 Asset Management
Consolidated financial statements
ofAegonN.V.
118 Exchange rates
119 Consolidated income statement of AegonN.V.
120 Consolidated statement of comprehensive income
ofAegonN.V.
121 Consolidated statement of financial position of AegonN.V.
122 Consolidated statement of changes in equity of AegonN.V.
125 Consolidated cash flow statement of AegonN.V.
Notes to the consolidated financial statements
126 1 General information
126 2 Significant accounting policies
152 3 Critical accounting estimates and judgment in applying
accounting policies
156 4 Financial risks
176 5 Segment information
186 6 Premium income and premiums paid to reinsurers
187 7 Investment income
187 8 Fee and commission income
187 9 Income from reinsurance ceded
188 10 Results from financial transactions
189 11 Other income
189 12 Policyholder claims and benefits
190 13 Profit sharing and rebates
190 14 Commissions and expenses
192 15 Impairment charges / (reversals)
193 16 Interest charges and related fees
193 17 Other charges
194 18 Income tax
195 19 Earnings per share
196 20 Dividend per common share
197 21 Cash and cash equivalents
199
22 Investments
201 23 Investments for account of policyholders
202
24 Derivatives
205 25 Investments in joint ventures and associates
208 26 Reinsurance assets
209 27 Deferred expenses
210 28 Other assets and receivables
213 29 Intangible assets
214 30 Shareholders’ equity
220 31 Other equity instruments
221 32 Subordinated borrowings
222 33 Trust pass-through securities
222 34 Insurance contracts
226 35 Investment contracts
227 36 Guarantees in insurance contracts
231
37 Borrowings
232
38 Provisions
233 39 Defined benefit plans
239 40 Deferred tax
241 41 Other liabilities
241
42 Accruals
241 43 Capital management and solvency
247 44 Fair value
259 45 Commitments and contingencies
263 46 Transfers of financial assets
265 47 Offsetting, enforceable master netting arrangements
and similar agreements
266 48 Companies and businesses acquired and divested
267 49 Group companies
268 50 Related party transactions
271 51 Events after the reporting period
TOC-3
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information93
Financial statements of AegonN.V.
273 Income statement of AegonN.V.
274 Statement of financial position of AegonN.V.
Notes to the financial statements
ofAegonN.V.
275 1 General information
275 2 Significant accounting policies
275 3 Investment income
275 4 Results from financial transactions
276 5 Commissions and expenses
276 6 Interest charges and related fees
276 7 Income tax
276 8 Shares in group companies
277 9 Loans to group companies
277 10 Non-current assets
277
11 Receivables
277 12 Other current assets
277 13 Share capital
279 14 Shareholders’ equity
282 15 Other equity instruments
283 16 Subordinated borrowings
283 17 Long-term borrowings
283 18 Current liabilities
284 19 Commitments and contingencies
284 20 Number of employees
284 21 Auditor's remuneration
284 22 Events after the reporting period
285 23 Proposal for profit appropriation
286 Independent auditor’s report
Other information
297 Profit appropriation
298 Major shareholders
Additional information
302 Overview of Americas
308 Overview of the Netherlands
314 Overview of United Kingdom
318 Overview of International
324 Overview of Asset Management
326 Risk factors Aegon N.V.
363 Frameworks and initiatives
Selected financial data
The financial results in this Annual Report are based on Aegon’s consolidated financial
statements, which have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union (EU-IFRS).
Application of the accounting policies in the preparation of the financial statements requires management to apply judgment involving
assumptions and estimates concerning future results or other developments, including the likelihood, timing or amount of future
transactions or events. There can be no assurance that actual results will not differ materially from those estimates. Accounting
policies that are critical to the presentation of the financial statements and that require complex estimates or significant judgment are
described in the notes to the financial statements.
A summary of historical financial data is provided in the table below. It is important to read this summary in conjunction with
the consolidated financial statements and related notes (see pages 119-271)of this Annual Report.
Selected consolidated income statement information
In EURmillions (except per share amount)
2021
2020 2019 2018 2017
Amounts based upon EU-IFRS
Premium income
15,444 16,099 18,138 19,316 22,826
Investment income
6,967 7,149 7,531 7,035 7,338
Total revenues
1)
25,209 25,657 28,197 28,914 32,973
Result before tax
1,979 (84) 1,828 777 2,389
Net result
1,701 55 1,525 741 2,358
Earnings per common share
Basic
0.78 - 0.70 0.31 1.08
Diluted
0.78 - 0.70 0.31 1.08
Earnings per common share B
Basic
0.02 - 0.02 0.01 0.03
Diluted
0.02 - 0.02 0.01 0.03
Selected consolidated balance sheet information
In EURmillions
2021
2020 2019 2018 2017
Amounts based upon EU-IFRS
Total assets
468,884 444,868 440,543 392,406 395,652
Insurance and investment contracts
400,104 370,286 371,014 329,974 323,759
Borrowings including subordinated and trust pass-through
securities
11,980 10,735 11,650 13,583 14,532
Shareholders' equity
24,282 22,815 22,449 19,507 20,548
Number of common shares
In thousands
2021
2020 2019 2018 2017
Balance at January 1
2,098,114 2,105,139 2,095,648 2,095,648 2,074,549
Share issuance
- - - - -
Stock dividends
10,665 2,466 9,491 - 21,099
Shares withdrawn
(2,466) (9,491) - - -
Balance at end of period
2,106,313 2,098,114 2,105,139 2,095,648 2,095,648
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2021
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Selected financial data
About Aegon Governance and risk management
Financial information
Non-financial informationSelected financial data
Selected financial data
Number of common shares B
In thousands
2021
2020 2019 2018 2017
Balance at January 1
571,795
585,022 585,022 585,022 585,022
Shares withdrawn
(2,956) (13,227) - - -
Balance at end of period
568,839 571,795 585,022 585,022 585,022
Dividends
Aegon declared interim and final dividends on common shares for the years 2017 through 2021, with the exception for the 2019
final dividend, in the amounts set forth in the following table. The 2021 interim dividend amounted to EUR0.08 per common share
and EUR0.002 per common share B. The interim dividend was paid in cash or stock at the election of the shareholder. The interim
dividend was payable as of September 17, 2021. At the General Meeting of Shareholders currently scheduled for May 31, 2022,
the Executive Board will, in line with its earlier announcement and barring unforeseen circumstances, propose afinal dividend
of EUR0.09 per common share (at each shareholders option in cash or in stock), and EUR0.00225 per common share B, which has
financial rights attached to it of 1/40
th
of acommon share. This will bring the total dividend for 2021 to EUR 0.17 per common
share and EUR 0.00425 per common share B. If the proposed dividend is approved by shareholders,this will be paid in cash or stock
at the election of the shareholder. The value of the stock dividend will be approximately equal to the cash dividend. Dividends
in USdollars are calculated based on the foreign exchange reference rate (WM/Reuters closing spot exchange rate fixed at 5.00 pm
Central European Summer Time (‘CEST’)) on the US-ex dividend day.
Year
EUR per common share
1)
USD per common share
1)
Interim Final Total Interim Final Total
2017
0.13 0.14 0.27 0.15 0.16 0.32
2018
0.14 0.15 0.29 0.16 0.17 0.33
2019
0.15 0.00
2)
0.15 0.17 - 0.17
2020
0.06 0.06 0.12 0.07 0.07 0.14
2021
0.08 0.09
3)
0.17 0.09
1
2
3
Aegon Integrated Annual Report
2021
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information95
Selected financial data
Results of operations
This Integrated Annual Report includes the non-EU-IFRS financial measure operating
result. The reconciliation of this measure to the most comparable EU-IFRS measure is
presented in note 5 'Segment information' of the consolidated financial statements.
This non-EU-IFRS measure is calculated by consolidating on aproportionate basis the
revenues and expenses of Aegon's joint ventures in Brazil, China, India, the Netherlands,
Portugal and Spain and Aegon's associates in France, the Netherlands and United
Kingdom.
The information on the following tables also includes the non-EU-IFRS financial measure operating result after tax. This is the after-tax
equivalent of operating result. The reconciliation of operating result to the most comparable EU-IFRS measure is presented in note
5 of the consolidated financial statements. Aegon believes that these non-EU-IFRS measures provides meaningful supplemental
information about the operating results of Aegon's businesses, including insight into the financial measures that senior management
uses in managing the businesses.
Aegon's senior management is compensated based in part on Aegon's results against targets using the non-EU-IFRS measures
presented in this report. While many other insurers in Aegon's peer group present substantially similar non-EU-IFRS measures,
the non-EU-IFRS measures presented in this document may nevertheless differ from the non-EU-IFRS measures presented by other
insurers. There is no standardized meaning to these measures under EU-IFRS or any other recognized set of accounting standards
and readers are cautioned to consider carefully the different ways in which Aegon and its peers present similar information before
making acomparison. Aegon believes the non-EU-IFRS measures present within this report, when read together with Aegon's reported
EU-IFRS financial statements, provide meaningful supplemental information for the investing public. This enables them to evaluate
Aegon's businesses after eliminating the impact of current EU-IFRS accounting policies for financial instruments and insurance
contracts, which embed anumber of accounting policy alternatives that companies may select in presenting their results (as companies
may use different local generally accepted accounting principles (GAAPs)), and this may make the comparability difficult between
time periods.
For the discussion on our operating results for the year ended December 31, 2019, including certain comparative discussion on our
operating results for the years ended December 31, 2019 and December 31, 2020, please refer to the section Results of operations
on pages 128 to 150 in Aegon's 2020 Integrated Annual Report.
Aegon Integrated Annual Report
2021
96
Results of operations
About Aegon Governance and risk management
Financial information
Non-financial informationResults of operations
Results of operations
Results of operations
Results 2021 worldwide
Operating result geographically
Amounts in EURmillions
2021
2020
%
Operating result after tax
1,582
1,425
11
Tax on operating result
324 285
14
Operating result
Americas
788 792
-
The Netherlands
755
665
13
United Kingdom
184 144
28
International
145
164
(12)
Asset Management
253 182
39
Holding and other activities
(219) (237)
8
Operating result
1,906 1,710
11
Fair value items
432 (421)
n.m.
Realized gains / (losses) on investments
446
150
196
Net impairments
53 (237)
n.m.
Non-operating items 930 (508)
n.m.
Other income / (charges)
(780) (1,239)
37
Result before tax (excluding income tax from certain proportionately
consolidated joint ventures and associates) 2,056 (37)
n.m.
Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
78 47
64
Income tax
(355) 92
n.m.
Of which Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
(78) (47)
(64)
Net result
1,701 55
n.m.
Operating expenses
3,775 3,852
(2)
of which addressable expenses
2,903 2,986
(3)
New life sales
Amounts in EURmillions
2021
2020
%
Americas
430 380
13
The Netherlands
74 92
(19)
United Kingdom
31 33
(7)
International
151 233
(35)
Total recurring plus 1/10 single
686 737
(7)
Amounts in EURmillions
2021
2020
%
New premium production accident and health insurance
170 180
(6)
New premium production property & casualty insurance
96 126
(23)
Gross deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Americas
2)
32,861 36,359
(10)
The Netherlands
19,902 16,399
21
United Kingdom
24,764 8,599
188
International
26 320
(92)
Asset Management
1)
157,290 135,375
16
Total gross deposits
2)
234,843 197,053
19
1
2
been impacted, as there was an offset in the market attribution. The cumulative adjustment for 2020 amounted to EUR (1,461) for gross and net deposits and
the equal and opposite amount for market impacts.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information97
Results of operations – Worldwide
Results of operations – Worldwide
•
Results 2021 worldwide
Net deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Americas
2)
(17,469)
(19,461)
10
The Netherlands
(273) 1,758
n.m.
United Kingdom
10,228
(3,587)
n.m.
International
3 155
(98)
Asset Management
1)
12,885
5,912
118
Total net deposits / (outflows)
2)
5,374 (15,223)
n.m.
1
2
been impacted, as there was an offset in the market attribution. The cumulative adjustment for 2020 amounted to EUR (1,461) for gross and net deposits and
the equal and opposite amount for market impacts.
Worldwide revenues geographically 2021
Amounts in EURmillions
Ameri-
cas
The
Nether-
lands
United
King-
dom
Interna-
tional
Asset
Man-
age-
ment
Holding
and
other
activi-
ties
Segment
total
Associ-
ates and
Joint
Ven
-
tures
elimina-
tions
Consoli-
dated
Total life insurance gross premiums
7,108 1,323 4,613 1,181 - - 14,225 (825) 13,400
Accident and health insurance premiums
1,273 254 3 179 - - 1,709 (67) 1,643
Property & casualty insurance premiums
- 136 - 432 - - 569 (168) 401
Total gross premiums 8,381 1,713 4,616 1,793 - - 16,504 (1,060) 15,444
Investment income
2,910 2,088 1,691 360 12 (19) 7,042 (75) 6,967
Fee and commission income
1,920 300 223 59 800 (183) 3,120 (335) 2,785
Other revenue
11 - - 2 2 12 27 (15) 13
Total revenues
13,222 4,101 6,531 2,215 814 (190) 26,693 (1,484) 25,209
Number of employees, including agent
employees
7,675 3,534 2,476 6,590 1,675 321 22,271
Worldwide revenues geographically 2020
Amounts in EURmillions
Americas
The
Nether-
lands
United
Kingdom
Interna-
tional
Asset
Manage-
ment
Holding
and
other
activi-
ties
Segment
total
Associ-
ates and
Joint
Ventures
elimina-
tions
Consoli-
dated
Total life insurance gross premiums
7,105 1,619 4,833 1,095 - 1 14,654 (726) 13,929
Accident and health insurance premiums
1,380 245 25 193 - - 1,844 (59) 1,784
General insurance premiums
- 130 - 388 - - 519 (132) 386
Total gross premiums 8,485 1,994 4,858 1,677 - 1 17,016 (917) 16,099
Investment income
2,986 2,083 1,795 362 7 (20) 7,212 (63) 7,149
Fee and commission income
1,653 255 194 50 750 (189) 2,713 (308) 2,405
Other revenue
7 - - 1 2 3 14 (10) 4
Total revenues
13,131 4,332 6,847 2,091 759 (204) 26,955 (1,298) 25,657
Number of employees, including agent
employees
7,960 3,521 2,307 6,598 1,527 409 22,322
Aegon Integrated Annual Report
2021
98
Results of operations – Worldwide
About Aegon Governance and risk management
Financial information
Non-financial informationResults 2021 worldwide
Aegon's net result increased by EUR 1,646million compared with 2020 to EUR
1,701million in 2021. This was mainly driven by better results on non-operating items
and by lower Other charges when compared with 2020. Non-operating items in 2021
benefited mainly from real estate and private equity revaluations. Other charges were
lower in 2021, mainly since 2020 included more adverse impact from assumption
updates in the United States. An increase in Operating result contributed to the higher
net result as well. Adverse claims experience in the US was more than offset by
increased fees from higher equity markets, the positive contribution from business
growth, and lower expenses driven by expense savings initiatives.
Net result
The 2021 net result amounted to EUR 1,701 million and was driven by the operating result of EUR 1,906 million. Non-operating items
amounted to a gain of EUR 930 million in 2021, whereas a loss of EUR 508 was recorded in 2020. The improvement in Non-operating
items in 2021 resulted mostly from positive fair value items and increased realized gains on investments, while 2020 reflected
the adverse economic impact from the COVID-19 pandemic. Fair value items amounted to EUR 432 million in 2021 and were mainly
driven by positive revaluations from real estate and private equity investments in the Americas. Realized gains on investments were
EUR 448 million in 2021 and were primarily due to asset sales in the Americas, in part to fund investments in long-duration assets
as part of the interest rate risk management plan. Net impairments – mainly related to the unsecured loan portfolio in the Netherlands
– amounted to EUR 53 million in 2021. Other charges in 2021 amounted to EUR 780 million, compared with EUR 1,239 million
in 2020. Other charges in 2021 were mainly driven by management actions to release capital and increase the predictability of capital
generation from the US variable annuity business. The result before tax in 2021 amounted EUR 2,056 million. After the tax charge
of EUR 355 million, the net result for 2021 amounted to EUR 1,701 million. The effective tax rate in 2021 was 17%, and reflects
regular tax exempt income items and the use of tax credits.
Operating result
Aegon's operating result increased by 11% compared with 2020 to EUR 1,906million in 2021. Adverse claims experience in the
US was more than offset by increased fees from higher equity markets, the positive contribution from business growth and lower
expenses driven by expense savings initiatives, leading to higher operating result in all other units, except International. This latter was
driven by the reclassification of the 2021 result of Central & Eastern Europe from operating result to Other income following the
announced divestment of the business.
•
The Americas’ operating result in 2021 decreased by 1% compared with 2020 to EUR 788million as favorable morbidity experience
in Long-Term Care and the impact of favorable market performance in Mutual Funds, Variable Annuities and Retirement Plans and
lower expenses largely offset the impact of adverse mortality in the Life business and unfavorable currency movements.
•
Operating result from the Netherlands increased by 13% compared with 2020 to EUR 755million in 2021. The increase in the
operating result reflects the benefits from expense savings, business growth and an improved investment margin in the
Life segment.
•
In the United Kingdom, the operating result rose by 28% compared with 2020
to EUR
184million
in 2021. The increase in operatingresult was mainly driven by higher fee revenues from the growth of the platform business and favorable equity markets, and
provision releases along with lower expenses, which more than offset the impacts from the loss of earnings due to the sale
of Stonebridge and the gradual run-off of the traditional product portfolio.
•
The operating result from International decreased by 12% compared with 2020 to EUR 145million in 2021. The decrease reflects
the reclassification of the result of Aegon’s businesses in Central & Eastern Europe from operating result to Other income, following
the announced divestment of the business. Adjusted for this, International’s operating results increased when compared with 2020,
driven by higher results in Spain & Portugal, China and TLB. This reflects portfolio growth in Spain & Portugal and China, and
favorable claims experience.
•
Theoperating result from Asset Management increased by 39% compared with 2020 to EUR 253million in 2021. This increase was
mainly driven by higher management fees as aresult of net deposits and favorable markets.
•
Theoperating result for Holdings and other activities amounted to aloss of EUR 219million in 2021 compared with aloss
of EUR 237million in 2020.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information99
Results of operations – Worldwide
Operating expenses
Operating expenses decreased by 2% compared with 2020 to EUR3.8billion in 2021. This decrease primarily reflects areduction
in addressable expenses, which decreased by 3% compared with 2020 to EUR2.9billion. The reduction in addressable expense savings
reflects the benefits from expense savings initiatives across the Group. All business units showed areduction in addressable expenses
compared with 2020, except for Asset Management. The latter was mainly driven by accruals of performance-related compensation.
Sales
Net deposits in 2021 amounted to EUR5.4billion, whereas in 2020 net outflows of EUR15.2billion were recorded. The improvement
was due to the United Kingdom and Asset Management. In the United Kingdom, this was mainly driven by the Institutional business
– which can be lumpy – while Retail and Workplace contributed positively as well. For Asset Management, this was mainly the result
of net deposits from the Global Platforms, driven by net deposits in the fixed income platform. Net outflows in the Americas were
mainly caused by Retirement Plans due to outflows in the low-margin Large-Market segment. Individual Solutions saw outflows from
Variable and Fixed Annuities following product exits as these books mature. Net outflows in the Netherlands were driven by the Bank,
and mainly resulted from Aegon’s decision to stop offering savings products to non-fee-paying customers.
New life sales in 2021 decreased by 7% compared with 2020 to EUR686million. Higher new life sales in the United States, mainly
driven by increased sales of whole life final expense and indexed universal life, were more than offset by lower new life sales
in International and the Netherlands. The lower new life sales in International mainly reflect the exclusion of sales from Central &
Eastern Europe as of 2021. In the Netherlands, the decrease follows from the decision to classify the Dutch Life business as aFinancial
Asset and to close most products for new sales.
New premium production for accident & health insurance decreased by 6% compared with 2020 to EUR170million in 2021. This was
mainly due to the decision to exit the individual Medicare supplement segment in the United States and an unfavorable impact from
currency movements, which more than offset higher long-term-care sales also in the United States. The latter resulted from achange
in legislation in the state of Washington. Otherwise, the product remains closed for new business.
New premium production for property & casualty insurance amounted to EUR96million, which is adecrease of 26% compared
with 2020. The decrease was mainly the result of the exclusion of sales from Central & Eastern Europe as of 2021. Adjusting
for this impact, property & casualty sales increased compared with 2020 mainly due to higher sales in Spain & Portugal, driven
by the introduction of anew household insurance product in the bancassurance channel.
Capital management
During 2021, shareholders' equity increased by EUR1.5billion to EUR24.3billion, driven by the net result of EUR1.7billion. Higher
interest rates and their negative impact on the revaluation reserve were largely offset by the favorable impact of currency movements.
Aegon's shareholders' equity, excluding revaluation reserves, non-controlling interests and share options not yet exercised amounted
to EUR18.1billion on December 31, 2021, or EUR8.71 per common share.
Gross financial leverage improved to EUR5.9billion on December 31, 2021, compared with EUR6.0billion on December 31, 2020.
This reduction was primarily driven by the redemption of USD 250million floating rate perpetual capital securities. There was apartial
offset from the strengthening of the US dollar against the Euro in 2021.
Cash Capital at Holding increased from EUR1.1billion at the end of 2020 to EUR1.3billion at the end of 2021. Free cashflows
amounted to EUR729million for 2021. These
Free cash flows
were used to reduce leverage and pay dividends to Aegon’s shareholders. Capital injections amounted to EUR125million and more than offset EUR66million proceeds from divestments,
notablyTransamerica’s portfolio of fintech and insurtech companies and Stonebridge in the United Kingdom.
As at December 31, 2021, Aegon's estimated Group Solvency II ratio amounted to 211%, an increase of 15%-points since December
31, 2020. This was mainly due to the positive impact from operating capital generation, management actions including the longevity
reinsurance for Aegon Levensverzekering N.V. (NL Life) in December 2021 and model and assumption changes – including an increased
L AC-
DT factor for NL Life. There was apartial offset from other one-time items, aslight negative impact from markets, external
dividends and the impact of deleveraging. For more details, please refer to Note 43.
Aegon Integrated Annual Report
2021
100
Results of operations – Worldwide
About Aegon Governance and risk management
Financial information
Non-financial information
Results 2021 Americas
Amounts in USDmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Operating result after tax
845
824
7143
721
(1)
Tax on operating result
88
80
9
74
70
5
Operating result
Individual Solutions
668
639
5
565
560
1
Workplace Solutions
268 254 222
6
2262
Brazil
(3)
11
n.m.
(3)
10
n.m.
Operating result
932 904 792
3
788-
Fair value items
826 (511) (448)
n.m.
698n.m.
Realized gains / (losses) on investments
370 106 93
n.m.
313n.m.
Net impairments
17 (166) (146)
n.m.
15n.m.
Non-operating items
1,213 (571) (500)
n.m.
1,025n.m.
Other income / (charges)
(789) (1,267) (1,110)
38
(667)40
Result before tax (excluding income tax from certain
proportionately consolidated joint ventures and
associates) 1,357 (935) (819)
n.m.
1,147n.m.
Income tax from certain proportionately consolidated
joint ventures and associates included in result
before tax
- 5 5
(98)
-(98)
Income tax
(162) 324 284
n.m.
(137)n.m.
Of which Income tax from certain proportionately
consolidated joint ventures and associates included
in result before tax
- (5) (5)
98
-98
Net result
1,195 (611) (535)
n.m.
1,010n.m.
Life insurance gross premiums
8,409 8,111 7,105
4
7,108-
Accident and health insurance premiums
1,506
1,575
(4)
1,273
1,380
(8)
Total gross premiums 9,915 9,686 8,485
2
8,381(1)
Investment income
3,442 3,408 2,986
1
2,910(3)
Fee and commission income
2,272 1,887 1,653
20
1,92016
Other revenues
13 8 7
60
1154
Total revenues
15,643 14,990 13,131
4
13,2221
Operating expenses
1,750 1,784 1,562
(2)
1,479(5)
of which addressable expenses
1,541 1,557 1,364
(1)
1,303(4)
New life sales
Amounts in USDmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Individual Solutions
360 302 264
19
30415
Workplace Solutions
57 56 49
1
48(2)
Brazil
92 75 66
22
7718
Total recurring plus 1/10 single
508 433 380
17
43013
Amounts in USDmillions Amounts in EURmillions
2021
2020
2021%
2020
%
New premium production accident and health
insurance
152 154 135
(1)
129(5)
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Financial information
Non-financial information101
Results of operations – Americas
Results of operations – Americas
•
Results 2021 Americas
Gross deposits (on and off balance)
Amounts in USDmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Individual Solutions
10,298 12,374 10,839
(17)
8,704(20)
Workplace Solutions
1)
28,154
28,954
(3)
23,797
25,363
(6)
Brazil
427 180 157
138
361129
Total gross deposits
1)
38,878 41,508 36,359
(6)
32,861(10)
1
been impacted, as there was an offset in the market attribution. The cumulative adjustment for 2020 amounted to USD (1,668) / EUR (1,461) for gross and net
deposits and the equal and opposite amount for market impacts.
Net deposits (on and off balance)
Amounts in USDmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Individual Solutions
(7,709) (3,184) (2,789)
(142)
(6,516)(134)
Workplace Solutions
1)
(13,179)
(19,054)
31
(11,140)
(16,691)
33
Brazil
222 21 18
n.m.
187n.m.
Total net deposits / (outflows)
1)
(20,667) (22,217) (19,461)
7
(17,469)10
1
been impacted, as there was an offset in the market attribution. The cumulative adjustment for 2020 amounted to USD (1,668) / EUR (1,461) for gross and net
deposits and the equal and opposite amount for market impacts.
Exchange rates
Per 1 EUR
Weighted average rate Closing rate as of
2021
2020
December 31, 2021December 31, 2020
USD
1.1831 1.1416 1.1372 1.2236
Aegon Integrated Annual Report
2021
102
Results of operations – Americas
About Aegon Governance and risk management
Financial information
Non-financial informationResults 2021 Americas
Aegon's businesses in the Americas reported anet result of USD 1,195million
compared with anet loss of USD 611million in 2020. The operating result increased by
3% compared with 2020 to USD 932million in 2021, as favorable morbidity experience,
the impact of favorable market performance on fee income, and lower expenses more
than offset the impact of adverse mortality experience. A positive result of USD
1,213million in non-operating items in 2021 was driven by fair value gains and realized
gains on investments. This was partly offset by USD 789million other charges, mainly
driven by management actions to release capital and increase the predictability of
capital generation from the US variable annuity business.
Net result
Aegon's businesses in the Americas reported anet result of USD 1,195million in 2021 compared with anet loss of USD 611million
in 2020. The increase in net result was largely driven by higher operating result, ahigher non-operating result, and lower other charges.
The operating result in 2021 of USD 932million increased by 3% compared with 2020. Non-operating items of USD 1,213million
were driven by fair value gains and realized gains on investments. This was partly offset by USD 789million other charges,
mainly driven by management actions to release capital and increase the predictability of capital generation from the US variable
annuity business.
Results on fair value items amounted to a gain of USD 826 million in 2021, which was primarily related to the following items:
•
Gainson fair value investments of USD 752million, mainly driven by the outperformance of private equity and real estate.
•
Theresult on fair value hedges with an accounting match – which includes the hedges of the variable annuities GMWB portfolio–
amounted to again of USD 146million caused by gains on unhedged risks.
•
Hedgeswithout an accounting match under IFRS resulted in aloss of USD 72million. This was mainly driven by the macro hedge
program net of reserve movements as aresult of equity markets movements through the end of the third quarter of 2021, and
losses on unhedged risks and unhedged volatility in indexed universal life. Starting in the fourth quarter of 2021, the dynamic hedge
program was expanded to cover guaranteed minimum income benefit (GMIB) and guaranteed minimum death benefit (GMDB) riders,
and the former macro hedge programs ended at the end of the third quarter 2021. Due to the accounting treatment for the GMIB
and GMDB riders, the results related to the dynamic hedge on this block are reported as fair value hedges without accounting match.
Realized gains on investments were USD 370million and were primarily due to asset sales, in part to fund investments in long-duration
assets as part of the interest rate risk management plan. Net impairments amounted to again of USD 17million, reflecting gross
impairments of USD 22million more than offset by recoveries.
Other charges of USD 789million in 2021 were mainly driven by acharge for the expansion of the variable annuity dynamic hedge
program as well as the execution of the lump-sum buy-out program for variable annuities with guaranteed minimum income benefit
riders, charges from model and assumption changes, and investments in the operational improvement plan. The model and assumption
changes were mainly driven by more conservative assumptions for variable annuities surrender rates to reflect portfolio and industry
experience. These charges were partly offset by aone-time gain related to changes in the employee pension plan.
Operating result
The operating result in 2021 increased by 3% compared with 2020 to USD 932million as favorable morbidity experience in Accident &
Health and the impact of favorable market performance in Mutual Funds, Variable Annuities and Retirement Plans and lower expenses
offset the impact of adverse mortality in the Life business.
TheIndividual Solutions operating result increased by 5% compared with 2020 to USD 668million, which was driven by the
following items:
•
Theoperating result from Life resulted in aloss of USD 111million in 2021 compared to an operating result of USD 3million
in 2020. The Life operating result was impacted by adverse mortality of USD 384million, which was driven by larger claims at older
ages in universal life products and elevated claims in universal life, traditional and term life products. USD 207million of these
claims can specifically be attributed to COVID-19 as direct cause of death, and Aegon believes much of the remaining adverse
mortality experience is indirectly related to COVID-19.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information103
Results of operations – Americas
•
Accident & Health operating result of USD 356million in 2021 compared with USD 305million in 2020, mainly due to favorable
morbidity experience of USD 209million. Most of the favorable morbidity experience was related to the closed block of Long-Term
Care insurance, where the actual to expected claim ratio amounted to 64% in 2021 compared to 79% in 2020. This was partly
driven by the partial release of the incurred but not reported (IBNR) reserve in 2021 that had been set up in 2020, as new claims
trended back to pre-pandemic levels over the course of 2021.
•
TheMutual Funds operating result of USD 58million in 2021 compared with USD 30million in 2020 due to an increase in fees
from favorable market performance and net deposits.
•
TheVariable Annuities operating result of USD 345million in 2021 compared with USD 263million in 2020, driven by higher fees
as aresult of favorable equity market performance, partly offset by net outflows.
•
TheFixed Annuities operating result of USD 20million in 2021 compared with USD 39million in 2020, mainly due to the impact
of lower interest rates on reinvestments and lower account balances.
Workplace Solutions operating result increased by 6% compared with 2020 to USD 268million, which was driven by the
following items:
•
Lifeoperating result of USD 13million in 2021 compared with USD 23million in 2020, reflecting adverse mortality experience
of USD 24million.
•
Accident& Health operating result of USD 21million in 2021 compared with USD 56million in 2020, reflecting more normalized
claims utilization driving morbidity claims to pre-pandemic levels.
•
RetirementPlans operating result of USD 156million in 2021 compared with USD 95million in 2020, driven by higher investment
income from transferring customer assets to higher yielding general account products, as well as higher fees driven by favorable
market performance despite net outflows and continued margin pressure.
•
StableValue Solutions operating result of USD 77million in 2021 compared with USD 80million in 2020, due to the decrease
in fee revenue from lower fee rates and notional balances.
Theoperating result from Brazil resulted in aloss of USD 3million in 2021 compared with an operating result of USD 11million
in 2020, mainly due to increased COVID-19 claims.
Operating expenses
Operating expenses decreased by 2% compared with 2020 to USD 1.8 billion in 2021, reflecting afavorable one-time benefit from
changes to the employee pension plan of USD 104 million, largely offset by higher restructuring expenses and one-time investments.
Addressable expenses decreased by 1% compared with 2020 to USD 1.5billion in 2021, driven by expense savings initiatives and lower
expenses for travel, marketing, and sales activities due to COVID-19 related restrictions and cancellations in the first half of 2021
partially offset by higher technology expenses and higher expenses related to performance-related compensation accruals.
Sales
Net outflows amounted to USD 20.7 billion in 2021 compared to net outflows of USD 22.2 billion in 2020. The net outflows in 2021
were mainly caused by Retirement Plans due to outflows in the low-margin Large-Market segment as well as participant withdrawals
following favorable market performance in the Middle-Market segment. Variable Annuities and Fixed Annuities also saw outflows
following product exits as these books mature.
New life sales increased by 17% to USD 508million in 2021 compared with USD 433million in 2020. Individual Solutions new life
sales grew by 19% compared to 2020 to USD 360million. This was mainly driven by increased sales of whole life final expense
and indexed universal life, supported by the funeral planning benefit for eligible indexed universal life policyholders, which led to an
increase in the average premium per policy especially for sales in the World Financial Group (WFG) distribution channel. Transamerica’s
market share within the WFG distribution channel expanded during 2021, and at the same time the WFG licensed agent salesforce grew
by 6% versus 2020. New Accident & Health premium production declined by 1% compared to 2020 to USD 152million. In Workplace
Solutions, new Accident & Health premium production declined to USD 116million in 2021 from USD 123million in 2020. New
Individual Solutions Accident & Health premium production increased to USD 36million from USD 32million reflecting higher individual
long-term care sales in the state of Washington resulting from achange in legislation. Otherwise, the product remains closed.
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Results of operations – Americas
About Aegon Governance and risk management
Financial information
Non-financial information
Results 2021 The Netherlands
Amounts in EURmillions
2021
2020
%
Operating result after tax
573
495
16
Tax on operating result
181 170
7
Operating result
Life
519 466
11
Mortgages
71
51
39
Bank
115 113
2
Workplace solutions
50
35
41
Operating result
755 665
13
Fair value items
(201) 50
n.m.
Realized gains / (losses) on investments
118 14
n.m.
Net impairments
40 (49)
n.m.
Non-operating items
(44) 15
n.m.
Other income / (charges)
(23) 78
n.m.
Result before tax (excluding income tax from certain proportionately
consolidated joint ventures and associates) 688 758
(9)
Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
- -
n.m.
Income tax
(183) (197)
7
Of which Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
- -
n.m.
Net result
505 561
(10)
Life insurance gross premiums
1,323 1,619
(18)
Accident and health insurance premiums
254
245
4
Property & casualty insurance
136 130
5
Total gross premiums 1,713 1,994
(14)
Investment income
2,088 2,083
-
Fee and commission income
300 255
18
Other revenues
- -
n.m.
Total revenues
4,101 4,332
(5)
Operating expenses
729 763
(4)
of which addressable expenses
607 633
(4)
New Life Sales
Amounts in EURmillions
2021
2020
%
Life
74 92
(19)
Total recurring plus 1/10 single
74 92
(19)
Amounts in EURmillions
2021
2020
%
Mortgage origination
10,856 11,069
(2)
New premium production accident and health insurance
10 16
(37)
New premium production property & casualty insurance
20 15
40
Gross deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Bank
19,006 15,453
23
Workplace solutions
896 946
(5)
Total gross deposits
19,902 16,399
21
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information105
Results of operations – The Netherlands
Results of operations – The Netherlands
•
Results 2021 The Netherlands
Net deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Bank
(1,012)
960
n.m.
Workplace solutions
739 798
(7)
Total net deposits
(273) 1,758
n.m.
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2021
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Results of operations – The Netherlands
About Aegon Governance and risk management
Financial information
Non-financial informationResults 2021 The Netherlands
The net result for the Netherlands decreased by 10% compared with 2020 to
EUR505million in 2021. This was primarily driven by negative non-operating items
andOther charges in 2021, which more than offset an increase in the operating result.
Non-operating items reflect the adverse impact from an increase in inflation
expectations. Other charges in 2021, were in part driven by investments in the
operational improvement plan. The increase in the operating result reflects the
benefitsfrom expense savings, business growth and an improved investment margin
inthe Life segment.
Net result
The net result from the Netherlands amounted to EUR505million in 2021, driven by an operating result of EUR755million.
Non-operating items amounted to aloss of EUR44million in 2021, compared to again of EUR15million in 2020. In 2021,
aEUR201million loss from fair value items, was largely offset by EUR118million realized gains and EUR40million net recoveries.
The 2021 fair value items were driven by the adverse impact from an increase in inflation expectations. Realized gains on investments
were driven by sales of sovereign bonds. Net recoveries mainly related to the Bank’s unsecured loan portfolio. Other charges in 2021
amounted to EUR33million, and were driven by investments in the operational improvement plan, while the negative impact from
model and assumption updates was offset by the release of atechnical provision following asettlement related to aco-insurance
contract. The result before tax in 2021 amounted to EUR688million. After the tax charge of EUR183million, the net result for 2021
amounted to EUR505million. The effective tax in 2021 was 27%.
Operating result
The operating result from Aegon’s operations in the Netherlands increased by 13% compared with 2020 to EUR 755million in 2021.
•
Theoperating result from Life increased by 11% compared with 2020 to EUR 519million in 2021. The increase was driven
by ahigher investment margin – in turn mainly driven by lower interest rate credited – and by the favorable impact from expense
savings initiatives. There was apartial offset from less favorable claims experience.
•
Theoperating result from Mortgages increased by 39% compared with 2020 in 2021, mainly due to higher fees
to EUR
71million
resulting from business growth. Mortgages under administration increased in 2021
by EUR
5billion
to EUR 60billion 31,
at December
2021. Expense saving initiatives and higher revenues from customer pre-payment compensation also contributed
favorably.
•
Theoperating result from Banking rose by 2% compared with 2020 to EUR 115million in 2021. Higher fee income from growth
in the number of fee-paying customers at Knab and the favorable impact from expense savings initiatives were partly offset
by alower interest income. The latter was primarily due to areduction of the unsecured loan portfolio.
•
Theoperating result from Workplace Solutions increased by 42% to EUR 50million in 2021. Improved results from the non-life
business were the main driver, due to favorable claims experience in 2021 and reserve additions in 2020. This more than offset
adecrease in revenue at TKP due to alarge pension fund having left at the beginning of 2021.
Operating expenses
Operating expenses in 2021 decreased by 4% to EUR729million compared with 2020, mainly as aresult of lower
addressable expenses.
Addressable expenses went down from EUR633million in 2020 to EUR607million in 2021. This was driven by expense savings
initiatives, which led to lower employee expenses, lower IT costs and lower costs of outsourced services. In addition, there was
abenefit
from lower pension cost for own employees driven by lower interest rates.
Sales
Workplace Solutions net deposits decreased by 7% compared to 2020 to EUR739million in 2021, driven by alarge contract win
in 2020 year that did not reoccur in 2021. Net deposits continued to be positive due to continued demand for defined contribution
products (PPI).
Net outflows for the Bank amounted to EUR1.0billion in 2021, while 2020 had positive net deposits of EUR1.0billion. The growth
in net deposits from new fee-paying Knab customers was more than offset by gross outflows mainly stemming from Aegon’s decision
to stop offering savings products to non-fee-paying customers. Due to low market interest rates, Aegon could not offer these savings
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information107
Results of operations – The Netherlands
products to its customers in aprofitable way. These customers were offered the opportunity to either transfer their funds to another
bank or transfer their funds to afee-based Knab account.
Mortgage origination decreased by 2% compared to 2020 to EUR 10.9 billion in 2021, of which EUR 6.9 billion was for third-party
investors. Third-party investors pay Aegon a fee for originating and servicing these mortgages. The decrease in 2021 when compared
to 2020 is driven by lower mortgage spreads in combination with Aegon’s focus on maintaining attractive margins.
New premium production for accident & health insurance amounted to EUR10million in 2021, adecrease of EUR6million compared
to 2020. This decrease was mostly due to lower production within the group disability segment, reflecting lower commercial activity
in the market compared to 2020. New premium production for property & casualty insurance increased by 40% to EUR20million,
driven by good commercial momentum, in particular in the Motor segment.
New life sales decreased by 19% to EUR74million, as expected, following the decision to classify the Dutch Life business
as aFinancial Asset and to close most products for new sales. The remaining sales were mostly from direct annuities, which are linked
to Aegon’s defined contribution business and remain acore product.
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Results of operations – The Netherlands
About Aegon Governance and risk management
Financial information
Non-financial information
Results 2021 United Kingdom
Amounts in GBPmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Operating result after tax
143
126
16614
142
17
Tax on operating result
15
2
n.m.
17
2
n.m.
Operating result
158 128 144
24
18428
Fair value items
(53) (2) (2)
n.m.
(62)n.m.
Realized gains / (losses) on investments
9
-
n.m.
10
-
n.m.
Non-operating items (44) (1) (1)
n.m.
(51)n.m.
Other income / (charges)
1
(61)
n.m.
1
(68)
n.m.
Result before tax (excluding income tax from
certain proportionately consolidated joint
ventures and associates) 115 66 74
74
13480
Income tax from certain proportionately
consolidated joint ventures and associates
included in result before tax
- - -
n.m.
-n.m.
Income tax
(10) (6) (7)
(62)
(12)(68)
Of which Income tax from certain
proportionately consolidated joint ventures
and associates included in result before tax
- - -
n.m.
-n.m.
Net result
104 60 67
75
12281
Life insurance gross premiums
3,966 4,298 4,833
(8)
4,613(5)
Accident and health insurance premiums
3 23 25
(88)
3(87)
Total gross premiums 3,969 4,320 4,858
(8)
4,616(5)
Investment income
1,454 1,596 1,795
(9)
1,691(6)
Fee and commission income
192 172 194
11
22315
Total revenues
5,615 6,089 6,847
(8)
6,531(5)
Operating expenses
386
406
(5)
448
631
(29)
of which addressable expenses
335 341 456
(2)
390(15)
New life sales
Amounts in GBPmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Total recurring plus 1/10 single
27 30 33
(10)
31(7)
Gross deposits (on and off balance)
Amounts in GBPmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Total gross deposits
21,292 7,646 8,599
178
24,764188
Net deposits (on and off balance)
Amounts in GBPmillions Amounts in EURmillions
2021
2020
2021%
2020
%
Retail
(210) (1,095) (1,232)
81
(244)80
Workplace solutions
1,493 1,104 1,242
35
1,73640
Institutional
8,754 (2,548) (2,865)
n.m.
10,181n.m.
Traditional products
(1,246) (651) (732)
(91)
(1,449)(98)
Total net deposits
8,792 (3,190) (3,587)
n.m.
10,228n.m.
Aegon Integrated Annual Report
2021
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Financial information
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Financial information
Non-financial information109
Results of operations – United Kingdom
Results of operations – United Kingdom
•
Results 2021 United Kingdom
Exchange rates
Per 1 EUR
Weighted average rate Closing rate as of
2021
2020
December 31, 2021December 31, 2020
Pound Sterling
0.8598 0.8892 0.8396 0.8951
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Results of operations – United Kingdom
About Aegon Governance and risk management
Financial information
Non-financial informationResults 2021 United Kingdom
The net result for the United Kingdom increased by 75% compared to 2020 to
GBP104million in 2021. The improvement was driven by ahigher operating result and
the non-recurrence of Other charges that impacted the 2020 result. The operating
result in 2021 amounted to GBP 158million, which is an increase of GBP 24million
compared with 2020 driven by higher fee revenues from favorable equity markets,
andlower expenses.
Net result
The net result for the United Kingdom in 2021 amounted to GBP 104million, as the operating result was partially offset by fair
value losses. The operating result rose by 24% compared with 2020 to GBP 158million in 2021. Fair value items amounted to aloss
of GBP 53million and included fair value losses on hedges to protect the solvency position, and were driven by higher interest rates,
higher equity markets and higher inflation. Gains on investments of GBP 9million resulted from the sale of bonds. Other income
amounted to GBP 1million, as investments related to the performance improvement plan were more than offset by income related
to policyholder taxes, which were fully offset by higher income taxes. The result before tax in 2021 amounted to GBP 115million and
the income tax amounted to GBP 10million. The latter includes acharge related to the aforementioned policyholder taxes.
Operating result
The operating result rose by 24% compared with 2020 to GBP 158 million in 2021. The increase in operating result was mainly driven
by higher fee revenues from the growth of the platform business and favorable equity markets, and provision releases along with
lower expenses, which more than offset the impacts from the loss of earnings due to the sale of Stonebridge and the gradual run-off
of the traditional product portfolio.
Operating expenses
Operating expenses amounted to GBP 386million in 2021, which was adecrease of 5% compared with 2020. This decrease was
driven by both lower restructuring expenses and expense savings. Addressable expenses amounted to GBP 335million in 2021,
which was adecrease of 2% compared with 2020. This decrease was driven by expense initiatives, which led to lower cost for
contractors, external advisors and IT platforms, partially offset by higher employee expenses as more permanent staff were hired
to facilitate growth.
Sales
Gross deposits increased by 178% compared with 2020 to GBP 21.3billion in 2021. Net deposits amounted to GBP 8.8billion
compared with net outflows of GBP 3.2billion in 2020. Net deposits were driven by GBP 8.8billion net deposits on the Institutional
business as well as GBP 1.5billion net deposits on the Workplace platform. For the Retail platform GBP 210million net outflows
were recorded in 2021, an improvement compared with the GBP 1.1billion net outflows in 2020. The improved net deposits
on the Workplace and Retail segments of the platform reflect stronger investor sentiment, as well as the benefits from investments
in the business. New life sales decreased by 10% compared with 2020 to GBP 27million in 2021, reflecting the impact on protection
sales as aresult of the COVID-19 pandemic.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information111
Results of operations – United Kingdom
Results 2021 International
Amounts in EURmillions
2021
2020
%
Operating result after tax
112
132
(15)
Tax on operating result
33 33
1
Operating result
Spain & Portugal
75 53
41
China
24
18
38
TLB
77 57
34
Other
(31)
36
n.m.
Operating result
145 164
(12)
Fair value items
(18) (7)
(142)
Realized gains / (losses) on investments
2 46
(96)
Net impairments
1 (16)
n.m.
Non-operating items
(15) 22
n.m.
Other income / (charges)
65 (1)
n.m.
Result before tax (excluding income tax from certain proportionately
consolidated joint ventures and associates) 195 186
5
Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
20 3
n.m.
Income tax
(36) (22)
(68)
Of which Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
(20) (3)
n.m.
Net result
159 164
(3)
Life insurance gross premiums
1,181 1,095
8
Accident and health insurance premiums
179
193
(7)
Property & casualty insurance premiums
432 388
11
Total gross premiums
1,793 1,677
7
Investment income
360 362
-
Fee and commission income
59 50
18
Other revenues
2 1
68
Total revenues
2,215 2,091
6
Operating expenses
386 400
(3)
of which addressable expenses
113 115
(2)
New life sales
Amounts in EURmillions
2021
2020
%
Spain & Portugal
48 43
11
China
90 97
(7)
TLB
11 8
34
Other
2 84
(97)
Total recurring plus 1/10 single
151 233
(35)
Amounts in EURmillions
2021
2020
%
New premium production accident and health insurance
31 29
6
New premium production property & casualty insurance
76 111
(32)
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2021
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Results of operations – International
About Aegon Governance and risk management
Financial information
Non-financial informationResults of operations – International
•
Results 2021 International
Gross deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Spain & Portugal
15
15
4
China
10 9
14
Other
-
296
n.m.
Total gross deposits
26 320
(92)
Net deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Spain & Portugal
-
3
(89)
China
3 3
(17)
Other
-
148
n.m.
Total net deposits
3 155
(98)
Exchange rates
Per 1 EUR
Weighted average rate Closing rate as of
2021
2020
December 31, 2021December 31, 2020
USD
1.1831 1.1416 1.1372 1.2236
Chinese Yuan Renminbi
7.6313 7.8726 7.2478 8.0018
Czech Koruna
25.6418 26.4557 24.8500 26.2620
Hungarian Florint
358.4993 351.1554 368.5650 362.6850
Polish Zloty
4.5641 4.4433 4.5834 4.5589
Romanian Leu
4.9211 4.8370 4.9488 4.8675
Turkish Lira
10.4938 8.0394 15.1017 9.0940
Ukrainian Hryvnia
32.2848 30.8293 31.0257 34.6693
Aegon Integrated Annual Report
2021
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Financial information
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Financial information
Non-financial information113
Results of operations – International
Results 2021 International
The net result from International decreased by 3% compared with 2020 to
EUR159million in 2021, as aresult of atax benefit in 2020 that did not reoccur.
Theresult before tax increased compared with 2020, as ahigher operating result
fromSpain & Portugal, China and Aegon’s high-net-worth business, TLB, more than
offset aloss from non-operating items.
Net result
The net result from International decreased by 3% compared with 2020 to EUR159million in 2021. A decrease in operating result and
non-operating items was partly offset by an increase in other income for 2021 compared with 2020. The operating result decreased
by 12% compared with 2020 to EUR145million in 2021 as aresult of the reclassification of the result of Aegon’s businesses
in Central & Eastern Europe from operating result to Other income, following the announced divestment of the business. Adjusting for
this impact, the operating result increased compared with 2020, as aresult of higher operating result from Spain & Portugal, China
and Aegon’s high-net-worth business, TLB. The loss from non-operating items of EUR15million in 2021 was driven by afair value
loss as aresult of the revaluation of an earn-out obligation in Central & Eastern Europe. Other income amounted to EUR65million
in 2021, and consisted predominantly of the result from Aegon’s businesses in Central & Eastern Europe. Income tax in 2021 was
EUR36million, compared with EUR22million in 2020, which included aone-time tax benefit.
Operating result
Operating result from International decreased by 12% compared with 2020 to EUR 145million in 2021. The decrease reflects the
reclassification of the result of Aegon’s businesses in Central & Eastern Europe from operating result to Other income, following the
announced divestment of the business. This was partly offset by higher results in Spain & Portugal, China and TLB.
•
Operating result from Spain & Portugal was EUR 75million, 41% higher compared with 2020. This was mainly driven by portfolio
growth and favorable claims experience.
•
Operatingresult from China increased by 38% compared with 2020 to EUR 24million in 2021 largely reflecting agrowing portfolio.
•
TLB, the high-net-worth business, recorded operating result of EUR 77million, an increase of EUR 20million compared with 2020.
This was mainly driven by an improved investment margin, reflecting alowering of the crediting rate with the aim to offset lower
reinvestment yields and favorable claims experience. In addition, expense savings initiatives led to adecrease in expenses.
•
For the Others segment, the result decreased to aloss of EUR 31million, an EUR 67million decrease compared with 2020. This
was largely due to the reclassification of the result of Central & Eastern Europe from operating result to Other income. This was
partly offset by reduced regional expenses.
Operating expenses
Operating expenses decreased by 3% compared with 2020 to EUR386million in 2021. This largely reflects lower restructuring
expenses, lower sales expenses in China, and expense savings in Central & Eastern Europe.
Addressable expenses decreased by 2% compared with 2020 to EUR113million in 2021. This was driven by expense savings
initiatives across the businesses.
Sales
Net deposits decreased by EUR152million compared with 2020 to EUR3million in 2021, mainly reflecting the exclusion of net
deposits from Central & Eastern Europe as of 2021.
Total new life sales declined by 35% compared with 2020 to EUR 151million in 2021, mainly reflecting the exclusion of sales from
Central & Eastern Europe as of 2021.
•
New life sales from the China joint venture decreased by EUR 7million to EUR 90million in 2021 reflecting industry-wide lower
demand for critical illness products.
•
For TLB, new life sales increased by EUR 3million to EUR 11million in 2021 driven by higher Index Universal Life sales following
the launch of new, capital-light products.
•
Spain & Portugal increased by EUR 5million to EUR 48million in 2021 mainly due to sales growth in the bancassurance channel.
•
Inthe Other segment, new life sales decreased by EUR 82million to EUR 2million, largely reflecting the exclusion of sales from
Central & Eastern Europe as of 2021, following the announced divestment of the business.
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2021
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Results of operations – International
About Aegon Governance and risk management
Financial information
Non-financial informationNew premium production for accident and health insurance increased by 6% compared with 2020 to EUR31million in 2021. Higher
sales in Spain & Portugal following the launch of new products were partly offset by the exclusion of sales from Central & Eastern
Europe. New premium production for property & casualty insurance decreased by 32% compared with 2020 to EUR76million
in 2021, largely reflecting the exclusion of sales from Central & Eastern Europe as of 2021, following the announced divestment
of the business. This was partly offset by higher sales in Spain & Portugal, which were driven by the introduction of anew household
insurance product in the bancassurance channel.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information115
Results of operations – International
Results 2021 Asset Management
Amounts in EURmillions
2021
2020
%
Operating result
181
130
39
Tax on operating result
72 51
40
Operating result
Global Platforms
54 46
17
Strategic Partnerships
199
136
47
Operating result
253 182
39
Fair value items
(1) 22
n.m.
Realized gains / (losses) on investments
2
1
148
Net impairments
(1) (1)
53
Non-operating items - 22
(99)
Other income / (charges)
(18) (8)
(123)
Result before tax (excluding income tax from certain proportionately
consolidated joint ventures and associates)
235 195
21
Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
(57) 40
n.m.
Income tax
(65) (44)
(47)
Of which Income tax from certain proportionately consolidated joint ventures and
associates included in result before tax
57 (40)
n.m.
Net result
170 151
13
Management fees
602 506
19
Performance fees
112 105
7
Other
75 65
16
Total revenues
788 676
17
Operating expenses
552
485
14
of which addressable expenses
371 359
3
Operating Margin - Global Platforms only
12.6% 10.9%
Gross deposits (on and off balance)
Amounts in EURmillions
2021
2020
%
Global Platforms
52,845 51,950
2
Strategic Partnerships
131,204 115,544
14
Total gross deposits
184,049 167,494
10
Exchange rates
Per 1 EUR
Weighted average rate Closing rate as of
2021
2020
December 31, 2021December 31, 2020
USD
1.1831 1.1416 1.1372 1.2236
Pound Sterling
0.8598 0.8892 0.8396 0.8951
Hungarian Florint
358.4993 351.1554 368.5650 362.6850
Chinese Yuan Renminbi
7.6313 7.8726 7.2478 8.0018
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2021
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Results of operations – Aegon Asset Management
About Aegon Governance and risk management
Financial information
Non-financial informationResults of operations – Aegon Asset Management
•
Results 2021 Asset Management
Results 2021 Asset Management
The net result from Asset Management increased by 13% compared with 2020 to
EUR170million in 2021. This was driven by an increased operating result mainly as
aresult of higher management fees from net deposits and favorable markets.
AssetManagement achieved positive third-party net deposits for the tenth consecutive
year, supported by continued third-party net deposits from Strategic Partnerships.
Net result
The net result from Asset Management increased by 13% compared with 2020 to EUR170million in 2021. This was driven by higher
operating result in 2021.
Operating result
The operating result from Asset Management increased by 39% compared with 2020 to EUR 253million in 2021. This increase was
mainly driven by higher management fees as aresult of net deposits and favorable markets.
•
Theoperating result from Strategic Partnerships increased to EUR 199million in 2021 compared with EUR 136million in 2020.
This was mainly driven by higher management fees as aresult of net deposits and favorable markets in AIFMC in 2021. Performance
fees net of performance-based compensation were EUR 73million.
•
The operating result from Global Platforms increased from EUR 46million in 2020 to EUR 54million in 2021. This was driven
by higher management fees, mainly in the fixed income platform, as aresult of third-party net deposits and favorable markets.
Thismore than offset higher expenses driven by accruals of performance-related compensation.
Operating expenses
Operating expenses increased by 14% compared with 2020 to EUR552million in 2021. The increase is mainly caused by higher
performance-based compensation in AIFMC, and higher expenses driven by AIFMC's business growth. For Global Platforms,
expenses increased driven by investments related to the operational improvement plan and higher accruals for performance-related
compensation. The operating margin in 2021 increased by 2% compared with 2020 supported by higher revenues as aresult of net
deposits and favorable markets.
Addressable expenses increased by 3% compared with 2020 to EUR371million in 2021. This increase was mainly driven by accruals
of performance-related compensation and unfavorable currency movements. This was partly offset by lower administration expenses
as aresult of performance improvement initiatives.
Sales
Third-party gross deposits increased by EUR22billion or 16% compared with 2020 to EUR157billion in 2021. This increase resulted
from higher gross deposits in Strategic Partnerships, which increased by EUR16billion compared with 2020 to EUR131billion
in 2021. This was driven by new fund launches at AIFMC in 2021, and gross deposits into existing AIFMC funds. Global Platforms
recorded gross deposits of EUR26billion in 2021, which was an increase of EUR6billion compared with 2020, mainly due to the fixed
income platform.
2021 was the tenth consecutive full year of positive third-party net deposits for Asset Management. Third-party net deposits
more than doubled compared with 2020 to EUR12.9billion in 2021. Third-party net deposits from Global Platforms increased
by EUR4.5billion compared with 2020, mainly driven by net deposits in the fixed income platform. Third-party net deposits from
Strategic Partnerships increased by EUR2.5billion compared with 2020 driven by net deposits in AIFMC.
Assets under management
Assets under management increased by 6% compared with 2020 to EUR410billion in 2021. This was mainly attributable to third-
party net deposits and favorable market movements.
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Results of operations – Aegon Asset Management
Exchange rates
Exchange rates at December 31,
2021
2020 2019
EUR USD GBP
EUR USD GBP EUR USD GBP
1
EUR - 1.1372 0.8396 - 1.2236 0.8951 - 1.1225 0.8473
1
USD 0.8794 - 0.7383 0.8173 - 0.7315 0.8909 - 0.7548
1
GBP 1.1910 1.3545 - 1.1172 1.3670 - 1.1802 1.3248 -
Weighted average exchange rates
2021
2020 2019
EUR USD GBP
EUR USD GBP EUR USD GBP
1
EUR - 1.1831 0.8598 - 1.1416 0.8892 - 1.1197 0.8770
1
USD 0.8452 - 0.7267 0.8760 - 0.7789 0.8931 - 0.7832
1
GBP 1.1631 1.3760 - 1.1246 1.2839 - 1.1403 1.2767 -
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About Aegon Governance and risk management
Financial information
Non-financial informationExchange rates
Consolidated financial statements ofAegonN.V.
Exchange rates
Consolidated income statement of AegonN.V.
For the year ended December 31
Amounts in EURmillions (except per share data)
Note
2021
2020 2019
Premium income
6 15,444
Investment income 6,967 7,149 7,531
7
Fee and commission income
8 2,785
Other revenues 13 4 6
Total revenues
Income from reinsurance ceded
9 4,289
Results from financial transactions 23,848 21,677 35,761
10
Other income
11 77
Total income 53,423 51,367 67,745
Premiums paid to reinsurers 3,518 2,703 2,434
6
Policyholder claims and benefits
12 41,852 42,006 56,856
Profit sharing and rebates 14 8 17
13
Commissions and expenses 5,984 5,983 6,153
14
Impairment charges / (reversals) 15 391 169
15
Interest charges and related fees 335 505 513
16
Other charges
17 104 150 1
Total charges 51,822 51,746 66,142
Result before share in profit / (loss) of joint ventures,
associates and tax 1,602 (379 ) 1,603
Share in profit / (loss) of joint ventures 265 184 214
25
Share in profit / (loss) of associates 112 111 12
25
Result before tax 1,979 (84 ) 1,828
Income tax (expense) / benefit
18
(278 ) 139 (303 )
Net result 1,701 55 1,525
Net result attributable to:
Owners of AegonN.V. 1,651 45 1,524
Non-controlling interests 50 11 -
Earnings per share (EUR per share)
19
Basic earnings per common share 0.78 - 0.70
Basic earnings per common share B 0.02 - 0.02
Diluted earnings per common share 0.78 - 0.70
Diluted earnings per common share B 0.02 - 0.02
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Consolidated financial statements of AegonN.V.
Financial statements
Consolidated financial statements of AegonN.V.
Consolidated income statement of AegonN.V.
Consolidated statement of comprehensive income ofAegonN.V.
For the year ended December 31
Amounts in EURmillions
2021
2020
1)
2019
Net result 1,701 55 1,525
Items that will not be reclassified to profit or loss:
Changes in revaluation reserve real estate held for own use
(4 ) 20 (4 )
Remeasurements of defined benefit plans 501 (360 ) (612 )
Income tax relating to items that will not be reclassified
(101 ) 138 92
Items that may be reclassified subsequently to profit or loss:
Gains / (losses) on revaluation of available-for-sale investments
(1,173 )
(Gains) / losses transferred to income statement on disposal and impairment of
available-for-sale investments
(450 ) 13 (412 )
Changes in cash flow hedging reserve
(228 ) (247 ) (8 )
Movement in foreign currency translation and net foreign investment hedging
reserves 1,240 (1,493 ) 314
Equity movements of joint ventures 25 12 8
Equity movements of associates
(6 ) 7 4
Disposal of group assets 8 (8 ) (1 )
Income tax relating to items that may be reclassified 372 (616 ) (634 )
Other
Total other comprehensive income / (loss) 200 458 2,237
Total comprehensive income / (loss) 1,901 513 3,762
Total comprehensive income/ (loss) attributable to:
Owners of AegonN.V. 1,840 507 3,763
Non-controlling interests
1
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About Aegon Governance and risk management
Financial information
Non-financial informationConsolidated financial statements of AegonN.V.
Consolidated statement of comprehensive income ofAegonN.V.
Consolidated statement of financial position of AegonN.V.
As at December 31
Amounts in EURmillions
Note
2021
2020 2019
Assets
Cash and cash equivalents 6,889 8,372 12,263
21
Investments
22 158,463
Investments for account of policyholders 250,953 224,172 226,374
23
Derivatives
24 8,827
Investments in joint ventures 1,743 1,376 1,983
25
Investments in associates
25 1,289
Reinsurance assets 20,992 18,910 20,253
26
Defined benefit assets
39 119 43 1
Deferred tax assets 131 101 193
40
Deferred expenses
27 10,503
Other assets and receivables 7,642 8,865 8,842
28
Intangible assets
29 1,333 1,386 1,559
Total assets 468,884 444,868 440,543
Equity and liabilities
Shareholders’ equity 24,282 22,815 22,449
30
Other equity instruments
31 2,363 2,569 2,571
Issued capital and reserves attributable to owners of
AegonN.V. 26,645 25,384 25,020
Non-controlling interests 196 75 20
Group equity 26,841 25,459 25,040
Subordinated borrowings 2,194 2,085 2,207
32
Trust pass-through securities 126 126 136
33
Insurance contracts 124,422 122,146 122,885
34
Insurance contracts for account of policyholders 149,323 135,441 135,710
34
Investment contracts 21,767 21,075 18,594
35
Investment contracts for account of policyholders 104,592 91,624 93,826
35
Derivatives 10,639 14,617 11,616
24
Borrowings 9,661 8,524 9,307
37
Provisions 193 309 214
38
Defined benefit liabilities 3,944 4,636 4,360
39
Deferred gains 9 10 11
Deferred tax liabilities 1,722 1,681 1,396
40
Other liabilities 12,916 16,685 14,816
41
Accruals 537 451 426
42
Total liabilities 442,044 419,410 415,503
Total equity and liabilities 468,884 444,868 440,543
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Consolidated financial statements of AegonN.V.
Consolidated statement of financial position of AegonN.V.
Consolidated statement of changes in equity of AegonN.V.
For the year ended December 31, 2021
Amounts in EURmillions
Note
Share
capital
Retained
earnings
Revaluation
reserves
Remea-
surement
of defined
benefit
plans
Other
reserves
Other
equity
instru-
ments
Issued
capital
and
reserves
1)
Non-
control-
ling
interests
Total
At January 1, 2021
Net result recognized in the
income statement
- 1,651 - - - - 1,651 50 1,701
Other comprehensive income:
Items that will not be
reclassified to profit or loss:
Changes in revaluation reserve
real estate held for own use
- - (4 ) - - - (4 ) - (4 )
Remeasurements of defined
benefit plans
- - - 501 - - 501 - 501
Income tax relating to items
that will not be reclassified
- - 1 (102 ) - - (101 ) - (101 )
Items that may be reclassified
subsequently to profit or loss:
Gains / (losses) on revaluation
of available-for-sale
investments
- - (1,173 ) - - - (1,173 ) - (1,173 )
(Gains) / losses transferred to
income statement on disposal
and impairment of available-
for-sale investments
- - (450 ) - - - (450 ) - (450 )
Changes in cash flow hedging
reserve
- - (228 ) - - - (228 ) - (228 )
Movements in foreign currency
translation and net foreign
investment hedging reserves
- - 447 (65 ) 848 - 1,231 9 1,240
Equity movements of joint
ventures
- - - - 25 - 25 - 25
Equity movements of associates
- - - - (6 ) - (6 ) - (6 )
Disposal of group assets
- - - - 8 - 8 - 8
Income tax relating to items
that may be reclassified
- - 369 - 3 - 372 - 372
Other
- 14 - - - - 14 3 16
Total other comprehensive
income / (loss)
- 14 (1,038 ) 335 878 - 188 11 200
Total comprehensive income /
(loss) for 2021
- 1,665 (1,038 ) 335 878 - 1,840 61 1,901
Shares issued
Issuance and purchase of
treasury shares
- (88 ) - - - - (88 ) - (88 )
Issuance and redemption of
other equity instruments
- - - - - (212 ) (212 ) - (212 )
Dividends paid on common
shares
(127 ) (120 ) - - - - (247 ) (1 ) (248 )
Dividend withholding tax
reduction
- - - - - - - - -
Coupons on perpetual securities
- (39 ) - - - - (39 ) - (39 )
Incentive plans
- - - - - 6 7 - 7
Change in ownership non-
controlling interest
- - - - - - - 61 61
At December 31, 2021
30, 31 7,354 12,362 6,442 (2,199 ) 325 2,363 26,645 196 26,841
1
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Financial information
Non-financial informationConsolidated financial statements of AegonN.V.
Consolidated statement of changes in equity of AegonN.V.
Consolidated statement of changes in equity of AegonN.V.
For the year ended December 31, 2021
Amounts in EURmillions
Note
Share
capital
Retained
earnings
Revaluation
reserves
Remea-
surement
of defined
benefit
plans
Other
reserves
Other
equity
instru-
ments
Issued
capital
and
reserves
1)
Non-
control-
ling
interests
Total
At January 1, 2021
7,480 10,943 7,480 (2,534) (553) 2,569 25,384 75
25,459
Net result recognized in the
income statement
- 1,651 - - - - 1,651 50 1,701
Other comprehensive income:
Items that will not be
reclassified to profit or loss:
Changes in revaluation reserve
real estate held for own use
- - (4) - - - (4) - (4)
Remeasurements of defined
benefit plans
- - - 501 - - 501 - 501
Income tax relating to items
that will not be reclassified
- - 1 (102) - - (101) - (101)
Items that may be reclassified
subsequently to profit or loss:
Gains / (losses) on revaluation
of available-for-sale
investments
- - (1,173) - - - (1,173) - (1,173)
(Gains) / losses transferred to
income statement on disposal
and impairment of available-
for-sale investments
- - (450) - - - (450) - (450)
Changes in cash flow hedging
reserve
- - (228) - - - (228) - (228)
Movements in foreign currency
translation and net foreign
investment hedging reserves
- - 447 (65) 848 - 1,231 9 1,240
Equity movements of joint
ventures
- - - - 25 - 25 - 25
Equity movements of associates
- - - - (6) - (6) - (6)
Disposal of group assets
- - - - 8 - 8 - 8
Income tax relating to items
that may be reclassified
- - 369 - 3 - 372 - 372
Other
- 14 - - - - 14 3 16
Total other comprehensive
income / (loss)
- 14 (1,038) 335 878 - 188 11 200
Total comprehensive income /
(loss) for 2021
- 1,665 (1,038) 335 878 - 1,840 61 1,901
Shares issued
1 - - - - - 1 - 1
Issuance and purchase of
treasury shares
- (88) - - - - (88) - (88)
Issuance and redemption of
other equity instruments
- - - - - (212) (212) - (212)
Dividends paid on common
shares
(127) (120) - - - - (247) (1) (248)
Dividend withholding tax
reduction
- - - - - - - - -
Coupons on perpetual securities
- (39) - - - - (39) - (39)
Incentive plans
- - - - - 6 7 - 7
Change in ownership non-
controlling interest
- - - - - - - 61 61
At December 31, 2021
30, 31
7,354 12,362 6,442 (2,199) 325 2,363 26,645 196 26,841
1
Consolidated statement of changes in equity of AegonN.V.
For the year ended December 31, 2020
Amounts in EURmillions
Note
Share
capital
Retained
earnings
Revaluation
reserves
Remea-
surement
of defined
benefit
plans
Other
reserves
Other
equity
instru-
ments
Issued
capital
and
reserves
1)
Non-
controlling
interests
2)
Total
At January 1, 2020 7,536 10,981 5,873 (2,397 ) 456 2,571 25,020 20 25,040
Net result recognized in the income
statement
- 45 - - - - 45 11 55
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Changes in revaluation reserve real
estate held for own use
- - 20 - - - 20 - 20
Remeasurements of defined
benefit plans
- - - (360 ) - - (360 ) - (360 )
Income tax relating to items that
will not be reclassified
- - (2 ) 140 - - 138 - 138
Items that may be reclassified
subsequently to profit or loss:
Gains / (losses) on revaluation of
available-for-sale investments
- - 2,990 - - - 2,990 - 2,990
(Gains) / losses transferred to
income statement on disposal
and impairment of available-for-
sale investments
- - 13 - - - 13 - 13
Changes in cash flow hedging
reserve
- - (247 ) - - - (247 ) - (247 )
Movements in foreign currency
translation and net foreign
investment hedging reserves
- - (556 ) 83 (1,015 ) - (1,489 ) (4 )
(1,493 )
Equity movements of joint ventures
- - - - 12 - 12 - 12
Equity movements of associates
- - - - 7 - 7 -
Disposal of group assets
- - (0 ) - (7 ) - (8 ) - (8 )
Income tax relating to items that
may be reclassified
- - (610 ) - (7 ) - (616 ) - (616 )
Other
- 2 - - 1 - 3 - 3
Total other comprehensive
income / (loss)
- 2 1,607 (137 ) (1,009 ) - 462 (4 ) 458
Total comprehensive income /
(loss) for 2020
- 46 1,607 (137 ) (1,009 ) - 507 7 513
Shares issued
(3 ) 3 - - - - - - -
Issuance and purchase of treasury
shares
- 3 - - - - 3 - 3
Issuance and redemption of other
equity instruments
- - - - - - - - -
Dividends paid on common shares
(54 ) (64 ) - - - - (118 ) - (118 )
Dividend withholding tax reduction
- 1 - - - - 1 - 1
Coupons on perpetual securities
- (38 ) - - - - (38 ) -
(38 )
Incentive plans
- 10 - - - (3 ) 8 - 8
Change in ownership non-
controlling interest
- - - - - - - 49
At December 31, 2020
30, 31 7,480 10,943 7,480 (2,534 ) (553 ) 2,569 25,384 75 25,459
1
2
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Consolidated financial statements of AegonN.V.
Consolidated statement of changes in equity of AegonN.V.
For the year ended December 31, 2019
Amounts in EURmillions
Note
Share
capital
Retained
earnings
Revaluation
reserves
Remea-
surement
of defined
benefit
plans
Other
reserves
Other
equity
instru-
ments
Issued
capital
and
reserves
1)
Non-
controlling
interests
Total
At January 1, 2019 7,808 9,922 3,435 (1,850 ) 149 3,320 22,784 22 22,806
Net result recognized in the income
statement
- 1,524 - - - - 1,524 - 1,525
Other comprehensive income:
Items that will not be reclassified
to profit or loss:
Changes in revaluation reserve real
estate held for own use
- 32 (36 ) - - - (4 ) - (4 )
Remeasurements of defined
benefit plans
- - - (612 ) - - (612 ) - (612 )
Income tax relating to items that
will not be reclassified
- (7 ) 8 90 - - 92 - 92
Items that may be reclassified
subsequently to profit or loss:
Gains / (losses) on revaluation of
available-for-sale investments
- - 3,477 - - - 3,477 - 3,477
(Gains) / losses transferred to
income statement on disposal
and impairment of available-for-
sale investments
- - (412 ) - - - (412 ) - (412 )
Changes in cash flow hedging
reserve
- - (8 ) - - - (8 ) - (8 )
Movements in foreign currency
translation and net foreign
investment hedging reserves
- - 37 (25 ) 302 - 314 -
Equity movements of joint ventures
- - - - 8 - 8 - 8
Equity movements of associates
- - - - 4 - 4 -
Disposal of group assets
- - - - (1 ) - (1 ) - (1 )
Income tax relating to items that
may be reclassified
- - (629 ) - (5 ) - (634 ) - (634 )
Other
- 15 - - - - 15 (2 ) 13
Total other comprehensive
income / (loss)
- 40 2,438 (547 ) 307 - 2,239 (2 ) 2,237
Total comprehensive income /
(loss) for 2019
- 1,565 2,438 (547 ) 307 - 3,763 (1 ) 3,762
Shares issued 1 - - - - - 1 - 1
Issuance and purchase of treasury
shares
- (30 ) - - - - (30 ) - (30 )
Issuance and redemption of other
equity instruments
- (81 ) - - - (744 ) (825 ) - (825 )
Dividends paid on common shares
(273 ) (309 ) - - - - (583 ) - (583 )
Dividend withholding tax reduction
- - - - - - - - -
Coupons on perpetual securities
- (88 ) - - - - (88 ) -
(88 )
Incentive plans
- 2 - - - (5 ) (3 ) - (3 )
At December 31, 2019
30, 31 7,536 10,981 5,873 (2,397 ) 456 2,571 25,020 20 25,040
1
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Financial information
Non-financial informationConsolidated financial statements of AegonN.V.
Consolidated cash flow statement of AegonN.V.
For the year ended December 31
Amounts in EURmillions
Note
2021
2020 2019
Result before tax 1,979 (84 ) 1,828
Results from financial transactions
(25,294 ) (22,372 ) (36,309 )
Amortization and depreciation
Impairment losses
Income from joint ventures
(265 ) (184 ) (214 )
Income from associates
(112 ) (111 ) (12 )
Release of cash flow hedging reserve
(106 ) (109 ) (97 )
Other
Adjustments of non-cash items (24,356 ) (21,663 ) (35,261 )
Insurance and investment liabilities
(1,885 ) 6,975 3,755
Insurance and investment liabilities for account of policyholders
Accrued expenses and other liabilities
(1,008 ) 655 352
Accrued income and prepayments
(543 ) (1,315 ) (1,057 )
Changes in accruals 10,169 17,319 29,562
Purchase of investments (other than money market investments)
(35,520 ) (44,637 ) (40,014 )
Purchase of derivatives
(1,611 ) 924 (214 )
Disposal of investments (other than money market investments)
Disposal of derivatives
Net purchase of investments for account of policyholders
Net change in cash collateral
(2,805 ) 2,425 (332 )
Net purchase of money market investments
(85 ) 363 1,089
Cash flow movements on operating items not reflected in income 10,391 1,585 11,200
Tax (paid)/ received
Other
Net cash flows from operating activities
21
(1,796 ) (2,854 ) 7,302
Purchase of individual intangible assets (other than VOBA and future
servicing rights)
(36 ) (40 ) (46 )
Purchase of equipment and real estate for own use
(76 ) (80 ) (102 )
Acquisition of subsidiaries, net of cash
Acquisition/capital contributions joint ventures and associates
(97 ) (305 ) (269 )
Disposal of intangible asset
Disposal of equipment
Disposal of subsidiaries and businesses, net of cash
Disposal joint ventures and associates
Dividend received from joint ventures and associates
Net cash flows from investing activities
21
(54 ) (139 ) (86 )
Issuance of treasury shares
Issuance of perpetuals
Purchase of treasury shares
(231 ) (59 ) (318 )
Proceeds from TRUPS
1)
, Subordinated borrowings and borrowings
Repayment of perpetuals
(212 ) - (1,343 )
Repayment of TRUPS
1)
, Subordinated borrowings and borrowings
(3,000 ) (3,985 ) (7,014 )
Dividends paid
(121 ) (63 ) (309 )
Coupons on perpetual securities
(52 ) (55 ) (112 )
Payment of Right-of-use Assets
(59 ) (60 ) (54 )
Change in ownership non-controlling interests
Net cash flows from financing activities
21
Net increase / (decrease) in cash and cash equivalents
2)
(1,550 ) (3,770 ) 3,486
Net cash and cash equivalents at the beginning of the year
Effects of changes in exchange rate
Net cash and cash equivalents at the end of the year
21
1
2
(2020: EUR 138 million and 2019: EUR 130 million).
The cash flow statement is prepared according to the indirect method.
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Consolidated financial statements of AegonN.V.
Consolidated cash flow statement of AegonN.V.
Notes to the consolidated financial statements
1 General information
in the Commercial Register of The Hague registered under number 27076669 and with its registered address at Aegonplein 50, 2591
in Amsterdam and New York.
AegonN.V. (or 'the Company') and its subsidiaries ('Aegon' or 'the Group') have life insurance and pensions operations and are also
active in savings and asset management operations, accident and health insurance, general insurance and to alimited extent banking
operations. Aegon focuses on three core markets (the United States, the Netherlands, and the United Kingdom), three growth markets
(Spain & Portugal, China, and Brazil) and one global asset manager.Furthermore, Aegon has activities in Asia and Southern and
Eastern Europe.Headquarters are located in The Hague, the Netherlands. The Group employs over 22,000 people worldwide (2020:
over 22,000).
2 Significant accounting policies
2.1 Basis of presentation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted
by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil Code.
The consolidated financial statements have been prepared in accordance with the historical cost convention as modified
by the revaluation of (investment) properties and those financial instruments (including derivatives) and financial liabilities that have
been measured at fair value. Information on the standards and interpretations that were adopted in 2021 is provided below in note
2.1.1. The consolidated financial statements are presented in euros and all values are rounded to the nearestmillion unless otherwise
stated. The consequence is that the rounded amounts may not add up to the rounded total in all cases. All ratios and variances are
calculated using the underlying amount rather than the rounded amount.
The preparation of financial statements in conformity with EU-IFRS requires management to make estimates and assumptions
affecting the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts
of revenues and expenses for the reporting period. Those estimates are inherently subject to change and actual results could differ
from those estimates. Included among the material (or potentially material) reported amounts and disclosures that require extensive
use of estimates are: fair value of certain invested assets and derivatives, deferred policy acquisition costs, value of business acquired
and other purchased intangible assets, goodwill, policyholder claims and benefits, insurance guarantees, pension plans, income taxes
and the potential effects of resolving litigation matters. Aegon applies fair value hedge accounting for portfolio hedges of interest
rate risk (macro hedging) under the European Union (EU) ‘carve out’ of EU-IFRS. Details are provided in note 2.9Derivatives and note
24 Derivatives.
The consolidated financial statements of AegonN.V. were approved by the Executive Board and by the Supervisory Board
on March16,2022. The financial statements will be put for adoption to the Annual General Meeting of Shareholders on May 31, 2022.
The shareholders’ meeting can decide not to adopt the financial statements but cannot amend them.
2.1.1 Adoption of new EU-IFRS accounting standards and amendments effective in 2021
New standards and amendments to standards become effective at the date specified by EU-IFRS, but may allow companies to opt for
an earlier adoption date. In 2021, the following amendments to existing standards issued by the IASB became mandatory:
Accounting standard/ amendment/ interpretation
IASB effective date Endorsed by EU Impact for Aegon
Interest Rate Benchmark Reform – Phase 2
(Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
January 1, 2021
Yes
See below for commentsExtension of the Temporary Exemption from Applying IFRS 9
(Amendments to IFRS 4 Insurance Contracts)
January 1, 2021
Yes
See 2.1.2 for commentsEarly adopted:
COVID-19-Related Rent Concessions beyond 30 June 2021
(Amendment to IFRS 16)
April 1, 2021
Yes
LowAegon Integrated Annual Report
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 1
Notes to the consolidated financial statements
Notes to the consolidated financial statements
Interest rate benchmark reform
In 2019, Aegon elected to early adopt the ‘Interest Rate Benchmark Reform – Phase 1 (Amendments to IFRS 9, IAS 39 and IFRS 7)’.
In accordance with the transition provisions, the Phase 1 amendments have been adopted retrospectively to hedging relationships
that existed on January 1, 2019 or were designated thereafter. The amendments provide temporary relief from applying specific hedge
accounting requirements, thereby ensuring that uncertainty on the outcome of the Interest Rate Benchmark Reform (IBOR reform) does
not result in early termination of hedge accounting, notably because the retrospective effectiveness may fall outside of the required
range due to the IBOR reform. Please refer to note 24 Derivatives for the required disclosures of the uncertainty arising from IBOR
reform for hedging relationships for which the Group applied the reliefs.
In 2021, ‘Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)’ became effective.
The Phase 2 amendments provide temporary reliefs which address issues that might affect financial reporting during the IBOR reform,
including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate
benchmark with an alternative benchmark rate. The amendments had no material impact on the financial position or the consolidated
financial statements of the Group. Aegon continues to follow the developments of IBOR reform and intends to use the Phase 2 reliefs
when applicable. Please refer to note 4 Financial risks for the required disclosures.
2.1.2 Future adoption of new EU-IFRS accounting standards and amendments
The following standards and amendments to existing standards, published prior to January 1, 2022, were not early adopted
by the Group, but will be applied in future years:
Accounting standard/ amendment/ interpretation
IASB effective date
Endorsed
by EU
Early adopted
by Aegon Impact for Aegon
IFRS 17 Insurance contracts
January 1, 2023 See below for comments
Yes
NoInitial Application of IFRS 17 and IFRS 9 - Comparative
Information (Amendments to IFRS 17)
January 1, 2023 Not yet No See below for comments
IFRS 9 Financial instruments
January 1, 2018
1)
Yes
No See below for comments
Prepayment Features with Negative Compensation
(Amendments to IFRS 9)
January 1, 2019
1)
Yes
No See below for comments
Reference to the Conceptual Framework
(Amendments to IFRS 3)
January 1, 2022 Low
Yes
NoProperty, Plant and Equipment: Proceeds before Intended
Use (Amendments to IAS 16)
January 1, 2022 Low
Yes
NoOnerous Contracts – Cost of Fulfilling aContract
(Amendments to IAS 37)
January 1, 2022 Low
Yes
NoAnnual Improvements to IFRS Standards 2018–2020
January 1, 2022 Low
Yes
NoClassification of Liabilities as Current or Non-current
(Amendments to IAS 1)
January 1, 2023 Low
Yes
NoDisclosure of Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2)
January 1, 2023 Not yet No Low
Definition of Accounting Estimates (Amendments to IAS 8)
January 1, 2023 Low
Yes
NoDeferred Tax related to Assets and Liabilities arising from
aSingle Transaction (Amendments to IAS 12)
January 1, 2023 Not yet No Low
1
insurance contracts within the scope of IFRS 4 to defer the implementation of IFRS 9 (and linked amendments ‘Amendments to IFRS 9 Financial instruments on
prepayment features with negative compensation’). The amendments to IFRS 4 are further explained below.
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Notes to the consolidated financial statements
Note 2
IFRS 9 Financial Instruments
The IASB issued the complete version of IFRS 9 Financial Instruments in July 2014, which was endorsed by the European Union
in November 2016. IFRS 9 combines classification and measurement, the expected credit loss impairment model and hedge accounting.
The standard replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. Under IFRS
9 Classification and Measurement, financial assets are measured at amortized cost, fair value through profit or loss or fair value
through other comprehensive income, based on both the entity’s business model for managing the financial assets and the financial
asset’s contractual cash flow characteristics. The classification and measurement of financial liabilities is unchanged from existing
requirements apart from own credit risk. For financial liabilities that are designated at fair value through profit or loss, the changes
which are attributable to the change in an entity’s own credit risk are presented in other comprehensive income, unless doing so would
enlarge or create an accounting mismatch. For the impairment component, the IASB included requirements for acredit loss allowance
or provision which should be based on expected losses rather than incurred losses.
Application of IFRS 9 is required for annual periods beginning on or after January 1, 2018. However, on May 18, 2017, the IASB
published the final version of the IFRS 17 Insurance Contracts standard. Prior to its finalization, the IASB issued an amendment
to IFRS 4 Insurance Contracts (the predecessor standard to IFRS 17) that provides for aqualifying insurer atemporary exemption
that permits, but does not require, the insurer to apply IAS 39 rather than IFRS 9 for annual periods beginning before January 1,
2021 (i.e., atemporary exemption of IFRS 9). The objective of the amendment is to address the temporary accounting consequences
of the different effective dates of IFRS 9 and IFRS 17.This amendment was endorsed by the European Union in November 2017.
On June 25, 2020, the IASB decided, next to anumber of significant amendments to the Standard, to defer the effective date of IFRS
17 to annual reporting periods beginning on or after January 1, 2023. As aconsequence 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, 2023.
An entity is eligible to apply the temporary exemption if the carrying amount of its liabilities connected with insurance activities is
•
Greater than 90% of the total carrying value of all liabilities; or
•
Between 80%and 90% of the total carrying value of all its liabilities, and the insurer does not have significant activities unrelated
to insurance.
Aegon performed this analysis at December 31, 2015, and concluded that it meets the requirements for the temporary exception
as 94% of its liabilities are connected with insurance activities. As aresult, Aegon elected to make use of the temporary
exemption of IFRS 9.
As Aegon defers the application of IFRS 9 (including linked amendments as included in above table), the full impact of the standard
in combination with IFRS 17 is not yet clear, however an initial impact assessment resulted in the expectation that it will have
asignificant impact on shareholders’ equity, income and/or other comprehensive income and disclosures. An implementation project
was started in 2017 and is combined with the implementation of IFRS 17 Insurance Contracts.
By qualifying for and electing the temporary exemption, the IFRS 4 amendment requires certain additional disclosures; specifically,
Aegon is required to disclose information to enable users of financial statements to compare insurers applying the temporary
exemption with entities applying IFRS 9. This information is presented below:
Fair value changes
The table below presents an overview of the fair value of the classes of financial assets as of December 31, 2021, as well as the
change in fair value during the reporting period. The asset classes are divided into two categories:
•
SPPI: assets of which cash flows represent solely payments of principal and interest (SPPI) on an outstanding principal amount,
excluding any financial assets that meet the definition of held for trading in IFRS 9, or that are managed and whose performance
is evaluated on afair value basis; and
•
Other: all financial assets other than those specified in SPPI:
•
with contractual terms that do not give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding;
•
that meet the definition of held for trading in IFRS 9; or
•
that are managed and whose performance are evaluated on afair value basis.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 2
Financial assets at fair value
2021
2020
Fair value at the
end of the
reporting period
Change in fair
value during the
reporting period
Fair value at the
end of the
reporting period
Change in fair
value during the
reporting period
Shares
1)
SPPI
44 10 51 2
Other
618 36 623 8
Debt securities SPPI
93,234 (3,132) 92,836 5,461
Other
3,961 (75) 6,514 6
Money Markets and other short-term investments SPPI
2,324 (0) 2,657 -
Other
2,586 - 2,011 -
Mortgage loans SPPI
44,366 (195) 43,258 72
Other
- - - -
Private loans SPPI
5,474 (267) 5,261 213
Other
36 (10) 50 13
Deposits with financial institutions SPPI
52 - 92 -
Other
- - - -
Policy loans SPPI
1 - 1 -
Other
1,892 (0) 1,800 12
Other financial assets SPPI
- - - -
Other
5,598 724 4,946 (145)
At December 31
160,187 (2,909) 160,100 5,644
1
Cash and cash equivalents, deposits with financial institutions, and receivables all pass the SPPI test and are held at amortized cost,
whereby the amortized cost is assumed to approximate fair value due to the short-term nature of the assets. For movement schedules
of these financial assets, refer to respective notes. The fair value at the end of the reporting period in the table reconciles back
to the respective table in note 22.1 Financial assets, excluding derivatives.
Credit Risk
The table below details the credit risk rating grades, as of December 31, 2021, for financial assets with cash flows that are SPPI,
excluding any financial assets that meet the definition of held for trading in IFRS 9, or that are managed and whose performance
is evaluated on afair value basis. The tables show the carrying value of those financial assets applying IAS 39 (in the case of financial
assets measured at amortized cost, before adjusting for any impairment allowances).
SPPI compliant financial assets at
carrying value
AAA AA
A BBB BB B
CCC or
lower
Not
Rated
Total
2021
Shares – Carried at fair value
- - - 23 13 - 8 - 44
Debt securities – Carried at fair value
26,076 10,195 24,916 28,524 1,828 918 754 24 93,234
Money market and other short-term
investments- carried at fair value
25 120 1,986 193 - - - - 2,324
Mortgage loans– Carried at amortized cost
1,383 4,221 3,301 519 59 - - 31,141 40,624
Private loans – Carried at amortized cost
2,607 216 189 1,050 44 - - 744 4,850
Other financial assets – Carried at fair
value
- - 13 1 - 18 - 21 53
At December 31
30,090 14,752 30,405 30,310 1,944 936 762 31,930 141,128
2020
Shares – Carried at fair value
- - - 17 24 7 3 51
Debt securities – Carried at fair value
28,970 9,869 23,615 26,310 2,119 938 1,015 2 92,836
Money market and other short-term
investments- carried at fair value
136 129 2,178 213 - - - - 2,657
Mortgage loans– Carried at amortized cost
1,066 3,494 3,369 695 78 - - 30,596 39,298
Private loans – Carried at amortized cost
1,913 74 142 1,098 46 - - 1,068 4,341
Other financial assets – Carried at fair
value
- - 6 1 - 45 1 41 93
At December 31
32,085 13,565 29,309 28,334 2,267 989 1,018 31,707 139,275
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Notes to the consolidated financial statements
Note 2
For assets that do not qualify for the low credit risk exemption (assets rated below BBB or not rated) and of which cash flows
represent SPPI, excluding any financial assets that meet the definition of held for trading in IFRS 9, or that are managed and whose
performance is evaluated on afair value basis, the table below provides the credit risk exposure from the financial assets held
by Aegon
1
.The financial assets are categorized by asset class with acarrying amount and fair value measured in accordance with
IAS39 measurement requirements.
1
Mortgage loans with no low credit risk are defined as being more than 90 days past due, in line with regulatory guidelines.
SPPI compliant financial assets rated BB or below
2021
2020
Carrying amount Fair value
Carrying amount Fair value
Shares – Carried at fair value
21 21 34 34
Debt securities – Carried at fair value
3,524 3,524 4,073 4,073
Mortgage loans – Carried at amortized cost
31,200 34,254 30,674 33,828
Private loans – Carried at amortized cost
788 816 1,114 1,210
Deposits with financial institutions – Carried at amortized cost
38 38 85 86
Other financial assets – Carried at fair value
1 1 1 1
At December 31
35,572 38,654 35,982 39,232
Investments in joint ventures and associates
All Aegon’s equity accounted investments remain to apply IAS 39. Except Santander Vida Seguros y Reaseguros S.A. ('Santander
Spain Life'), Aegon Industrial Fund Management Co.Ltd. ('AIFMC') and Amvest Residential Core Fund, Aegon does not hold any other
individually material joint-venture or associate. As most of AIFMC andAmvest Residential Core Fund financial assets are measured
at fair value through profit or loss, there is no material difference between the financial statements of AIFMC andAmvest Residential
Core Fund under IFRS 9 and IAS 39. Refer to note 25 Investments in joint ventures and associates for more detailed information
on these joint ventures. As the remaining joint ventures and associates are not material on aconsolidated level, the additional
information required by IFRS 4 for electing the temporary exemption is not disclosed for these entities. The additional information for
Santander Spain Life is presented below:
Financial assets at fair value
2021
2020
Fair value at the
end of the
reporting period
Change in fair
value during the
reporting period
Fair value at the
end of the
reporting period
Change in fair
value during the
reporting period
Debt securities SPPI
178 8 169 119
Other
- - 1 -
Money Markets and other short-term investments SPPI
- - - -
Other
10 - 37 -
At December 31
188 8 207 119
SPPI compliant financial assets at
carrying value
AAA AA
A BBB BB B
CCC or
lower
Not
Rated
Total
2021
Debt securities – Carried at fair value
8 13 120 37 - - - - 178
At December 31
8 13 120 37 - - - - 178
2020
Debt securities – Carried at fair value
9 19 106 35 - - - - 169
At December 31
9 19 106 35 - - - - 169
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 2
Subsidiaries, joint ventures and associates applying IFRS 9 in their statutory accounts
Information on the application of IFRS 9 by principal subsidiaries and joint ventures that for statutory purposes cannot elect to defer
the effective date of IFRS 9 can be found in the publicly available statutory annual reports on www.aegon.nl and/or the Chamber
of Commerce.This information is not part of the audited consolidated financial statements of AegonN.V.. The related entities are:
•
Aegon Bank N.V.
•
Aegon Hypotheken B.V.
•
Aegon Asset Management Holding B.V.
•
Amvest Vastgoed B.V.
•
Amvest Development Fund B.V.
•
Amvest Living & Care Fund
•
Amvest Residential Core Fund
IFRS 17 Insurance Contracts
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.
IFRS17 establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued, reinsurance
contracts held and investment contracts with discretionary participating features issued. The objective of the Standard is to ensure
that entities provide relevant information in away that faithfully represents those contracts. This information should provide users
of financial statements with abasis to assess the effects that the contracts have on the financial position, financial performance and
cash flows of the insurer. The Standard also specifies presentation and disclosure requirements to enhance comparability between
insurance companies.
On June 25, 2020, the IASB decided, next to anumber of significant amendments to the Standard, to defer the effective date of IFRS
17 to annual reporting periods beginning on or after January 1, 2023. As aconsequence 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, 2023. The EU has endorsed IFRS 17 including the June 25, 2020 amendments as per
November 2021.
The Standard represents afundamental change to current financial reporting and the implementation effort is significant. Aegon
will not early adopt the Standard. An implementation project was started soon after the publication of the new Standard.Based
on the finalamendmentsof June 2020 quantitativeassessments are performed and these continued during 2021. In 2022, finalization
of methodology and policy choices are expected and will also form the basis of parallel runs. The impact of the initial application
on Aegon’s financial statements is expected to be significant. Aegon will communicate to the market, once results are reliable, final
methodology and policy choices with related impact. Formal communication is expected in the second half year of 2022.
2.2 Basis of consolidation
Subsidiaries
The consolidated financial statements include the financial statements of AegonN.V. and its subsidiaries. Subsidiaries (including
consolidated structured entities) are entities over which Aegon has control. Aegon controls an entity when Aegon is exposed, or has
rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. The assessment of control is based on the substance of the relationship between the Group and the entity and, among
other things, considers existing and potential voting rights that are substantive. For aright to be substantive, the holder must have
the practical ability to exercise that right.
The subsidiary’s assets, liabilities and contingent liabilities are measured at fair value on the acquisition date and are subsequently
accounted for in accordance with the Group’s accounting policies, which is consistent with EU-IFRS. Intra-group transactions, including
AegonN.V. shares held by subsidiaries, which are recognized as treasury shares in equity, are eliminated. Intra-group losses may
indicate an impairment that requires recognition in the consolidated financial statements. Non-controlling interests are initially stated
at their share in the fair value of the net assets on the acquisition date and subsequently adjusted for the non-controlling share
in changes in the subsidia
ry
’s equity.
The excess of the consideration paid to acquire the interest and the fair value of any interest already owned, over the Group’s share
in the net fair value of assets, liabilities and contingent liabilities acquired is recognized as goodwill. Negative goodwill is recognized
directly in the income statement. If the fair value of the assets, liabilities and contingent liabilities acquired in the business combination
has been determined provisionally, adjustments to these values resulting from the emergence of new evidence within 12 months
after the acquisition date are made against goodwill. Aegon recognized contingent considerations either as provision or as financial
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Notes to the consolidated financial statements
Note 2
liability depending on the characteristics. Any contingent consideration payable is recognized at fair value at the acquisition date.
If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent consideration are recognized in the income statement.
The identifiable assets, liabilities and contingent liabilities are stated at fair value when control is obtained.
Subsidiaries are deconsolidated when control ceases to exist. Any difference between the net proceeds plus the fair value of any
retained interest and the carrying amount of the subsidiary including non-controlling interests is recognized in the income statement.
Transactions with non-controlling interests
Transactions with non-controlling interests are accounted for as transactions with owners. Therefore disposals to non-controlling
interests and acquisitions from non-controlling interests, not resulting in losing or gaining control of the subsidiary are recorded
in equity. Any difference between consideration paid or received and the proportionate share in net assets is accounted for in equity
attributable to shareholders of AegonN.V.
Investment funds
Investment funds managed by the Group in which the Group holds an interest are consolidated in the financial statements if the Group
has power over that investment fund and it is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. In assessing control, all interests held by the Group in the fund
are considered, regardless of whether the financial risk related to the investment is borne by the Group or by the policyholders (unless
adirect link between the policyholder and the fund can be assumed).
In determining whether Aegon has power over an investment fund all facts and circumstances are considered, including the following:
•
Control structure of the asset manager (i.e. whether an Aegon subsidiary);
•
The investment constraints posed by investment mandate;
•
Legal rights held by the policyholder to the separate assets in the investment vehicle (e.g. policyholders could have the voting rights
related to these investments);
•
The governance structure, such as an independent board of directors, representing the policyholders, which has substantive rights
(e.g. to elect or remove the asset manager); and
•
Rights held by other parties (e.g. voting rights of policyholders that are substantive or not).
Exposure or rights to variability of returns can be the result of, for example:
•
General account investment of Aegon;
•
Aegon's investments held for policyholder;
•
Guarantees provided by Aegon on return of policyholders in specific investment vehicles;
•
Fees dependent on fund value (including, but not limited to, asset management fees); and
•
Fees dependent on performance of the fund (including, but not limited to, performance fees).
Investment funds where Aegon acts as an agent are not consolidated due to lack of control of the funds. In particular, for some
separate accounts, the independent board of directors has substantive rights and therefore Aegon does not have power over these
separate accounts but acts as an agent.
For limited partnerships, the assessment takes into account Aegon’s legal position (i.e. limited partner or general partner) and any
substantive removal rights held by other parties. Professional judgment is applied concerning the substantiveness of the removal rights
and the magnitude of the exposure to variable returns, leading to the conclusion that Aegon controls some, but not all, of the limited
partnerships in which it participates.
Upon consolidation of an investment fund, aliability is recognized to the extent that the Group is legally obliged to buy back
participations held by third parties. The liability is presented in the consolidated financial statements as investment contracts for
account of policyholders. Where no repurchase obligation exists, the participations held by third parties are presented as non-
controlling interests in equity. The assets allocated to participations held by third parties or by the Group on behalf of policyholders are
presented in the consolidated financial statements as investments for account of policyholders.
Equity instruments issued by the Group that are held by investment funds are eliminated on consolidation. However, the elimination
is reflected in equity and not in the measurement of the related financial liabilities towards policyholders or other third parties.
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Note 2
Structured entities
A structured entity is defined in IFRS 12 as “An entity that has been designed so that voting rights are not the dominant factor
in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities
are directed by means of contractual arrangements.” In these instances the tests and indicators to assess control provided by IFRS
10 have more focus on the purpose and design of the investee (with relation to the relevant activities that most significantly affect
the structured entity) and the exposure to variable returns, which for structured entities lies in interests through e.g. derivatives, and
will not be focused on entities that are controlled by voting rights.
Structured entities that are consolidated include certain mortgage backed securitization deals, where Aegon was involved in the design
of the structured entities and also has the ability to use its power to affect the amount of the investee’s returns. Other factors that
contribute to the conclusion that consolidation of these entities is required includes consideration of whether Aegon fully services
the investees and can therefore influence the defaults of the mortgage portfolios and the fact that in these cases the majority of risks
are maintained by Aegon.
Structured entities that are not consolidated include general account investments in non-affiliated structured entities that are used for
investment purposes.
Non-current assets held for sale and disposal groups
Disposal groups are classified as held for sale if they are available for immediate sale in their present condition, subject only
to the customary sales terms of such assets and disposal groups and their sale is considered highly probable. Management must
be committed to the sale, which is expected to occur within one year from the date of classification as held for sale.
Upon classification as held for sale, the carrying amount of the disposal group (or group of assets) is compared to their fair value
less cost to sell. If the fair value less cost to sell is lower than the carrying value, this expected loss is recognized through areduction
of the carrying value of any goodwill related to the disposal group or the carrying value of certain other non-current, non-financial
assets to the extent that the carrying value of those assets exceeds their fair value. Any excess of the expected loss over the reduction
of the carrying amount of these relevant assets is not recognized upon classification as held for sale, but is recognized as part
of the result on disposal if and when adivestment transaction occurs.
Classification into or out of held for sale does not result in restating comparative amounts in the statement of financial position.
2.3 Foreign exchange translation
a. Translation of foreign currency transactions
The Group’s consolidated financial statements are presented in euros. Items included in the financial statements of individual group
companies are recorded in their respective functional currency which is the currency of the primary economic environment in which each
entity operates. Transactions in foreign currencies are initially recorded at the exchange rate prevailing at the date of the transaction.
At the reporting date, monetary assets and monetary liabilities in foreign currencies are translated to the functional currency
at the closing rate of exchange prevailing on that date, except for own equity instruments in foreign currencies which are
translated using historical exchange rates. Non-monetary items carried at cost are translated using the exchange rate at the date
of the transaction, while assets carried at fair value are translated at the exchange rate when the fair value was determined.
Exchange differences on monetary items are recognized in the income statement when they arise, except when they are deferred
in other comprehensive income as aresult of aqualifying cash flow or net investment hedge. Exchange differences on non-monetary
items carried at fair value are recognized in other comprehensive income or the income statement, consistently with other gains and
losses on these items.
b. Translation of foreign currency operations
On consolidation, the financial statements of group entities with aforeign 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. Goodwill and fair value adjustments arising on the acquisition of aforeign entity are
translated at the closing rates on the reporting date.
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Note 2
The resulting exchange differences are recognized in the 'foreign currency translation reserve', which is part of shareholders’
equity. On disposal of aforeign entity the related cumulative exchange differences included in the reserve are recognized
in the income statement.
2.4 Segment reporting
Reporting segments and segment measures are explained and disclosed in note 5 Segment information.
2.5 Offsetting of assets and liabilities
Financial assets and liabilities are offset in the statement of financial position when the Group has alegally enforceable right
to offset and has the intention to settle the asset and liability on anet basis or simultaneously. The legally enforceable right must
not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency
or bankruptcy of the Company or the counterpart.
2.6 Intangible assets
a. Goodwill
Goodwill is recognized as an intangible asset for interests in subsidiaries and is measured as the positive difference between
the acquisition cost and the Group’s interest in the net fair value of the entity’s identifiable assets, liabilities and contingent liabilities.
Subsequently, goodwill is carried at cost less accumulated impairment charges. It is derecognized when the interest in the subsidiary
is disposed.
b. Value of business acquired
When aportfolio of insurance contracts is acquired, whether directly from another insurance company or as part of abusiness
combination, the difference between the fair value and the carrying amount of the insurance liabilities is recognized as value
of business acquired (VOBA). The Group also recognizes VOBA when it acquires aportfolio of investment contracts with discretionary
participation features.
VOBA is amortized over the useful life of the acquired contracts, based on either the expected future premiums, revenues
or the expected gross profit margins. The amortization period and pattern are reviewed at each reporting date; any change in estimates
is recorded in the income statement. For all products, VOBA, in conjunction with deferred policy acquisition costs (DPAC) where
appropriate, is assessed for recoverability using aggregation levels on ageographical jurisdiction basis or at the level of portfolio
of contracts that are subject to broadly similar risks and managed together as asingle portfolio. The portion determined not to be
recoverable is charged to the income statement. VOBA is considered in the liability adequacy test for each reporting period, for more
details refer to 2.19.f Liability adequacy testing.
When unrealized gains or losses arise on available-for-sale assets backing the insurance liabilities, VOBA is adjusted to equal the effect
that the realization of the gains or losses (through asale or impairment) would have had on VOBA. The adjustment is recognized
in other comprehensive income and accumulated in the related revaluation reserve in shareholders’ equity. VOBA is derecognized when
the related contracts are settled or disposed.
c. Future servicing rights
On the acquisition of aportfolio of investment contracts without discretionary participation features under which Aegon will render
investment management services, the present value of future servicing rights is recognized as an intangible asset. Future servicing
rights can also be recognized on the sale of aloan portfolio or the acquisition of insurance agency activities.
The present value of the future servicing rights is amortized over the servicing period and is subject to impairment testing. It is
derecognized when the related contracts are settled or disposed.
Where applicable, Aegon recognizes other intangibles on the acquisition of abusiness combination such as those related to customer
relationships.This can include customer contracts, distribution agreements and client portfolios. For these intangibles the present
value of future cash flows are recognized and amortized in the period when future economic benefits arise from these intangibles.
These intangible assets are also presented under future servicing rights.
d. Software and other intangible assets
Software and other intangible assets are recognized to the extent that the assets can be identified, are controlled by the Group,
are expected to provide future economic benefits and can be measured reliably. The Group does not recognize internally generated
intangible assets arising from research or internally generated goodwill, brands, customer lists and similar items.
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Software and other intangible assets are carried at cost less accumulated depreciation and impairment losses. Depreciation
of the asset is over its useful life as the future economic benefits emerge and is recognized in the income statement as an expense.
The depreciation period and pattern are reviewed at each reporting date, with any changes recognized in the income statement.
An intangible asset is derecognized when it is disposed of or when no future economic benefits are expected from its use or disposal.
2.7 Investments
General account investments comprise financial assets, excluding derivatives, as well as investments in real estate.
a. Financial assets, excluding derivatives
Financial assets are recognized at trade date (except for Private placements that are recognized at settlement date) when the Group
becomes aparty to the contractual provisions of the instruments. All financial assets are classified for accounting purposes depending
on the characteristics of the instruments and the purpose for which they were purchased.
Classification
The following financial assets are measured at fair value through profit or loss: financial assets held for trading, financial assets
managed on afair value basis in accordance with the Group’s investment strategy and financial assets containing an embedded
derivative that is not closely related and that cannot be reliably bifurcated. In addition, in certain instances the Group designates
financial assets to this category when by doing so apotential accounting mismatch in the financial statements is eliminated
or significantly reduced.
Financial assets with fixed or determinable payments, that are not quoted in an active market and that the Group does not intend
to sell in the near future are classified as loans. Those for which the holder may not recover substantially all of its initial investment,
other than because of credit deterioration, are accounted for as available-for-sale.
All remaining non-derivative financial assets are classified as available-for-sale.
Measurement
Financial assets are initially recognized at fair value plus, in the case of afinancial asset not at fair value through profit or loss, any
directly attributable incremental transaction costs.
Loans and financial assets held-to-maturity are subsequently carried at amortized cost using the effective interest rate method.
Financial assets at fair value through profit or loss are measured at fair value with all changes in fair value recognized in the income
statement as incurred. Available-for-sale assets are recorded at fair value with unrealized changes in fair value recognized in other
comprehensive income. Financial assets that are designated as hedged items are measured in accordance with the requirements for
hedge accounting.
Amortized cost
The amortized cost of adebt instrument is the amount at which it is measured at initial recognition minus principal repayments, plus
or minus the cumulative amortization of any difference between the initial amount and the maturity amount, and minus any reduction
for impairment. The effective interest rate method is amethod of calculating the amortized cost and of allocating the interest income
or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
or receipts through the expected life of the debt instrument or, when appropriate, ashorter period to the net carrying amount
of the instrument. When calculating the effective interest rate, all contractual terms are considered. Possible future credit losses are
not taken into account. Charges and interest paid or received between parties to the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums or discounts are included in the calculation.
Fair value
The consolidated financial statements provide information on the fair value of all financial assets, including those carried at amortized
cost where the values are provided in the notes to the financial statements.
Fair value is defined as the amount that would be received from the sale of an asset or paid to transfer aliability in an
orderly transaction between market participants at the measurement date under current market conditions (i.e. an exit price
at the measurement date from the perspective of amarket participant that holds the asset or owes the liability). For quoted financial
assets for which there is an active market, the fair value is the bid price at the reporting date. In the absence of an active market, fair
value is estimated by using present value based or other valuation techniques. Where discounting techniques are applied, the discount
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rate is based on current market rates applicable to financial instruments with similar characteristics. The valuation techniques that
include unobservable inputs can result in adifferent outcome than the actual transaction price at which the asset was acquired. Such
differences are not recognized in the income statement immediately but are deferred. They are released over time to the income
statement in line with the change in factors (including time) that market participants would consider in setting aprice for the asset.
Interest accrued to date is not included in the fair value of the financial asset.
Derecognition
A financial asset is derecognized when the contractual rights to the asset’s cash flows expire or when the Group retains the right
to receive cash flows from the asset but has an obligation to pay any received cash flows in full without delay to athird party and
either: has transferred the asset and substantially all the risks and rewards of ownership, or has neither transferred nor retained
all the risks and rewards but has transferred control of the asset. Financial assets of which the Group has neither transferred nor
retained significantly all the risk and rewards and retained control are recognized to the extent of the Group’s continuing involvement.
If significantly all risks are retained, the assets are not derecognized.
On derecognition, the difference between the disposal proceeds and the carrying amount is recognized in the income statement
as arealized gain or loss. Any cumulative unrealized gain or loss previously recognized in the revaluation reserve in shareholders’ equity
is also recognized in the income statement.
Security lending and repurchase agreements
Financial assets that are lent to athird party or that are transferred subject to arepurchase agreement at afixed price are not
derecognized as the Group retains substantially all the risks and rewards of the asset. A liability is recognized for cash (collateral)
received, on which interest is accrued.
A security that has been received under aborrowing or reverse repurchase agreement is not recognized as an asset. A receivable
is recognized for any related cash (collateral) paid by Aegon. The difference between sale and repurchase price is treated as investment
income. If the Group subsequently sells that security, aliability to repurchase the asset is recognized and initially measured
at fair value.
Collateral
With the exception of cash collateral, assets received as collateral are not separately recognized as an asset until the financial asset
they secure defaults. When cash collateral is recognized, aliability is recorded for the same amount.
b. Real estate
Investments in real estate include property held to earn rentals or for capital appreciation, or both. Investments in real estate are
presented as 'Investments'. Property that is occupied by the Group and that is not intended to be sold in the near future is classified
as real estate held for own use and is presented in 'Other assets and receivables'.
All property is initially recognized at cost. Such cost includes the cost of replacing part of the real estate and borrowing cost for long-
term construction projects if recognition criteria are met. Subsequently, investments in real estate are measured at fair value with
the changes in fair value recognized in the income statement. Real estate held for own use is carried at its revalued amount, which
is the fair value at the date of revaluation less subsequent accumulated depreciation and impairment losses. Depreciation is calculated
on astraight line basis over the useful life of abuilding. Land is not depreciated. Revaluation of real estate for own use is recognized
inother comprehensive income and accumulated in revaluation reserve in equity. On revaluation the accumulated depreciation
is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount.
On disposal of an asset, the difference between the net proceeds received and the carrying amount is recognized in the income
statement. Any remaining surplus attributable to real estate in own use in the revaluation reserve is transferred to retained earnings.
Maintenance costs and other subsequent expenditure
Expenditure incurred after initial recognition of the asset is capitalized to the extent that the level of future economic benefits of
the asset is increased. Costs that restore or maintain the level of future economic benefits are recognized in the income statement
as incurred.
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2.8 Investments for account of policyholders
Investments held for account of policyholders consist of investments in financial assets as well as investments in real estate.
Investment return on these assets is passed on to the policyholder. Also included are the assets held by consolidated investment funds
that are backing liabilities towards third parties. Investments for account of policyholders are valued at fair value through profit or loss.
2.9 Derivatives
a. Definition
Derivatives are financial instruments of which the value changes in response to an underlying variable, that often require little or no net
initial investment and are settled at afuture date.
Assets and liabilities may include derivative-like terms and conditions. With the exception of features embedded in contracts held
at fair value through profit or loss, embedded derivatives that are not considered closely related to the host contract are bifurcated,
carried at fair value and presented as derivatives. In assessing whether aderivative-like feature is closely related to the contract
in which it is embedded, the Group considers the similarity of the characteristics of the embedded derivative and the host contract.
Embedded derivatives that transfer significant insurance risk are accounted for as insurance contracts.
Derivatives with positive values are reported as assets and derivatives with negative values are reported as liabilities. Derivatives for
which the contractual obligation can only be settled by exchanging afixed amount of cash for afixed amount of AegonN.V. equity
instruments are accounted for in shareholders’ equity.
b. Measurement
All derivatives recognized on the statement of financial position are carried at fair value.
The fair value is calculated net of the interest accrued to date and is based on market prices, when available. When market prices
are not available, other valuation techniques, such as option pricing or stochastic modeling, are applied. The valuation techniques
incorporate all factors that market participants would consider and are based on observable market data, to the extent possible.
c. Hedge accounting
As part of its asset liability management, the Group enters into economic hedges to limit its risk exposure. These transactions are
assessed to determine whether hedge accounting can and should be applied.
To qualify for hedge accounting, the hedge relationship is designated and formally documented at inception, detailing the particular risk
management objective and strategy for the hedge (which includes the item and risk that is being hedged), the derivative that is being
used and how hedge effectiveness is being assessed. A derivative has to be highly effective in accomplishing the objective of offsetting
either changes in fair value or cash flows for the risk being hedged. The effectiveness of the hedging relationship is evaluated
on aprospective and retrospective basis using qualitative and quantitative measures of correlation. Qualitative methods may include
comparison of critical terms of the derivative to the hedged item. Quantitative methods include acomparison of the changes in the fair
value or discounted cash flow of the hedging instrument to the hedged item. A hedging relationship is considered highly effective
if the results of the hedging instrument are within aratio of 80% to 125% of the results of the hedged item.
Following the financial crisis, the reform and replacement of benchmark interest rates such as LIBOR and other interbank offered rates
(‘IBORs’) has become apriority for global regulators. There is currently uncertainty around the timing and precise nature of these
changes, in light of which the following assumptions have been made with respect to hedge accounting:
•
When considering the ‘highly probable’ requirement, it is assumed that the current benchmark interest rate on which the hedged
positions is based will not change as aresult of IBOR reform.
•
In assessing whether the hedge is expected to be ‘highly effective’ on aforward-looking basis, it is assumed that the current
benchmark interest rate on which the cash flows of the hedged item and the derivative that hedges it are based is not altered
as aresult of the IBOR reform.
•
Hedge accounting is not discontinued during the period of IBOR-related uncertainty solely because the retrospective effectiveness
falls outside the required 80-125% range.
•
For macro hedging the assessment whether the hedged risk component is aseparately identifiable, is performed only when
ahedged item is first included in the hedge and not on an ongoing basis.
•
The cash flows hedge reserve relating to the period after the IBOR reform is expected to take effect, is not recycled solely because
cash flows are expected to change.
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When the uncertainty arising from IBOR reform is no longer present with respect to the hedged risk or the timing and the amount
of interest rate benchmark-based cash flows of the hedged item or of the hedging instrument, the hedge documentation is amended
to reflect the changes required by IBOR reform (i.e. achange results directly from IBOR reform and occurs on an economically
equivalent basis). For this purpose, the hedge designation is amended only to make one or more of the following changes:
•
designating an alternative benchmark rate as the hedged risk;
•
amending the description of the hedged item, including the description of the designated portion of the cash flows or fair value
being hedged;
•
amending the description of the hedging instrument; or
•
amending the description of the method for assessing hedge effectiveness.
Amending the formal designation of ahedging relationship to reflect the changes required by IBOR reform constitutes neither
the discontinuation of the hedging relationship nor the designation of anew hedging relationship.
For hedge accounting purposes, adistinction is made between fair value hedges, cash flow hedges and hedges of anet investment
in aforeign operation.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognized in the profit and loss
account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer
meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments,
amortized through the profit and loss account over the remaining term of the original hedge or recognized directly when the hedged
item is derecognized.
Aegon applies fair value hedge accounting to portfolio hedges of interest rate risk (fair value macro hedging) under the EU ‘carve out’
of EU-IFRS. The EU ‘carve out’ macro hedging enables agroup of derivatives (or proportions thereof) to be viewed in combination
and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting. Under the EU
‘carve out’, ineffectiveness in fair value hedge accounting only arises when the revised projection of the amount of cash flows
in scheduled time buckets falls below the designated amount of that bucket. Aegon applies fair value hedge accounting for portfolio
hedges of interest rate risk (macro hedging) under the EU ‘carve out’ to mortgage loans. Changes in the fair value of the derivatives
are recognized in the profit and loss account, together with the fair value adjustment on the mortgages (hedged items) insofar
as attributable to interest rate risk (the hedged risk).
Cash flow hedges
Cash flow hedges are hedges of the exposure to variability in cash flows that is attributable to aparticular risk of aforecasted
transaction or arecognized asset or liability and could affect profit or loss.
To
the extent that the hedge is effective, the change in the fair value of the derivative is recognized in the related revaluation reserve in shareholders’ equity. Any ineffectiveness
is recognized directly in the income statement. The amount recorded in shareholders’ equity is released to the income statement
to coincide with the hedged transaction, except when the hedged transaction is an acquisition of anon-financial asset or liability. In this
case, the amount in shareholders’ equity is included in the initial cost of the asset or liability.
Net investment hedges
Net investment hedges are hedges of currency exposures on anet investment in aforeign operation.
To
the extent that the hedge is effective, the change in the fair value of the hedging instrument is recognized in the net foreign investment hedging reserve
in shareholders’ equity. Any ineffectiveness is recognized in the income statement. The amount in shareholders’ equity is released
to the income statement when the foreign operation is disposed
of.
Hedge accounting is discontinued prospectively for hedges that are no longer considered effective. When hedge accounting
is discontinued for afair value hedge, the derivative continues to be carried on the statement of financial position with changes in its
fair value recognized in the income statement. When hedge accounting is discontinued for acash flow hedge because the cash flow
is no longer expected to occur, the accumulated gain or loss in shareholders’ equity is recognized immediately in the income statement.
In other situations where hedge accounting is discontinued for acash flow hedge, including those where the derivative is sold,
terminated or exercised, accumulated gains or losses in shareholders’ equity are amortized into the income statement when the income
statement is impacted by the variability of the cash flow from the hedged item.
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2.10 Investments in joint arrangements
In general, joint arrangements are contractual agreements whereby the Group undertakes, with other parties, an economic activity that
is subject to joint control. Joint control exists when it is contractually agreed to share control over an economic activity. Joint control
exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and
obligations each investor has rather than the legal structure of the joint arrangement. Aegon has assessed the nature of its joint
arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognized at cost, which includes positive goodwill
arising on acquisition. Negative goodwill is recognized in the income statement on the acquisition date. If joint ventures are obtained
in successive share purchases, each significant transaction is accounted for separately.
The carrying amount is subsequently adjusted to reflect the change in the Group’s share in the net assets of the joint venture and
is subject to impairment testing. The net assets are determined based on the Group’s accounting policies. Any gains and losses
recorded in other comprehensive income by the joint venture are recognized in other comprehensive income and reflected in other
reserves in shareholders’ equity, while the share in the joint ventures net result is recognized as aseparate line item in the consolidated
income statement. The Group’s share in losses is recognized until the investment in the joint ventures' equity and any other long-term
interest that are part of the net investment are reduced to nil, unless guarantees exist.
Gains and losses on transactions between the Group and the joint ventures are eliminated to the extent of the Group’s interest
in the entity, with the exception of losses that are evidence of impairment which are recognized immediately. Own equity instruments
of AegonN.V. that are held by the joint venture are not eliminated.
On disposal of an interest in ajoint venture, the difference between the net proceeds and the carrying amount is recognized
in the income statement and gains and losses previously recorded directly in the revaluation reserve are reversed and recorded through
the income statement.
2.11 Investments in associates
Entities over which the Group has significant influence through power to participate in financial and operating policy decisions, but
which do not meet the definition of asubsidiary, are accounted for using the equity method. Interests held by venture capital entities,
mutual funds and investment funds that qualify as an associate are accounted for as an investment held at fair value through profit
or loss. Interests held by the Group in venture capital entities, mutual funds and investment funds that are managed on afair value
basis, are also accounted for as investments held at fair value through profit or loss.
Interests in associates are initially recognized at cost, which includes positive goodwill arising on acquisition. Negative goodwill
is recognized in the income statement on the acquisition date. If associates are obtained in successive share purchases, each significant
transaction is accounted for separately.
The carrying amount is subsequently adjusted to reflect the change in the Group’s share in the net assets of the associate and
is subject to impairment testing. The net assets are determined based on the Group’s accounting policies. Any gains and losses
recorded in other comprehensive income by the associate are reflected in other reserves in shareholders’ equity, while the share
in the associate’s net result is recognized as aseparate line item in the consolidated income statement. The Group’s share in losses
is recognized until the investment in the associate’s equity and any other long-term interest that are part of the net investment are
reduced to nil, unless guarantees exist.
Gains and losses on transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the entity,
with the exception of losses that are evidence of impairment which are recognized immediately. Own equity instruments of AegonN.V.
that are held by the associate are not eliminated.
On disposal of an interest in an associate, the difference between the net proceeds and the carrying amount is recognized
in the income statement and gains and losses previously recorded directly in the revaluation reserve are reversed and recorded through
the income statement.
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2.12 Reinsurance assets
Reinsurance contracts are contracts entered into by the Group in order to receive compensation for claims/benefits incurred
on contracts written by the Group (outgoing reinsurance). Reinsurance assets are also held as part of exiting the business. For
contracts transferring sufficient insurance risk, areinsurance asset is recognized for the expected future benefits, less expected future
reinsurance premiums. Reinsurance contracts with insufficient insurance risk transfer are accounted for as investment or service
contracts, depending on the nature of the agreement.
Reinsurance assets are measured consistently with the assumptions associated with the underlying insurance contracts and
in accordance with the terms of each reinsurance contract. They are subject to impairment testing and are derecognized when
the contractual rights are extinguished or expire or when the contract is transferred to another party.
Aegon is not relieved of its legal liabilities when entering into reinsurance transactions, therefore the reserves relating to the underlying
insurance contracts will continue to be reported on the consolidated statement of financial position during the contractual term
of the underlying contracts.
Reinsurance premiums, commissions and claim settlements are accounted for in the same way as the original contracts for which
the reinsurance was concluded. The insurance premiums for the original contracts are presented gross of reinsurance premiums paid.
2.13 Deferred expenses
a. Deferred policy acquisition costs (DPAC)
DPAC relates to all insurance contracts as well as investment contracts with discretionary participation features and represents directly
attributable costs that are related to the selling, underwriting and initiating of these insurance contracts.
DPAC are deferred to the extent that they are recoverable and are subsequently amortized based on factors such as expected gross
profit margins. For products sold in the United States and Asia with amortization based on expected gross profit margins or revenues,
the amortization period and pattern are reviewed at each reporting date and any change in estimates is recognized in the income
statement. Estimates include, but are not limited to: an economic perspective in terms of future returns on bond and equity
instruments, mortality, morbidity and lapse assumptions, maintenance expenses and expected inflation rates.
For all products, DPAC, in conjunction with VOBA where appropriate, is assessed for recoverability at least annually as part
of the
liability adequacy test for each reporting period. If appropriate
, the assumptions included
in the determination
of estimated gross
profits or revenues are adjusted. The portion of DPAC that is determined not to be recoverable is charged to the income statement.
For products sold in the United States and Asia, when unrealized gains or losses arise on available-for-sale assets backing
the insurance liabilities, DPAC is adjusted to equal the effect that the realization of the gains or losses (through sale or impairment)
would have had on its measurement. This is recognized in other comprehensive income and accumulated in the related revaluation
reserve in shareholders’ equity.
DPAC is derecognized when the related contracts are settled or disposed.
b. Deferred cost of reinsurance
A deferred cost of reinsurance is established when Aegon enters into areinsurance transaction, except for reinsurance transactions
that are entered into as part of aplan to exit abusiness. When Aegon enters into areinsurance contract as part of aplan to exit
abusiness, an immediate loss is recognized in the income statement. Upon reinsurance, Aegon is not relieved of its legal liabilities,
so the reserves relating to the underlying reinsured contracts will continue to be reported in the consolidated statement of financial
position during the contractual term of the underlying contracts.
The difference, if any, between amounts paid in areinsurance transaction and the amount of the liabilities relating to the underlying
reinsured contracts is part of the deferred cost of reinsurance.
When losses on buying reinsurance are deferred, the amortization is based on the assumptions of the underlying insurance contracts.
In the Netherlands, the amortization is based on the percentage of premium paid on the reinsurance contract. For products
sold in the Americas and Asia where the amortization is based on expected gross profit margins (EGPs), these EGPs will be net
of reinsurance (i.e., net of actual reinsurance cash flows that exceed expected reinsurance cash flows). The amortization is recognized
in the income statement.
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c. Deferred transaction costs
Deferred transaction costs relate to investment contracts without discretionary participation features under which Aegon will render
investment management services. Incremental costs that are directly attributable to securing these investment management contracts
are recognized as an asset if they can be identified separately and measured reliably and if it is probable that they will be recovered.
For contracts involving both the origination of afinancial liability and the provision of investment management services, only
the transaction costs allocated to the servicing component are deferred. The other transaction costs are included in the carrying
amount of the financial liability.
The deferred transaction costs are amortized in line with fee income, unless there is evidence that another method better represents
the provision of services under the contract. The amortization is recognized in the income statement. Deferred transaction costs are
subject to impairment testing at least annually.
Deferred transaction costs are derecognized when the related contracts are settled or disposed.
2.14 Other assets and receivables
Other assets include trade and other receivables, prepaid expenses, equipment and real estate held for own use. Trade and other
receivables are initially recognized at fair value and are subsequently measured at amortized cost. Equipment is initially carried at cost,
depreciated on astraight line basis over its useful life to its residual value and is subject to impairment testing. The accounting for real
estate held for own use is described in note 2.7 Investments.
2.15 Cash and cash equivalents
Cash comprises cash at banks and in-hand. Cash equivalents are short-term, highly liquid investments generally with original maturities
of three months or less that are readily convertible to known cash amounts, are subject to insignificant risks of changes in value and
are held for the purpose of meeting short-term cash requirements. Money market investments that are held for investment purposes
(backing insurance liabilities, investment liabilities or equity based on asset liability management considerations) are not included
in cash and cash equivalents but are presented as investments or investments for account of policyholders.
2.16 Impairment of assets
An asset is impaired if the carrying amount exceeds the amount that would be recovered through its use or sale. For tangible and
intangible assets, financial assets and reinsurance assets, if not held at fair value through profit or loss, the recoverable amount
of the asset is estimated when there are indications that the asset may be impaired. Irrespective of the indications, goodwill and other
intangible assets with an indefinite useful life that are not amortized, are tested at least annually.
There are anumber of significant risks and uncertainties inherent in the process of monitoring investments and determining
if impairment exists. These risks and uncertainties include the risk that the Group’s assessment of an issuer’s ability to meet all of its
contractual obligations will change based on changes in the credit characteristics of that issuer and the risk that the economic outlook
will be worse than expected or have more of an impact on the issuer than anticipated. Any of these situations could result in acharge
against the income statement to the extent of the impairment charge recorded.
a. Impairment of non-financial assets
Assets are tested individually for impairment when there are indications that the asset may be impaired. For goodwill and intangible
assets with an undefined life, an impairment test is performed at least once ayear or more frequently as aresult of an event or change
in circumstances that would indicate an impairment charge may be necessary. The impairment loss is calculated as the difference
between the carrying and the recoverable amount of the asset, which is the higher of an asset’s value in use and its fair value less
cost of disposal. The value in use represents the discounted future net cash flows from the continuing use and ultimate disposal
of the asset and reflects its known inherent risks and uncertainties. The valuation utilizes the best available information, including
assumptions and projections considered reasonable and supportable by management. The assumptions used in the valuation involve
significant judgments and estimates. Refer to note 29 Intangible assets for more details.
Impairment losses are charged to other comprehensive income to the extent that they offset apreviously recorded revaluation reserve
relating to the same item. Any further losses are recognized directly in the income statement. Impairment of deferred policy acquisition
costs is included in note 15 Impairment charges/(reversals).
With the exception of goodwill, impairment losses are reversed when there is evidence that there has been achange in the estimates
used to determine the asset’s recoverable amount since the recognition of the last impairment loss. The reversal is recognized
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in the income statement to the extent that it reverses impairment losses previously recognized in the income statement. The carrying
amount after reversal cannot exceed the amount that would have been recognized had no impairment taken place.
Non-financial assets that only generate cash flows in combination with other assets and liabilities are tested for impairment
at the level of the cash-generating unit. The goodwill acquired in abusiness combination, for the purpose of impairment testing,
is allocated to cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies
of the combination. The allocation is based on the level at which goodwill is monitored internally and cannot be larger than
an operating segment. When impairing acash-generating unit, any goodwill allocated to the unit is first written-off and recognized
in the income statement. The remaining impairment loss is allocated on apro rata basis among the other assets, on condition that
the resulting carrying amounts do not fall below the individual assets’ recoverable amounts.
b. Impairment of debt instruments
Debt instruments are impaired if there is objective evidence that acredit event has occurred after the initial recognition of the asset
that has anegative impact on the estimated future cash flows. Individually significant loans and other receivables are first assessed
separately. All non-impaired assets measured at amortized cost are then grouped by credit risk characteristics and collectively tested
for impairment.
For debt instruments carried at amortized cost, the carrying amount of impaired financial assets is reduced through an allowance
account. The impairment loss is calculated as the difference between the carrying and recoverable amount of the investment.
The recoverable amount is determined by discounting the estimated probable future cash flows at the original effective interest rate
of the asset. For variable interest debt instruments, the current effective interest rate under the contract is applied.
For debt instruments classified as available-for-sale, the asset is impaired to its fair value. Any unrealized loss previously recognized
in other comprehensive income is taken to the income statement in the impairment loss. After impairment the interest accretion
on debt instruments is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring
the impairment loss.
Impairment losses recognized for debt instruments can be reversed if in subsequent periods the amount of the impairment loss
decreases and that decrease can be objectively related to acredit event occurring after the impairment was recognized. For debt
instruments carried at amortized cost, the carrying amount after reversal cannot exceed what the amortized cost would have been
at the reversal date, had the impairment not been recognized.
c. Impairment of equity instruments
For equity instruments, objective evidence of impairment of an investment in an equity instrument classified as available-for-sale
includes information about significant changes with an adverse effect that have taken place in the technological, market, economic
or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not
be recovered. A significant or prolonged decline in fair value below initial cost is also considered objective evidence of impairment and
always results in aloss being recognized in the income statement. Significant or prolonged decline is defined as an unrealized loss
position for generally more than six months or afair value of less than 80% of the cost price of the investment. Equity investments are
impaired to the asset’s fair value and any unrealized gain or loss previously recognized in shareholders’ equity is taken to the income
statement as an impairment loss. The amount exceeding the balance of previously recognized unrealized gains or losses is recognized
in the income statement. If an available-for- sale equity security is impaired based upon Aegon’s qualitative or quantitative impairment
criteria, any further declines in the fair value at subsequent reporting dates are recognized as impairments. Therefore, at each reporting
period, for an equity security that is determined to be impaired based upon Aegon’s impairment criteria, an impairment is recognized for
the difference between the fair value and the original cost basis, less any previously recognized impairments.
Impairment losses on equity instruments cannot be reversed.
d. Impairment of reinsurance assets
Reinsurance assets are impaired if there is objective evidence, as aresult of an event that occurred after initial recognition
of the reinsurance asset, that not all amounts due under the terms of the contract may be received. In such acase, the value
of the reinsurance asset recoverable is determined based on the best estimate of future cash flows, taking into consideration
the reinsurer’s current and expected future financial conditions plus any collateral held in trust for Aegon’s benefit. The carrying value
is reduced to this calculated recoverable value, and the impairment loss recognized in the income statement.
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2.17 Equity
Financial instruments that are issued if they represent
by the
Group are classified as equityaresidual
interest in the
assets of the
Groupafter deducting all of its liabilities and the Group has an unconditional right to avoid delivering cash or another financial asset to settle
its contractual obligation. In addition to common shares, the Group has issued perpetual securities. Perpetual securities have no final
maturity date, repayment is at the discretion of Aegon and for junior perpetual capital securities, Aegon has the option to defer coupon
payments at its discretion. The perpetual capital securities are classified as equity rather than debt, are measured at par and those that
are denominated in US dollars are translated into euro using historical exchange rates.
Non-cumulative subordinated notes were identified as acompound instrument due to the nature of this financial instrument. For
these non-cumulative subordinated notes, Aegon had an unconditional right to avoid delivering cash or another financial asset
to settle the coupon payments. The redemption of the principal was however not at the discretion of Aegon and therefore Aegon had
acontractual obligation to settle the redemption in cash or another financial asset or through the exchange of financial assets and
liabilities at potentially unfavorable conditions for Aegon. Compound instruments were separated into liability components and equity
components. The liability component for the non-cumulative subordinated notes was equal to the present value of the redemption
amount and carried at amortized cost using the effective interest rate method.The unwinding of the discount of this component was
recognized in the income statement. At initial recognition the equity component was assigned the residual amount after deducting
the liability component from the fair value of the instrument as awhole. The equity component in US dollars was translated into euro
using historical exchange rates.
Incremental external costs that are directly attributable to the issuing or buying back of own equity instruments are recognized
in equity, net of tax. For compound instruments incremental external costs that were directly attributable to the issuing or buying back
of the compound instruments were recognized proportionate to the equity component and liability component, net of tax.
The Group recognizes the income tax consequences of dividends in profit or loss, other comprehensive income or equity according
to where it originally recognized the past transactions or events that generated the distributable profits.A liability for non-cumulative
dividends payable is not recognized until the dividends have been declared and approved.
Treasury shares are shares issued by AegonN.V. that are held by Aegon, one of its subsidiaries or by another entity controlled
by Aegon. Treasury shares are deducted from Group equity, regardless of the objective of the transaction. No gain or loss is recognized
in the income statement on the purchase, sale, issue or cancellation of the instruments. If sold, the difference between the carrying
amount and the proceeds is reflected in retained earnings. The consideration paid or received is recognized directly in shareholders’
equity. All treasury shares are eliminated in the calculation of earnings per share and dividend per common share.
2.18 Trust pass-through securities and (subordinated) borrowings
A financial instrument issued by the Group is classified as aliability if the contractual obligation must be settled in cash or another
financial asset or through the exchange of financial assets and liabilities at potentially unfavorable conditions for the Group.
Trust pass-through securities and (subordinated) borrowings are initially recognized at their fair value including directly attributable
transaction costs and are subsequently carried at amortized cost using the effective interest rate method, with the exception of specific
borrowings that are designated as at fair value through profit or loss to eliminate, or significantly reduce, an accounting mismatch,
or specific borrowings which are carried as at fair value through profit or loss as they are managed and evaluated on afair value basis.
The liability is derecognized when the Group’s obligation under the contract expires, is discharged or is cancelled.
Subordinated borrowings include the liability component of non-cumulative subordinated notes. These notes are identified
as acompound instrument due to the nature of this financial instrument. Compound instruments are separated into equity components
and liability components. The liability component for the non-cumulative subordinated notes is related to the redemption amount. For
further information on the accounting policy of the non-cumulative subordinated notes refer to note 2.17 Equity.
2.19 Insurance contracts
Insurance contracts are accounted for under IFRS 4 Insurance Contracts. In accordance with this standard, Aegon continues to apply
the existing accounting policies that were applied prior to the adoption of EU-IFRS with certain modifications allowed by IFRS 4 for
standards effective subsequent to adoption. Aegon applies, in general, non-uniform accounting policies for insurance liabilities
and insurance related intangible assets to the extent that it was allowed under Dutch Accounting Principles. As aresult, specific
methodologies applied may differ between Aegon’s operations as they may reflect local regulatory requirements and local practices for
specific product features in these local markets. At the time of EU-IFRS adoption, Aegon was applying US GAAP for its United States
operations whereas in the Netherlands and the United Kingdom, Aegon was applying Dutch Accounting Principles. Since adoption
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of EU-IFRS, Aegon has considered new and amended standards in those GAAPs which have become effective subsequent to the date
of transition to EU-IFRS. If any changes are made to current accounting policies for insurance contracts, these will be in accordance
with IFRS 4.
Insurance contracts are contracts under which the Group accepts asignificant risk – other than afinancial risk – from apolicyholder
by agreeing to compensate the beneficiary on the occurrence of an uncertain future event by which he or she will be adversely
affected. Contracts that do not meet this definition are accounted for as investment contracts. The Group reviews homogeneous books
of contracts to assess whether the underlying contracts transfer significant insurance risk on an individual basis. This is considered
the case when at least one scenario with commercial substance can be identified in which the Group has to pay significant additional
benefits to the policyholder. Contracts that have been classified as insurance are not reclassified subsequently.
Insurance liabilities are recognized when the contract is entered into and the premiums are charged. The liability is derecognized
when the contract expires, is discharged, disposed or cancelled. Within the United States, the Netherlands and the United Kingdom,
substantially modified contracts are accounted for as an extinguishment of the original liability and the recognition of anew liability.
Insurance assets and liabilities are valued in accordance with the accounting principles that were applied by the Group prior
to the transition to EU-IFRS and with consideration of standards effective subsequent to the date of transition to EU-IFRS, as further
described in the following paragraphs. In order to reflect the specific nature of the products written, subsidiaries are allowed to apply
local accounting principles to the measurement of insurance contracts. All valuation methods used by the subsidiaries are based
on the general principle that the carrying amount of the net liability must be sufficient to meet any reasonably foreseeable obligation
resulting from the insurance contracts.
a. Life insurance contracts
Life insurance contracts are insurance contracts with life-contingent benefits. The measurement of the liability for life insurance
contracts varies depending on the nature of the product.
Liabilities arising from traditional life insurance products that are offered by Aegon, particularly those with fixed and guaranteed
account terms, are typically measured using the net premium method. Under this method the liability is determined as the sum
of the discounted value of the expected benefits and future administration expenses directly related to the contract, less
the discounted value of the expected theoretical premiums that would be required to meet the future cash outflows based
on the valuation assumptions used. The liability is either based on current assumptions or calculated using the assumptions established
at the time the contract was issued, in which case amargin for risk and adverse deviation is generally included. Furthermore, the liability
for life insurance comprises reserves for unearned premiums and accrued annuity benefits payable.
Depending on local accounting principles, the liability may include amounts for future services on contracts where the policy
administration charges are higher in the initial years than in subsequent years.
Terms and conditions, including participation features, are considered when establishing the insurance liabilities. Where the Group has
discretion over the amount or timing of the bonuses distributed resulting from participation features, aliability is recognized equal
to the amount that is available at the reporting date for future distribution to policyholders.
In establishing the liability, guaranteed minimum benefits issued to the policyholder are measured as described in note
2.19.c Embedded derivatives or, if bifurcated from the host contract, as described in note 2.9 Derivatives.
b. Life insurance contracts for account of policyholders
Life insurance contracts under which the policyholder bears the risks associated with the underlying investments are classified
as insurance contracts for account of policyholders.
The liability for the insurance contracts for account of policyholders is measured at the policyholder account balance. Contracts with
unit-denominated payments are measured at current unit values, which reflect the fair values of the assets of the fund. If applicable,
the liability representing the nominal value of the policyholder unit account is amortized over the term of the contract so that interest
on actuarial funding is at an expected rate of return.
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c. Embedded derivatives
Life insurance contracts may include derivative-like terms and conditions. With the exception of policyholder options to surrender
the contract at afixed amount, contractual features that are not closely related to the insurance contract and that do not themselves
meet the definition of insurance contracts are accounted for as derivatives.
Guaranteed minimum benefits
Certain life insurance contracts, issued by the Group, contain guaranteed minimum benefits. Bifurcated guaranteed minimum benefits
are classified as derivatives.
In the United States, the additional liability for guaranteed minimum benefits that are not bifurcated is determined each period
by estimating the expected value of benefits in excess of the projected account balance and recognizing the excess over
the accumulation period based on total expected assessments. The estimates are reviewed regularly and any resulting adjustment
to the additional liability is recognized in the income statement. The benefits used in calculating the liabilities are commonly based
on the average benefits payable over arange of stochastic scenarios. Where applicable, the calculation of the liability incorporates
apercentage of the potential annuitizations that may be elected by the contract holder.
In the Netherlands, an additional liability is established for guaranteed minimum investment returns on group pension plans with profit
sharing and on traditional insurance contracts, with profit sharing based on an external interest index, that are not bifurcated. These
guarantees are measured at fair value.
d. Shadow accounting
Shadow accounting allows that all gains and losses on investments affect the measurement of the insurance assets and liabilities
in the same way, regardless of whether they are realized or unrealized and regardless of whether the unrealized gains and losses are
recognized in the income statement orthrough other comprehensive income in the revaluation reserve. In some instances, realized
gains or losses on investments have adirect effect on the measurement of the insurance assets and liabilities. For example, some
insurance contracts include benefits that are contractually based on the investment returns realized by the insurer. In addition,
realization of gains or losses on available-for-sale investments can lead to unlocking of VOBA or DPAC and can also affect the outcome
of the liability adequacy test to the extent that it considers actual future investment returns. For similar changes in unrealized gains
and losses, shadow accounting is applied. If an unrealized gain or loss triggers ashadow accounting adjustment to VOBA, DPAC
or the insurance liabilities, the corresponding adjustment is recognized through other comprehensive income in the revaluation reserve,
together with the unrealized gain or loss.
Some profit sharing schemes issued by the Group entitle the policyholder to abonus which is based on the actual total return
on specific assets held.
To
the extent that the bonus relates to gains or losses on available-for-sale investments for which the unrealized gains or losses are recognizedthrough other comprehensive incomein the revaluation reserve in shareholders'
equity, shadow accounting is applied. This means that the increase in the liability is also charged through other comprehensive
incometo shareholders' equity to offset the unrealized gains rather than to the income statement.
e. Non-life insurance contracts
Non-life insurance contracts are insurance contracts where the insured event is not life-contingent. For non-life products the insurance
liability generally includes reserves for unearned premiums, unexpired risk, inadequate premium levels and outstanding claims and
benefits. No catastrophe or equalization reserves are included in the measurement of the liability.
The reserve for unearned premiums includes premiums received for risks that have not yet expired. Generally, the reserve is released
over the coverage period of the premium and is recognized as premium income.
The liability for outstanding claims and benefits is established for claims that have not been settled and any related cash flows, such
as claims handling costs. It includes claims that have been incurred but have not been reported to the Group. The liability is calculated
at the reporting date using statistical methods based on empirical data and current assumptions that may include amargin for adverse
deviation. Liabilities for claims subject to periodic payment are calculated using actuarial methods consistent with those applied to life
insurance contracts. Discounting is applied if allowed by the local accounting principles used to measure the insurance liabilities.
Discounting of liabilities is generally applied when there is ahigh level of certainty concerning the amount and settlement term
of the cash outflows.
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f. Liability adequacy testing
At each reporting date, the adequacy of the life insurance liabilities (including life insurance contracts for account of policyholders), net
of VOBA and DPAC, is assessed using aliability adequacy test.
All tests performed within the Group are based on current estimates of all contractual future cash flows, including related cash flows
from policyholder options and guarantees. A number of valuation methods are applied, including discounted cash flow methods,
option pricing models and stochastic modeling. Aggregation levels are set either on geographical jurisdiction or at the level of portfolio
of contracts that are subject to broadly similar risks and managed together as asingle portfolio.Specifically, in the Netherlands
the liability adequacy test is performed on aconsolidated basis for all life and non-life business, whereas in the Americas and the UK it
is performed at the level of the portfolio of contracts.
To
the extent that the tests involve discounting of future cash flows, the interest rate applied is based on market rates or is based on management’s expectation of the future return on investments. These future
returns on investments take into account management’s best estimate related to the actual investments and, where applicable,
reinvestments of these investments at maturity. Aegon the Netherlands, as required locally, adjusts the outcome of the liability
adequacy test for the difference between the fair value and the book value of the assets that are measured at amortized cost
in the statement of financial position. For details on the fair value (measurement) of Aegon's assets and liabilities, please refer to note
44 Fair value. Only differences between the fair value and the book value build up during the period when the assets were allocated
to the insurance portfolio are included in the
LAT
.To
the extent that the account balances are insufficient to meet future benefits and expenses, any resulting deficiency is recognized
in the income statement, initially by impairing the DPAC and VOBA and subsequently by establishing an insurance liability for
the remaining loss, unless shadow loss recognition has taken place.In the Netherlands, in situations where market interest rates
for the valuation of debt securities lead to achange in the revaluation reserve, and where the result of using the same assumptions
for the liabilities could lead to adeficiency in the liability adequacy test that should be recognized in the income statement, shadow
loss recognition is applied. Shadow loss recognition is applied to the extent that the deficiency of the insurance liabilities relates
to the revaluation of debt securities as aresult of movements in interest rates, the addition to the insurance liabilities is then offset
against the revaluation reserve. If in subsequent periods such adeficiency of the insurance liability is no longer applicable, shadow loss
recognition is reversed via the revaluation reserve.
The adequacy of the non-life insurance liability is tested at each reporting date. Changes in expected claims that have occurred,
but that have not been settled, are reflected by adjusting the liability for claims and future benefits. The reserve for unexpired risk
is increased to the extent that the future claims and expenses in respect of current insurance contracts exceed the future premiums
plus the current unearned premium reserve.
2.20 Investment contracts
Aegon conducts its operations through the following type of investment contracts:
Contracts issued by the Group that do not transfer significant insurance risk, but do transfer financial risk from the policyholder
to the Group are accounted for as investment contracts. Depending on whether the Group or the policyholder runs the risks associated
with the investments allocated to the contract, the liabilities are classified as investment contracts or as investment contracts for
account of policyholders. Investment contract liabilities are recognized when the contract is entered into and are derecognized when
the contract expires, is discharged, cancelled or substantially modified.
a. Investment contracts with discretionary participation features
Some investment contracts have participation features whereby the policyholder has the right to receive potentially significant
additional benefits which are based on the performance of aspecified pool of investment contracts, specific investments held
by the Group or on the issuer’s net result. If the Group has discretion over the amount or timing of the distribution of the returns
to policyholders, the investment contract liability is measured based on the accounting principles that apply to insurance contracts with
similar features.
Some unitized investment contracts provide policyholders with the option to switch between funds with and without discretionary
participation features. The entire contract is accounted for as an investment contract with discretionary participation features
if there is evidence of actual switching resulting in discretionary participation benefits that are asignificant part of the total
contractual benefits.
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b. Investment contracts without discretionary participation features
At inception, investment contracts without discretionary participation features are carried at amortized cost.
Investment contracts without discretionary participation features are carried at amortized cost based on the expected cash flows and
using the effective interest rate method. The expected future cash flows are re-estimated at each reporting date and the carrying
amount of the financial liability is recalculated as the present value of estimated future cash flows using the financial liability’s original
effective interest rate. Any adjustment is immediately recognized in the income statement. For these investment contracts deposit
accounting is applied, meaning that deposits are not reflected as premium income, but are recognized as part of the financial liability.
The consolidated financial statements provide information on the fair value of all financial liabilities, including those carried
at amortized cost. As these contracts are not quoted in active markets, their value is determined by using valuation techniques, such
as discounted cash flow methods and stochastic modeling. For investment contracts without discretionary participation features that
can be cancelled by the policyholder, the fair value cannot be less than the surrender value.
c. Investment contracts for account of policyholders
Investment contracts for account of policyholders are investment contracts for which the actual return on investments allocated
to the contract is passed on to the policyholder. Also included are participations held by third parties in consolidated investment funds
that meet the definition of afinancial liability.
Investment contracts for account of policyholders are designated at fair value through profit or loss. Contracts with unit-denominated
payments are measured at current unit values, which reflect the fair values of the assets of the fund.
For unit-linked contracts without discretionary participation features and subject to actuarial funding, the Group recognizes aliability
at the funded amount of the units. The difference between the gross value of the units and the funded value is treated as an initial
fee paid by the policyholder for future asset management services and recognized as adeferred revenue liability, refer to note
2.23 Deferred gains.
2.21 Provisions
A provision is recognized for present legal or constructive obligations arising from past events, when it is probable that it will
result in an outflow of economic benefits and the amount can be reliably estimated. Management exercises judgment in evaluating
the probability that aloss will be incurred.
The amount recognized as aprovision is the best estimate of the expenditure required to settle the present obligation at the reporting
date, considering all its inherent risks and uncertainties, as well as the time value of money. The estimate of the amount of aloss
requires management judgment in the selection of aproper calculation model and the specific assumptions related to the particular
exposure. The unwinding of the effect of discounting is recorded in the income statement as an interest expense.
Onerous contracts
With the exception of insurance contracts and investment contracts with discretionary participation features for which potential future
losses are already considered in establishing the liability, aprovision is recognized for onerous contracts in which the unavoidable costs
of meeting the resulting obligations exceed the expected future economic benefits. The unavoidable costs under acontract reflect
the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising
from failure to fulfill it.
2.22 Assets and liabilities relating to employee benefits
a. Short-term employee benefits
A liability is recognized for the undiscounted amount of short-term employee benefits expected to be settled within one year after
the end of the period in which the service was rendered. Accumulating short-term absences are recognized over the period in which
the service is provided. Benefits that are not service-related are recognized when the event that gives rise to the obligation occurs.
b. Post-employment benefits
The Group has issued defined contribution plans and defined benefit plans. A plan is classified as adefined contribution plan when
the Group has no further obligation than the payment of afixed contribution. All other plans are classified as defined benefit plans.
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Defined contribution plans
The contribution payable to adefined contribution plan for services provided is recognized as an expense in the income statement.
An asset is recognized to the extent that the contribution paid exceeds the amount due for services provided.
Defined benefit plans
Measurement
The defined benefit obligation is based
on the
terms and conditions of the
plan applicable
on the reporting date. In measuring the defined
benefit obligation the Group uses the projected unit credit method and actuarial assumptions that represent the management
'
s bestestimates.
The benefits are discounted using an interest rate based
on the market yield for high-quality corporate bonds that are
denominated in the
currency in which the benefits will be paid and that have terms to maturity that approximate the terms
of the
related
pension liability. Actuarial assumptions used
in the
measurementof the
liability include the discount rate, estimated future salary increases, mortality rates and price inflation.
To
the
extent that actual experience deviates from these assumptions, the valuationof defined benefit plans and the level of pension expenses recognized
in the
future may be affected. Plan improvements (either vested or unvested) are recognized
in the
income statement at the
date when the plan improvement occurs.Plan assets are qualifying insurance policies and assets held by long-term employee benefit funds that can only be used to pay
the employee benefits under the plan and are not available to the Group’s creditors. They are measured at fair value and are deducted
from the defined benefit obligation in determining the amount recognized on the statement of financial position.
Profit or loss recognition
The cost of the defined benefit plans are determined at the beginning of the year and comprise the following components:
•
Current year service cost which is recognized in profit or loss; and
•
Net interest on the net defined benefit liability (asset) which is recognized in profit or loss.
Remeasurements of the net defined benefit liability (asset) which is recognized in other comprehensive income are revisited quarterly
and are not allowed to be reclassified to profit or loss in asubsequent period.
Deducted from current year service cost are discretionary employee contributions and employee contributions that are linked to service
(those which are independent of the number of years of service).Net interest on the net defined benefit liability (asset) is determined
by multiplying the net defined benefit liability (asset) by the applicable discount rate. Net interest on the net defined benefit liability
(asset) comprises interest income on plan assets and interest cost on the defined benefit obligation. Whereby interest income on plan
assets is acomponent of the return on plan assets and is determined by multiplying the fair value of the plan assets by the applicable
discount rate. The difference between the interest income on plan assets and the actual return on plan assets is included
in the remeasurement of the net defined benefit liability (asset).
Remeasurements of the net defined benefit liability (asset) comprise of:
•
Actuarial gains and losses;
•
The return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and
•
Any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).
Past service cost and gains or losses on settlements
Past service cost is the change in the present value of the defined benefit obligation for employee service, resulting from aplan
amendment or curtailment.
Gains or losses on curtailments or settlements of adefined benefit plan comprise of the difference between:
•
The present value of the defined benefit obligation being settled, as determined on the date of settlement; and
•
The settlement price, including any plan assets transferred and any payments made directly by Aegon in connection with the
settlement.
Aegon recognizes (in the income statement) gains or losses on the curtailment or settlement of adefined benefit plan when
the curtailment or settlement occurs.
c. Share-based payments
The Group has issued share-based plans that entitle selected employees to receive AegonN.V. common shares, subject to pre-defined
conditions such as the grant price of the shares and (business and personal) performance criteria. The number of shares that will vest
may partly depend on Aegon’s relative total shareholder return in comparison with apeer group.
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The expenses recognized for these plans are based on the fair value on the grant date of the shares. The fair value is measured
at the market price of AegonN.V. common shares, adjusted to take into account the non-vesting and market conditions upon which
the shares were granted. For example, where the employee is not entitled to receive dividends during the vesting period, this factor
is taken into account when estimating the fair value of the shares granted. For the determination of factors such as expected dividends,
market observable data has been considered. In addition, where the relative total shareholder return is included in the performance
criteria, this factor represents amarket condition and hence is taken into account when estimating the fair value of the shares granted.
The cost for long term incentive plans are recognized in the income statement, together with acorresponding increase in shareholders’
equity, as the services are rendered. During this period the cumulative expense recognized at the reporting date reflects
management’s best estimate of the number of shares expected to vest ultimately.
The withholding of shares to fund the payment to the tax authority in respect of the employee’s withholding tax obligation associated
with the share-based payment is accounted for as adeduction from equity for the shares withheld, except to the extent that
the payment exceeds the fair value at the net settlement date of the equity instruments withheld.
2.23 Deferred gains
Initial fees and front-end loadings paid by policyholders and other clients for future investment management services related
to investment contracts without discretionary participation features are deferred and recognized as revenue when the related services
are rendered.
2.24 Taxation
The income tax charge on the result for the year comprises current and deferred tax. Current tax is calculated taking into account
items that are non-taxable or disallowed, using rates that have been enacted or substantively enacted by the reporting date and any
adjustments to tax payable relating to previous years.
Current tax receivables and payables for current and prior periods reflect the best estimate of the tax amount expected to be paid
or received and includes provisions for uncertain income tax positions, if any.
Deferred tax assets and liabilities are recognized, using the liability method, for temporary differences arising between the carrying
value and tax value of an item on the balance sheet and for unused tax losses and credits carried forward. Deferred tax assets and
liabilities are measured using tax rates applicable that have been enacted or substantively enacted at the balance sheet date and are
expected to apply when the deferred tax asset is realized, or the deferred tax liability is settled.
Deferred tax assets are recognized for deductible temporary differences and unused tax losses and credits carried forward
to the extent that the realization of the related tax benefit through future taxable profits is probable. The recognition of the deferred
tax assets is based on Aegon’s mid-term projections including sensitivities and tax planning and is reassessed periodically.
Deferred tax liabilities relating to investments in subsidiaries, associates and joint ventures are not recognized if the Group
is able to control the timing of the reversal of the temporary difference and it is probable that the difference will not be reversed
in the foreseeable future.
Tax assets and liabilities are presented separately in the consolidated balance sheet except where there is alegally enforceable right
to offset the tax assets against tax liabilities within the same tax jurisdiction and the intention to settle such balances on anet basis.
Tax assets and liabilities are recognized in relation to the underlying transaction either in profit and loss, other comprehensive income
or directly in equity.
2.25 Contingent assets and liabilities
Contingent assets are disclosed in the notes if the inflow of economic benefits is probable, but not virtually certain. When the inflow
of economic benefits becomes virtually certain, the asset is no longer contingent and its recognition is appropriate.
A provision is recognized for present legal or constructive obligations arising from past events, when it is probable that it will result
in an outflow of economic benefits and the amount can be reliably estimated. If the outflow of economic benefits is not probable,
acontingent liability is disclosed, unless the possibility of an outflow of economic benefits is remote.
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2.26 Premium income
Gross premiums, including recurring and single premiums, from life and non-life insurance and investment contracts with discretionary
participation features are recognized as revenue when they become receivable. For products where deposit accounting is required,
the deposits are not reflected as premium income, but are recognized as part of the financial liability. For these products the surrender
charges and charges assessed have been included in gross premiums.
Premium loadings for installment payments and additional payments by the policyholder towards costs borne by the insurer are
included in the gross premiums. Rebates that form part of the premium rate, such as no-claim rebates, are deducted from the gross
premium, others are recognized as an expense. Depending on the applicable local accounting principles, bonuses that are used
to increase the insured benefits may be recognized as gross premiums. The insurance premiums for the original contracts are presented
gross of reinsurance premiums paid.
2.27 Investment income
For interest-bearing assets, interest is recognized as it accrues and is calculated using the effective interest rate method. Fees and
commissions that are an integral part of the effective yield of the financial assets or liabilities are recognized as an adjustment
to the
effective interest rate
of the instrument. Investment income includes the interest income and dividend income on financial assets
carried at fair value through profit or loss.
Investment income also includes rental income due.
2.28 Fee and commission income
Fees and commissions from investment management services and mutual funds are performed on an ongoing basis evenly throughout
the year and are accounted for monthly (1/12 of the contractual agreement). Performance fees may be charged to policyholders
in the event of outperformance in the investments compared to predefined benchmark levels. They are accounted for only when
specified hurdles for generating performance fees are achieved i.e. when the full performance obligation is met.
Aegon acts also as an insurance broker selling insurance contracts of other insurance companies to policyholders and receiving direct
sales commission as well as commissions over time when the same policyholders renew their contracts. These commissions are
recognized only when received as policyholders’ renewals are not certain enough to be recorded upfront.
2.29 Policyholder claims and benefits
Policyholder claims and benefits consist of claims and benefits paid to policyholders, including benefits in excess of account value for
products for which deposit accounting is applied and the change in the valuation of liabilities for insurance and investment contracts.
It includes internal and external claims handling costs that are directly related to the processing and settlement of claims. Amounts
receivable in respect of salvage and subrogation are also considered.
2.30 Results from financial transactions
Results from financial transactions include:
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives include
fair value changes of financial assets carried at fair value through profit or loss. The net gains and losses do not include interest
or dividend income.
Realized gains and losses on financial investments
Gains and losses on financial investments include realized gains and losses on general account financial assets, other than those
classified as at fair value through profit or loss.
Net fair value change of derivatives
All changes in fair value are recognized in the income statement, unless the derivative has been designated as ahedging instrument
in acash flow hedge or ahedge of anet investment in aforeign operation. Fair value movements of fair value hedge instruments
are offset by the fair value movements of the hedged item, and the resulting hedge ineffectiveness, if any, is included in this line.
In addition, the fair value movements of bifurcated embedded derivatives are included in this line.
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Note 2
Net fair value change on for account of policyholder financial assets at fair value through profit or loss
Net fair value change on for account of policyholder financial assets at fair value through profit or loss includes fair value movements
of investments held for account of policyholders (refer to note 2.8 Investments for account of policyholders). The net fair value change
does not include interest or dividend income.
Other
In addition, results from financial transactions include gains/losses on real estate (general account and account of policyholders),
net foreign currency gains/(losses) and net fair value change on borrowings and other financial liabilities and realized gains
on repurchased debt.
2.31 Impairment charges/(reversals)
Impairment charges and reversals include impairments and reversals on investments in financial assets, impairments and reversals
on the valuation of insurance assets and other non-financial assets and receivables.Impairment of deferred policy acquisition costs
is included in note 15 Impairment charges/ (reversals).
2.32 Interest charges and related fees
Interest charges and related fees includes interest expense on trust pass-through securities and other borrowings. Interest expense
on trust pass-through securities and other borrowings carried at amortized cost is recognized in profit or loss using the effective
interest method.
2.33 Leases
As alessee
The Group recognizes aright-of-use asset and alease liability at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before
the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same
basis as those of real estate and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses (using
the same rate to measure the lease liability), if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing
rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The lease liability is measured at amortized cost
using the effective interest method. It is remeasured when there is achange in future lease payments arising from achange in an
index or rate, if there is achange in the Group’s estimate of the amount expected to be payable under aresidual value guarantee, or if
the Group changes its assessment of whether it will exercise apurchase, extension or termination option. The Group presents right-
of-use assets that do not meet the definition of investment property in ‘Other assets and receivables’ and lease liabilities in ‘Other
liabilities’ in the statement of financial position.
Short-term leases and leases of low-value assets The Group has elected not to recognize right-of-use assets and lease liabilities
for short-term leases that have alease term of 12 months or less and leases of low-value assets, including small office equipment.
The Group recognizes the lease payments associated with these leases as an expense on astraight-line basis over the lease term.
As alessor
Where the Group is the lessor under an operating lease, the assets subject to the operating lease arrangement are presented
in the statement of financial position according to the nature of the asset. Income from these leases is recognized in the income
statement on astraight line basis over the lease term, unless another systematic basis is more representative of the time pattern
in which use benefit derived from the leased asset is diminished.
2.34 Events after the reporting period
The financial statements are adjusted to reflect events that occurred between the reporting date and the date when the financial
statements are authorized for issue, provided they give evidence of conditions that existed at the reporting date.
Events that are indicative of conditions that arose after the reporting date are disclosed, but do not result in an adjustment
of the financial statements themselves.
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Note 2
3 Critical accounting estimates and judgment in applying accounting policies
Application of the accounting policies in the preparation of the financial statements requires management to apply judgment involving
assumptions and estimates concerning future results or other developments, including the likelihood, timing or amount of future
transactions or events. Those estimates are inherently subject to change and actual results could differ from those estimates. Included
among the material (or potentially material) reported amounts and disclosures that require extensive use of estimates are: fair value
of certain invested assets and derivatives, deferred policy acquisition costs (please refer to paragraph 2.13), value of business acquired
and other purchased intangible assets (please refer to paragraph 2.6), goodwill (please refer to paragraph 2.6), policyholder claims
and benefits (please refer to paragraph 2.29), insurance guarantees (please refer to paragraph 2.19), pension plans (please refer
to paragraph 2.22), income taxes(please refer to paragraph 2.24) and the potential effects of resolving litigation matters (please refer
to paragraph 2.25). Accounting policies that are critical to the financial statement presentation and that require complex estimates
or significant judgment are described in the following sections.
Uncertainty resulting from COVID-19
During 2021, uncertainty resulting from the COVID-19 pandemic continued to significantly impact theCompany’s operations,
the business, and the industry. Continued uncertainty with respect to how the pandemic would play out and what the resulting
economic consequences might be, led to volatility in financial markets. Equity markets and interest rates in Aegon’s three main
markets increased in 2021, as vaccination rates rose and governments provided strong fiscal stimulus to the economy, while central
banks provided monetary stimulus. Progress on vaccinations has reduced the spread of COVID-19 and will likely continue to reduce
the effects of the public health crisis on the economy. However, the pace of vaccinations has slowed down, and new strains of the virus
and reduced availability of healthcare remain risks.
In 2021, Aegon’s operating result in the Americas was impacted by EUR345million of adverse mortality in Life, of which the large
majority can be attributed to COVID-19, either directly or indirectly. This was partly offset by favorable morbidity experience in Accident
& Health, mostly related to Long-Term Care insurance with higher claims terminations due to higher mortality and discharges from
care facilities. Through 2021, Aegon continued to observe better morbidity experience than expected in Long-Term Care. Over the year,
new claims started trending back to pre-pandemic levels. Therefore, in the course of 2021, Aegon Americas released aportion
of the EUR51million Long-Term Care incurred but not reported (IBNR) reserve established during the pandemic, and at year end 2021
the balance of the reserve is EUR27million.
As part of its normal process, Aegon has updated its sensitivity analysis for the impact of changes in financial assumptions on its IFRS
equity and net result included in note 4 Financial risks.
Overall there were no significant impacts from COVID-19 on Level-III measurements. Note 44 Fair value, provides additional information
on the fair valuation methods and assumptions applied, as well as movements or transfers in fair value hierarchy.
Aegon Group’s Solvency II capital position remained at astrong level increasing from 196% per December 31, 2020, to 211% per
December 31, 2021.
Aegon continues to monitor the relevant market and the economic factors to proactively manage the associated risks. Management
believes that the most significant risks are related to financial markets (particularly credit, equity, and interest rates risks) and
underwriting risks (particularly related to mortality, morbidity, and policyholder behavior).
Management's assessment of going concern
The consolidated financial statements of Aegon have been prepared assuming agoing concern basis of accounting based
on the reasonable assumption that the Company is, and will be, able to continue its normal course of business in the foreseeable
future. Relevant facts and circumstances relating to the consolidated financial position on December 31, 2021, were assessed in order
to reach the going concern assumption. The main areas assessed are the financial performance, capital adequacy, financial position and
flexibility, liquidity, ability to access capital markets, leverage ratios and the level of Cash Capital at Holding. Considering all these areas
management concluded that the going concern assumption for Aegon is appropriate in preparing the consolidated financial statements.
Valuation of assets and liabilities arising from life insurance contracts
The valuation of certain assets and liabilities arising from insurance contracts is developed using complex valuation models. The liability
for life insurance contracts with guaranteed or fixed account terms is either based on current assumptions, on the assumptions
established at inception of the contract, reflecting the best estimates at the time increased with amargin for adverse deviation, or on
the valuation assumptions (historical cost), without risk margin. All contracts are subject to liability adequacy testing which reflects
management’s current estimates of future cash flows (including investment returns).
To
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assumptions, achange in assumptions will have an immediate impact on the income statement. Also, if achange in assumption
results in not passing the liability adequacy test, the entire deficiency is recognized in the income statement.
To
the extent that the deficiency relates to unrealized gains and losses on available-for-sale investments, the additional liability is recognized through
other comprehensive income in therelated revaluation reserve in shareholders' equity.
Aegon the Netherlands, as required locally, adjusts the outcome of the liability adequacy test for the difference between the fair
value and the book value of the assets that are measured at amortized cost in the statement of financial position. Mortgage loans
and private loans are the primary asset classes for which the difference between the fair value and the book value of assets impacts
the LAT.For details on the fair value (measurement) of Aegon's assets and liabilities, please refer to note 44 Fair value.
Some insurance contracts without aguaranteed or fixed contractual term contain guaranteed minimum benefits. Depending
on the nature of the guarantee, it may either be bifurcated and presented as aderivative, or be reflected in the value of the insurance
liability in accordance with local accounting principles. Given the dynamic and complex nature of these guarantees, stochastic
techniques under avariety of market return scenarios are often used for measurement purposes. Such models require management
to make numerous estimates based on historical experience and market expectations. Changes in these estimates will immediately
affect the income statement.
In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force are recorded
as DPAC and VOBA assets respectively, and are amortized to the income statement over time. If the assumptions relating to the future
profitability of these policies are not realized, the amortization of these costs could be accelerated and may require write-offs due
to unrecoverability.
Actuarial and economic assumptions
The main assumptions used in measuring DPAC, VOBA and the liabilities for life insurance contracts with fixed or guaranteed terms
relate to mortality, morbidity, investment return and future expenses. Depending on local accounting principles, surrender, lapse, and
utilization rates may be considered.
Mortality tables applied are generally developed based on ablend of company experience and industry wide studies, taking into
consideration product characteristics, own risk selection criteria, target market and past experience. Mortality experience is monitored
through regular studies, the results of which are fed into the pricing cycle for new products and reflected in the liability calculation
when appropriate. For contracts insuring survivorship or mortality, allowance may be made for further longevity or mortality
improvements. Morbidity assumptions are based on own claims severity and frequency experience, adjusted where appropriate for
industry information.
Investment assumptions are prescribed by the local regulator, market observable or based on management’s future expectations.
In the latter case, the anticipated future investment returns are set by management on acountrywide basis, considering available
market information and economic indicators. A significant assumption related to estimated gross profits on variable annuities
and variable life insurance products in the United States and some of the smaller countries, is the annual long-term growth rate
of the underlying assets. The reconsideration of this assumption may affect the original DPAC or VOBA amortization schedule, referred
to as DPAC or VOBA unlocking. The difference between the original DPAC or VOBA amortization schedule and the revised schedule,
which is based on actual and estimates of future gross profits, is recognized in the income statement as an expense or abenefit
in the period of determination.
Assumptions on future expenses are based on the current level of expenses, adjusted for expected expense inflation if appropriate.
In Aegon the Netherlands, the expense basis makes an allowance for planned future cost savings, which are included in the liability
adequacy test.
Surrender and lapse rates depend on product features, policy duration and external circumstances such as the interest rate
environment and competitor behavior. For policies with account value guarantees based on equity market movements, adynamic
lapse assumption is utilized to reflect policyholder behavior based on whether the guarantee is in the money. Own experience, as well
as industry published data, are used in establishing assumptions. Lapse experience is correlated to mortality and morbidity levels,
as higher or lower levels of surrenders may indicate future claims will be higher or lower than anticipated. Such correlations are
accounted for in the mortality and morbidity assumptions based on the emerging analysis of experience.
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Actuarial assumption and model updates
Assumptions are reviewed periodically in the second quarter for the US and in the fourth quarter for Europe and Asia, based
on historical experience, observable market data, including market transactions such as acquisitions and reinsurance transactions,
anticipated trends and legislative changes. Similarly, the models and systems used for determining our liabilities are reviewed
periodically and, if deemed necessary, updated based on emerging best practices and available technology.
During 2021, Aegon implemented actuarial assumption and model updates resulting in anet EUR298million charge to result before
tax (2020: EUR580million charge). This is mainly related to Aegon’s businesses in the Americas and the Netherlands.
Assumption changes and model updates in the Americas led to anet negative impact of EUR250million. This mainly reflects acharge
of EUR123million related to an update of theminimum surrender rate assumption for variable annuities with guaranteed lifetime
withdrawal benefits from 2% to 1.5% to reflect latest portfolio and industry experience.
Assumption changes and model updates in the Netherlands led to an unfavorable impact of EUR52million mainly related to adverse
impacts from more granular modeling driven by the transfer of the administration of defined benefit pensions to TKP. This was
partly offset bythe favorable impact of model updates relating to interest guarantees and indexation assumptions for certain
pension products.
For the years 2019 through 2021, Aegon kept its long-term equity market return assumption for the estimated gross profits
on variable life and variable annuity products in the Americas at 8%. The long term credit spread assumption, net of assumed defaults
and expenses, on our most common corporate bonds is 120bps. The 90-day Treasury yield was 0.14%, 0.15% and 1.55% at December
31, 2021, 2020 and 2019 respectively. During 2021, the 90-day Treasury yield was assumed to have auniform grading over 10 years
to 2.0%, which was achange from the assumption during 2020 and 2019 of grading over 10 years to 1.5% and 2.5%, respectively.
On aquarterly basis, the estimated gross profits are updated for the difference between the estimated market return and the actual
market return.
Sensitivities
Please note that the sensitivities listed in the disclosures below represent sensitivities to Aegon’s position at the balance sheet date for
the respective years. The sensitivities reflect single shocks where other elements remain unchanged. Real world market impacts (e.g.
lower interest rates and declining equity markets) may happen simultaneously which can lead to more severe combined impacts and
may not be equal to the sum of the individual sensitivities presented in the disclosure.
Sensitivity on variable annuities and variable life insurance products in the United States
Sensitivity analysis of DPAC and VOBA balances to changes in in expected long-term equity growth rate
Estimated approximate effect
2021
2020
DPAC /VOBA
DPAC /VOBA
1% decrease in the expectected long-term equity growth rate
(95) (108)
The DPAC and VOBA balances for these products in the United States amounted to EUR2.1billion at December 31, 2021 (2020:
EUR2.4billion).
Sensitivity analysis of net result to changes in various underwriting risks
Estimated approximate effect
2021
2020
Net Result
Net Result
10% increase to mortality assumption
(128) (124)
20% increase in the lapse rate assumption
71 89
Any reasonably possible changes in the other assumptions Aegon uses to determine EGP margins (i.e. maintenance expenses) would
reduce net result by less than EUR8million (2020: EUR11million).
Sensitivity on long term care (LTC) products in the United States
After tax sensitivities of significant product liability assumptions on the
LTC
IFRS after-tax Gross Present Value Reserve (GPV) are indicated below. The GPV is the liability as determined on abest estimate assumption basis.
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Sensitivity analysis of GPV to changes in various underwriting risks
Estimated approximate effect
2021
2020
GPV
GPV
5% increase in the utilization rates
195 186
5% decrease in the utilization rates
(201) (193)
10% increase expected mortality
122 113
10% decrease expected mortality
(114) (105)
Removing the morbidity improvement assumption, which is acomponent of the utilization assumption, would result in aGPV increase
of approximately EUR309million(2020:EUR278million), of which EUR194million (2020:EUR173million) relates to the loss
recognition block.
Removing future mortality improvement would result in aGPV decrease of approximately EUR112million (2020:EUR99million).
Sensitivity on liability adequacy test (LAT) in the Netherlands
At December 31, 2021 the liability adequacy test (LAT) of Aegon the Netherlands resulted in adeficiency. The LAT assesses
the adequacy of the insurance liabilities by comparing them to their fair value. Aegon the Netherlands adjusts the outcome of the
LAT
for certain unrealized gains in the bond portfolio (shadow loss recognition) and certain differences between the fair value and the book
value of assets measured at amortized cost, mainly residential mortgages. Please also refer to Note 2.19f Liability adequacy testing for
further details on the accounting policy.
The LAT deficit per December 31, 2021 in Aegon the Netherlands amounted to EUR5.2billion (2020: EUR7.0billion), which was
partially offset by the shadow loss recognition of EUR3.0billion (2020: EUR4.5billion), resulting in anet deficit of EUR2.2billion
(2020: EUR2.5billion). For more information refer to note 34.2 Insurance contracts for general account.
Sensitivity analysis of LAT deficit to changes in various underwriting risks
Estimated approximate effect in EURbillion
2021
2020
LAT deficit
LAT deficit
100 bps increase in interest rate
(3.3) (3.9)
100 bps decrease in interest rate
4.3 5.2
50 bps increase in bond credit spread
0.3 0.2
50 bps decrease in bond credit spread
(0.3) (0.3)
50 bps increase in mortgage spread
0.5 0.6
50 bps decrease in mortgage spread
(0.6) (0.6)
5 bps increase in liquidity premium
(0.2) (0.2)
5 bps decrease in liquidity premium
0.2 0.2
Given the LAT deficit at December 31, 2021, the above mentioned results would be reflected directly in the income statement.
This impact on the income statement will be partially offset by the application of shadow loss recognition, triggered
by the interest rate shock.
Determination of fair value and fair value hierarchy
The following is adescription of Aegon’s methods of determining fair value, and aquantification of its exposure to assets and liabilities
measured at fair value.
Fair value is defined as the amount that would be received from the sale of an asset or paid to transfer aliability in an orderly
transaction between market participants at the measurement date under current market conditions (i.e. an exit price at the
measurement date from the perspective of amarket participant that holds the asset or owes the liability). A fair value measurement
assumes that the transaction to sell the asset or transfer the liability takes place either:
•
In the principal market for the asset or liability; or
•
In the absence of aprincipal market, in the most advantageous market for the asset or liability.
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Aegon uses the following hierarchy for measuring and disclosing of the fair value of assets and liabilities:
•
Level I: quoted prices (unadjusted) in active markets for identical assets or liabilities that Aegon can access at the
measurement date;
•
Level II: inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices of identical or similar assets and liabilities) using valuation techniques for which
all significant inputs are based on observable market data; and
•
Level III: inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) using valuation
techniques for which any significant input is not based on observable market data.
The best evidence of fair value is aquoted price in an actively traded market. In the event that the market for afinancial instrument
is not active or quoted market prices are not available, avaluation technique is used.
The degree of judgment used in measuring the fair value of assets and liabilities generally inversely correlates with the level
of observable valuation inputs. Aegon maximizes the use of observable inputs and minimizes the use of unobservable valuation
inputs when measuring fair value. Financial instruments, for example, with quoted prices in active markets generally have more pricing
observability and therefore less judgment is used in measuring fair value. Conversely, financial instruments for which no quoted prices
are available have less observability and are measured at fair value using valuation models or other pricing techniques that require
more judgment.
The assets and liabilities categorization within the fair value hierarchy is based on the lowest input that is significant to the fair value
measurement.
An active market is one in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis. The judgment as to whether amarket is active may include, although not necessarily determinative,
lower transaction volumes, reduced transaction sizes and, in some cases, no observable trading activity for short periods. In inactive
markets, assurance is obtained that the transaction price provides evidence of fair value or it is determined that adjustments
to transaction prices are necessary to measure the fair value of the instrument.
The majority of valuation techniques employ only observable market data, and so the reliability of the fair value measurement is high.
However, certain assets and liabilities are valued on the basis of valuation techniques that feature one or more significant market
inputs that are unobservable and, for such assets and liabilities, the derivation of fair value is more judgmental. An instrument is
classified in its entirety as valued using significant unobservable inputs (Level III) if, in the opinion of management, asignificant
proportion of the instrument’s carrying amount is driven by unobservable inputs. 'Unobservable' in this context means that there is
little or no current market data available from which to determine the price at which an at arm’s length transaction would be likely to
occur. It generally does not mean that there is no market data available at all upon which to base adetermination of fair value.
Additional information is provided in the table headed 'Effect of changes in significant unobservable assumptions to reasonably
possible alternatives' in note 44 Fair Value. While Aegon believes its valuation techniques are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine the fair value of certain instruments (both
financial and non-financial) could result in adifferent estimate of fair value at the reporting date.
The valuation techniques applied to financial instrument affected by IBOR reforms remain consistent with those of other market
participants, and the uncertainty on the outcome of the reforms has not affected the classification of the instruments.
To operationalize Aegon’s fair value hierarchy, individual instruments (both financial and non-financial) are assigned afair value level
based primarily of instrument and the source
on the
type of the
prices (e.g. index, third-party pricing service, broker, internally modeled). Periodically, this logic for assigning fair value levels is reviewed to determine if any modifications are necessary in the context
of the current market environment.
4 Financial risks
General
As an insurance group, Aegon is exposed to avariety of risks. Aegon's largest exposures are to changes in financial markets (e.g.
foreign currency, interest rate, credit and equity market risks) that affect the value of the investments, liabilities from products that
Aegon sells, deferred expenses and value of business acquired.Other risks include insurance related risks, such as changes in mortality,
morbidity, bond credit spread and liquidity premium, which are discussed in note 34 Insurance contracts. Aegon manages risk at local
level where business is transacted, based on principles and policies established at the Group level. Aegon's integrated approach to risk
management involves similar measurement of risk and scope of risk coverage to allow for aggregation of the Group's risk position.
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Note 4
To manage the risk from changes in financial markets, Aegon’s products are priced using amarket-consistent framework and
comprehensive asset liability management (ALM) programs are implemented to ensure that the assets backing policyholder benefits
are invested prudently over the long term. A range of ALM techniques are used across the Group. These range in terms of sophistication
and complexity from cash-flow matching (for traditional fixed annuities) to duration matching (for the Universal Life range of products)
to derivative-based semi-static and dynamic hedges (to match variable annuities).
To manage its risk exposure, Aegon has risk policies in place. Many of these policies are group-wide while others are specific
to the unique situation of local businesses. For ALM specifically, the Enterprise Risk Management (ERM) framework includes several risk
policies that govern ALM strategies, such as the Investment and Counterparty Risk Policy (ICRP). The ICRP governs the management
of investment risks associated with credit, equity, property, alternative asset classes, interest rate and currency risk in addition to option
markets, implied volatility risk, interest rate options and swaptions. As well as product-level ALM programs, subsidiary businesses are
required by the ICRP to maintain overarching entity-level ALM strategies that set the direction and limits for the aggregated product-
level programs. Significant or complex ALM strategies are approved at group level, and all programs are subject to Group Risk oversight.
Together with the ICRP, which guides ALM strategy, several other ERM policies govern concentration risk, liquidity risk, use of derivatives
and securities lending and repos. As Aegon uses derivatives extensively, collateral calls can be significant depending on market
circumstances. Liquidity is managed at legal entity level in the first instance with central coordination by Aegon NV. The large US and
Dutch units may use external market solutions to match projected liquidity requirements with funding.
Next to guidance, the Group level policies also provide limits the to Group's exposure to major risks such as equity, interest rates, credit,
and currency. The limits in these policies in aggregate remain within the Group's overall tolerance for risk and the Group's financial
resources. Operating within this policy framework, Aegon employs risk management programs including ALM processes and models and
hedging programs (which are largely conducted via the use of financial derivative instruments). These risk management programs are
in place in each country unit and are not only used to manage risk in each unit, but are also part of the Group's overall risk strategy.
Aegon operates aDerivative Use Policy to govern its usage of derivatives. This policy establishes the control, authorization, execution
and monitoring requirements of the usage of such instruments. In addition, the policy stipulates necessary mitigation of credit risk
created through derivatives management tools. For derivatives, counterparty credit risk is normally mitigated by requirements to post
collateral via credit support annex agreements or through acentral clearing house.
As part of its risk management programs, Aegon takes inventory of its current risk position across risk categories. Aegon also measures
the sensitivity of net result and shareholders' equity under both deterministic and stochastic scenarios. Management uses the insight
gained through these 'what if?' scenarios to manage the Group's risk exposure and capital position. The models, scenarios and
assumptions used are reviewed regularly and updated as necessary.
Results of Aegon's sensitivity analyses are presented throughout this section to show the estimated sensitivity of net result and
shareholders' equity to various scenarios. For each type of market risk, the analysis shows how net result and shareholders' equity
would have been affected by changes in the relevant risk variable that were reasonably possible at the reporting date. For each
sensitivity test the impact of areasonably possible change in asingle factor is shown. Management action is taken into account
to the extent that it is part of Aegon's regular policies and procedures, such as established hedging programs. However, incidental
management actions that would require achange in policies and procedures are not considered.
Each sensitivity analysis reflects the extent to which the shock tested would affect management's critical accounting estimates and
judgment in applying Aegon's accounting policies. Market-consistent assumptions underlying the measurement of non-listed assets
and liabilities are adjusted to reflect the shock tested. The shock may also affect the measurement of assets and liabilities based
on assumptions that are not observable in the market. For example, ashock in interest rates may lead to changes in the amortization
schedule of DPAC or to increased impairment losses on equity investments. Although management's short-term assumptions may
change if there is areasonably possible change in arisk factor, long-term assumptions will generally not be revised unless there
is evidence that the movement is permanent. This fact is reflected in the sensitivity analyses.
The accounting mismatch inherent in EU-IFRS is also apparent in the reported sensitivities. A change in interest rates has an immediate
impact on the carrying amount of assets measured at fair value. However, the shock will not have asimilar effect on the carrying
amount of the related insurance liabilities that are measured based on locked-in assumptions or on management's long-term
expectations. Consequently, the different measurement bases for assets and liabilities lead to increased volatility in EU-IFRS net
result and shareholders' equity. Aegon has classified asignificant part of its investment portfolio as 'available-for-sale', which is one
of the main reasons why the economic shocks tested have adifferent impact on net result than on shareholders' equity. Unrealized
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Notes to the consolidated financial statements
Note 4
gains and losses on these assets are not recognized in the income statement but are booked through other comprehensive income
to the revaluation reserves in shareholders' equity, unless impaired. As aresult, economic sensitivities predominantly impact
shareholders' equity but leave net result unaffected. The effect of movements of the revaluation reserve on capitalization ratios and
capital adequacy are minimal. Aegon's target ratio for the composition of its capital base is based on shareholders' equity excluding
the revaluation reserve.
The sensitivities do not reflect what the net result for the period would have been if risk variables had been different because
the analysis is based on the exposures in existence at the reporting date rather than on those that actually occurred during the year.
Nor are the results of the sensitivities intended to be an accurate prediction of Aegon's future shareholders' equity or earnings.
The analysis does not take into account the impact of future new business, which is an important component of Aegon's future
earnings. It also does not consider all methods available to management to respond to changes in the financial environment, such
as changing investment portfolio allocations or adjusting premiums and crediting rates. Furthermore, the results of the analyses cannot
be extrapolated for wider variations since effects do not tend to be linear.
Concentration risk for financial risks are measured and managed at the following levels:
•
Concentration per risk type: Risk exposures are measured per risk type as part of Aegon’s internal economic framework. A risk
tolerance framework is in place which sets risk limits per risk type to target desired risk balance and promote diversification across
risk types;
•
Concentration per counterparty: Risk exposure is measured and risk limits are in place per counterparty as part of the Counterparty
Name Limit Policy; and
•
Concentration per sector, geography and asset class: Aegon’s investment strategy is translated in investment mandates for its
internal and external asset managers. Through these investment mandates limits on sector, geography and asset class are set.
Compliance monitoring of the investment mandates is done by the insurance operating companies.
Moreover, concentration of financial risks are measured in Aegon business planning cycle. As part of business planning, the resilience
of Aegon's business strategy is tested in several extreme event scenarios. In the Adverse Financial scenario, financial markets are
stressed without assuming diversification across different market factors. Within the projection certain management actions may
be implemented when management deems this necessary.
Aegon's significant financial risks and related financial information are explained in the order as follows:
•
Credit risk
•
Equity market risk and other investment risks
•
Interest rate risk
•
Currency exchange risk
•
Liquidity risk
Credit risk
As premiums and deposits are received, these funds are invested to pay for future policyholder obligations. For general account
products, Aegon typically bears the risk for investment performance which is equal to the return of principal and interest. Aegon
is exposed to credit risk on its general account fixed-income portfolio (debt securities, mortgages and private placements), over-the-
counter derivatives and reinsurance contracts. Some issuers have defaulted on their financial obligations for various reasons, including
bankruptcy, lack of liquidity, downturns in the economy, downturns in real estate values, operational failure and fraud. During financial
downturns, Aegon can incur defaults or other reductions in the value of these securities and loans, which could have amaterially
adverse effect on Aegon
'
s business, results of operations and financial condition. Investments for account of policyholders are excluded as the policyholder bears the credit risk associated with the investments.
The table that follows shows the Group's maximum exposure to credit risk from investments in general account financial assets, as well
as general account derivatives and reinsurance assets, collateral held and net exposure. Please refer to note 45 and 46 for further
information on capital commitments and contingencies and on collateral given, which may expose the Group to credit risk.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
2021
Maximum
exposure
to credit
risk
Cash Securities
Letters of
credit /
guaran-
tees
Real
estate
property
Master
netting
agree-
ments Other
Total
collateral
Surplus
collateral (or
overcollater-
alization)
Net
exposure
Debt securities -
carried at fair value
97,195 - - 221 - - - 221 - 96,974
Money market and
other short-term
investments
- carried at fair
value
4,910 - 330 - - - - 330 21 4,601
Mortgage loans -
carried at
amortized cost
40,624 2,684 - 32 75,412 - - 78,128 38,197 693
Private loans -
carried at
amortized cost
4,883 33 - - - - - 33 - 4,850
Other loans - carried
at amortized cost
1,949 - - - - - 1,872 1,872 1,346 1,423
Other financial
assets - carried at
fair value
4,245 - - - - - - - - 4,245
Derivatives
8,780 2,555 107 - - 5,921 - 8,583 66 263
Reinsurance assets
20,992 - 3,784 77 - - - 3,861 - 17,131
At December 31
183,577 5,272 4,221 330 75,412 5,921 1,872 93,028 39,630 130,180
2020
Maximum
exposure
to credit
risk
Cash Securities
Letters of
credit /
guaran-
tees
Real
estate
property
Master
netting
agree-
ments Other
Total
collateral
Surplus
collateral (or
overcollateral-
ization)
Net
exposure
Debt securities -
carried at fair value
99,350 - - 245 - - - 245 - 99,105
Money market and
other short-term
investments
- carried at fair
value
4,667 - 330 - - - - 330 19 4,357
Mortgage loans -
carried at
amortized cost
39,298 2,685 - 60 64,028 - - 66,772 28,655 1,181
Private loans -
carried at
amortized cost
4,358 45 - - - - - 45 - 4,313
Other loans - carried
at amortized cost
1,917 - - - - - 1,786 1,786 1,293 1,424
Other financial
assets - carried at
fair value
3,641 - - - - - - - - 3,641
Derivatives
13,238 4,873 60 29 - 8,373 - 13,336 135 38
Reinsurance assets
18,910 - 3,578 117 - - - 3,694 - 15,216
At December 31
185,380 7,603 3,967 450 64,028 8,373 1,786 86,207 30,101 129,274
Debt securities
Several bonds in Aegon's Americas' portfolio are guaranteed by Monoline insurers. This is shown in the table above in the column
'Letters of credit / guarantees'.
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Notes to the consolidated financial statements
Note 4
Money market and short-term investments
The collateral reported for the money market and short-term investments are related to tri-party repurchase agreements (repos).
Within tri-party repos Aegon invests under short-term reverse repurchase agreements and the counterparty posts collateral to athird
party custodian. The collateral posted is typically high-quality, short-term securities and is only accessible for or available to Aegon
in the event the counterparty defaults.
Mortgage loans
The real estate collateral for mortgages includes both residential and commercial properties. The collateral for commercial mortgage
loans in Aegon Americas is measured at fair value. At aminimum on an annual basis, afair value is estimated for each individual real
estate property that has been pledged as collateral. When aloan is originally provided, an external appraisal is obtained to estimate
the value is typically estimated internally using various professionally accepted valuation
of the
property.
In subsequent years, the valuemethodologies. Internal appraisals are performed by qualified, professionally accredited personnel. International valuation standards
are used and the most significant assumptions made during the valuation of real estate are the current cost of reproducing or replacing
the property, the value that the property's net earning power will support, and the value indicated by recent sales of comparable
properties. Valuations are primarily supported by market evidence. For Aegon the Netherlands, collateral for the residential mortgages
is measured as the foreclosure value which is indexed periodically.
Cash collateral for mortgage loans includes the savings that have been received to redeem the underlying mortgage loans
at redemption date. These savings are part of the credit side of the statement of financial position, but reduce the credit risk for
the mortgage loan as awhole.
A substantial part of Aegon's Dutch residential mortgage loan portfolio benefits from guarantees by aDutch government-backed
trust (Stichting Waarborgfonds Eigen Woning) through the Dutch Mortgage loan Guarantee program (NHG). With exception of NHG-
backed mortgage loans originated after January 1, 2014, for which a10% lender-incurred haircut applies on realized losses on each
defaulted loan, these guarantees cover all principal losses, missed interest payments and foreclosure costs incurred upon termination
and settlement of defaulted mortgage loans when lender-specific terms and conditions of the guarantee are met. When not fully
met, the trust may pay claims in part or in full, depending on the severity of the breach of terms and conditions. For each specific loan,
the guarantee amortizes in line with an equivalent annuity mortgage loan. When the remaining loan balance at default does not exceed
the amortized guarantee, it covers the full loss under its terms and conditions. Any loan balance in excess of this decreasing guarantee
profile serves as afirst loss position for the lender.
Derivatives
The master netting agreements column in the table relates to derivative liability positions which are used in Aegon's credit risk
management. The offset in the master netting agreements column includes balances where there is alegally enforceable right
of offset, but no intention to settle these balances on anet basis under normal circumstances. As aresult, there is anet exposure for
credit risk management purposes. However, as there is no intention to settle these balances on anet basis, they do not qualify for net
presentation for accounting purposes.
Reinsurance assets
The collateral related to the reinsurance assets include assets in trust that are held by the reinsurer for the benefit of Aegon.
The assets in trust can be accessed to pay policyholder benefits in the event the reinsurers fail to perform under the terms of their
contract. Further information on the related reinsurance transactions is included in note 26 Reinsurance assets.
Other loans
The collateral included in the other column represents the policyholders account value for policy loans. The excess of the account value
over the loan value is included in the surplus collateral column. For further information on the policy loans refer to note 22.1 Financial
assets, excluding derivatives.
The total collateral includes both under- and over-collateralized positions. To present anet exposure of credit risk, the over-
collateralization, which is shown in the surplus collateral column, is extracted from the total collateral.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
Credit risk management
Aegon manages credit risk exposure by individual counterparty, sector and asset class, including cash positions. Normally, Aegon
mitigates credit risk in derivative contracts by entering into credit support agreement, where practical, and in ISDA master netting
agreements for most of Aegon's legal entities to facilitate Aegon's right to offset credit risk exposure. Main counterparties to these
transactions are investment banks which are typically rated 'A' or higher. The credit support agreement will normally dictate
the threshold over which collateral needs to be pledged by Aegon or its counterparty. Transactions requiring Aegon or its counterparty
to post collateral are typically the result of derivative trades, comprised mostly of interest rate swaps, equity swaps, currency swaps
and credit swaps. Collateral received is mainly cash (USD and EUR). The credit support agreements that outline the acceptable
collateral require high-quality instruments to be posted. Over the last three years, there was no default with any derivatives
counterparty. The credit risk associated with financial assets subject to amaster netting agreement is eliminated only to the extent
that financial liabilities due to the same counterparty will be settled after the assets are realized. Eligible derivative transactions are
traded via Central Clearing Houses as required by EMIR and the Dodd-Frank act. Credit risk in these transactions is mitigated through
posting of initial and variation margins.
Aegon may also mitigate credit risk in reinsurance contracts by including downgrade clauses that allow the recapture of business,
retaining ownership of assets required to support liabilities ceded or by requiring the reinsurer to hold assets in trust. For the resulting
net credit risk exposure, Aegon employs deterministic and stochastic credit risk modeling in order to assess the Group's credit risk
profile, associated earnings and capital implications due to various credit loss scenarios.
Aegon operates aCredit Name Limit Policy (CNLP) under which limits are placed on the aggregate exposure that it has to any one
counterparty. Limits are placed on the exposure at both group level and individual country units. The limits also vary by arating system,
which is acomposite of the main rating agencies (S&P, Moody's and Fitch) and Aegon's internal rating of the counterparty. If an
exposure exceeds the stated limit, then the exposure must be reduced to the limit for the country unit and rating category as soon
as possible. Exceptions to these limits can only be made after explicit approval from Aegon's Group Risk and Capital Committee (GRCC).
The policy is reviewed regularly.
At December 31, 2021, there was one violation of the Credit Name Limit Policy at Group level (2020: one). This related to the Republic
of Turkey and is being closely monitored. The breach will be resolved by the disposal of Aegon Turkey, which is expected
to close in 2022.
At December 31, 2021, Aegon's largest corporate credit exposures are toWilton Re Holdings Ltd, American United Mutual Insurance,
Reinsurance Group of America and JP Morgan. Aegon had large government exposures, the largest being to the United States,
the Netherlands and Germany. Highly rated government bonds and government exposure domestically issued and owned in local
currency are excluded from the Credit Name Limit Policy.
Aegon group level long-term counterparty exposure limits are as follows:
Group limits per credit rating
Amounts in EURmillion
2021
2020
AAA
900 900
AA
900 900
A
675 675
BBB
450 450
BB
250 250
B
125 125
CCC or lower
50 50
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Notes to the consolidated financial statements
Note 4
Credit rating
The ratings distribution of general account portfolios of Aegon's major reporting units, excluding reinsurance assets, are presented
in the table that follows, organized by rating category and split by assets that are valued at fair value and assets that are valued
at amortized cost. Aegon uses acomposite rating based on acombination of the external ratings of S&P, Moody's, Fitch and National
Association of Insurance Commissioners (NAIC which is for US only) and internal ratings. The rating used is the lower of the external
rating and the internal rating.
Credit rating general account
investments, excluding reinsurance
assets 2021
Americas The Netherlands United Kingdom International
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Amortized
cost
Fair
value
AAA
1,383 15,537 2,607 11,832 - 74 - 738
AA
4,219 4,438 216 6,474 - 586 - 699
A
3,301 20,888 128 10,636 - 384 52 2,610
BBB
519 21,894 1,050 4,458 - 202 (4) 3,311
BB
59 1,614 44 127 - 1 - 272
B
- 549 - 19 - - 18 370
CCC or lower
- 441 - 19 - - - 13
Assets not rated
1,868 4,257 31,770 1,418 - 644 27 79
Total 11,349 69,618 35,814 34,983 - 1,893 93 8,093
Past due and/or impaired assets
2 2,044 176 17 - - - 116
At December 31
11,352 71,662 35,990 35,000 - 1,893 93 8,208
Credit rating general account investments,
excluding reinsurance assets 2021
Asset Management
Total 2021
1)
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Total carrying
value
AAA
- 295 3,989 28,476 32,465
AA
- - 4,436 12,197 16,633
A
- - 3,481 34,530 38,011
BBB
- - 1,564 29,866 31,431
BB
- - 103 2,015 2,118
B
- - 18 938 956
CCC or lower
- - - 473 473
Assets not rated
- 2 33,685 6,474 40,160
Total - 296 47,277 114,968 162,245
Past due and/or impaired assets
- - 178 2,176 2,355
At December 31
- 296 47,455 117,145 164,600
1
Credit rating general account
investments, excluding
reinsurance assets 2020
Americas The Netherlands United Kingdom International
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Amortized
cost
Fair
value
AAA
1,066 15,551 1,913 14,362 - 43 - 925
AA
3,494 4,112 74 7,663 - 605 - 617
A
3,369 21,741 46 14,421 - 337 49 2,604
BBB
631 21,049 1,098 4,031 - 173 (4) 3,242
BB
56 1,847 46 248 - 1 - 230
B
- 611 - 100 - - 45 302
CCC or lower
- 556 - 15 - - 1 12
Assets not rated
1,775 3,360 31,546 1,464 - 848 30 80
Total 10,390 68,828 34,724 42,305 - 2,008 120 8,014
Past due and/or impaired assets
87 1,130 212 14 - - - 88
At December 31
10,477 69,958 34,936 42,319 - 2,008 120 8,102
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
Credit rating general account investments,
excluding reinsurance assets 2020
Asset Management Total 2020
1)
Amortized
cost
Fair
value
Amortized
cost
Fair
value
Total carrying
value
AAA
- 159 2,980 31,042 34,021
AA
- 3 3,567 13,001 16,568
A
- 4 3,464 39,123 42,586
BBB
- 15 1,725 28,510 30,235
BB
- 16 102 2,372 2,473
B
- 8 45 1,022 1,067
CCC or lower
- 2 1 585 586
Assets not rated
- 1 33,391 5,984 39,374
Total - 208 45,273 121,637 166,911
Past due and/or impaired assets
- - 300 1,238 1,538
At December 31
- 208 45,573 122,875 168,448
1
The following table shows the credit quality of the gross positions in the statement of financial position for general account
reinsurance assets specifically:
Carrying value
2021
Carrying value
2020
AAA
-
-
AA
9,084 9,025
A
11,087
9,430
Below A
7 34
Not rated
813 421
At December 31
20,992 18,910
Credit risk concentration
The tables that follow present specific credit risk concentration information for general account financial assets.
Credit risk concentrations – debt
securities and money market
investments 2021
Americas
The
Netherlands
United
Kingdom
Interna-
tional
Asset
Management
Total
2021
1)
Of which past
due and/or
impaired
assets
Residential mortgage-backed securities
(RMBSs)
1,854 106 - 20 4 1,984 611
Commercial mortgage-backed securities
(CMBSs)
3,005 3 122 517 - 3,647 13
Asset-backed securities (ABSs) - CDOs
backed by ABS, Corp. bonds, Bank loans
265 1,576 - 37 - 1,878 2
ABSs – Other
1,972 1 74 267 8 2,321 27
Financial - Banking
5,597 3,146 177 1,035 - 9,956 9
Financial - Other
9,916 854 68 783 257 11,877 175
Capital goods and other industry
4,048 1,078 33 501 - 5,661 144
Communications & Technology
6,190 1,561 3 732 - 8,485 411
Consumer cyclical
3,159 741 43 342 - 4,286 152
Consumer non-cyclical
6,138 1,900 121 825 - 8,984 177
Energy
4,177 143 26 635 - 4,980 91
Transportation
2,151 815 - 197 - 3,163 130
Utility
5,356 707 105 590 - 6,757 153
Government bonds
11,663 14,321 477 1,649 18 28,127 4
At December 31
65,490 26,951 1,248 8,130 286 102,105 2,101
1
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Notes to the consolidated financial statements
Note 4
Credit risk concentrations – Government
bonds per country of risk 2021
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Total
2021
1)
United States
10,897 - - 463 - 11,360
Netherlands
- 4,691 - - - 4,691
United Kingdom
- 3 413 - 18 433
Austria
- 1,175 - 6 - 1,181
Belgium
- 1,132 - 5 - 1,137
Finland
- 41 - - - 41
France
- 1,618 34 2 - 1,654
Germany
- 4,309 - - - 4,309
Hungary
- - - 302 - 302
Indonesia
75 39 - 28 - 141
Luxembourg
- 873 - 1 - 875
Spain
- 144 - 197 - 341
Rest of Europe
85 65 - 503 - 654
Rest of world
587 230 31 131 - 979
Supranational
19 - - 11 - 29
At December 31
11,663 14,321 477 1,649 18 28,127
1
Credit risk concentrations – Credit rating 2021
2)
Government
bonds
Corporate
bonds
RMBSs
CMBSs ABSs Other
Total
2021
1)
AAA
19,740 754 5,779 1,882 28,155
AA
5,476 4,099 1,125 - 10,700
A
1,228 25,470 1,648 - 28,345
BBB
1,094 28,855 338 - 30,286
BB
238 1,700 63 - 2,001
B
348 553 26 - 927
CCC or lower
5 183 826 - 1,014
Assets not rated
- 3 24 649 676
At December 31
28,127 61,617 9,830 2,531 102,105
1
2
Moody’s.
There are no individual issuers rated below investment grade in the RMBS sector, CMBS sector and ABS sector which have unrealized
loss position greater than EUR25million.
Credit risk concentrations – debt securities
and money market investments 2020
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Total
2020
1)
Of which past
due and/or
impaired
assets
Residential mortgage-backed securities (RMBSs)
2,317 165 - 80 3 2,565 736
Commercial mortgage-backed securities (CMBSs)
2,970 12 122 495 - 3,599 9
Asset-backed securities (ABSs) - CDOs backed
by ABS, Corp. bonds, Bank loans
422 1,703 - 35 - 2,159 1
ABSs – Other
1,584 11 74 294 2 1,965 9
Financial - Banking
6,144 4,520 164 1,034 2
11,863
9
Financial - Other
9,080 706 78 744 135 10,760 35
Capital goods and other industry
3,968 1,182 18 446 4
5,618
41
Communications & Technology
5,736 1,129 3 701 1 7,570 119
Consumer cyclical
3,112 999 43 368 - 4,522 30
Consumer non-cyclical
6,200 1,773 120 815 1 8,909 32
Energy
3,852 287 27 545 4 4,715 12
Transportation
2,202 784 - 197 1 3,183 21
Utility
4,872 401 78 610 - 5,960 143
Government bonds
11,282 17,208 434 1,658 46 30,627 4
At December 31
63,739 30,880 1,160 8,022 199 104,018 1,200
1
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
Credit risk concentrations – Government
bonds per country of risk 2020
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Total
2020
1)
United States
10,623 61 - 503 2 11,189
Netherlands
- 6,505 - - - 6,505
United Kingdom
- 3 368 - 17 387
Austria
- 1,318 - 9 - 1,326
Belgium
- 1,255 - 5 - 1,260
Finland
- 42 - - - 42
France
- 1,779 34 3 - 1,816
Germany
- 4,869 - - - 4,869
Hungary
2 - - 375 1 378
Luxembourg
- 950 - 1 - 951
Spain
- 146 - 208 - 354
Rest of Europe
87 165 - 434 3 689
Rest of world
567 115 32 115 24 854
Supranational
3 - - 4 - 7
At December 31
11,282 17,208 434 1,658 46 30,627
1
Credit risk concentrations – Credit rating 2020
2)
Government
bonds
Corporate
bonds
RMBSs
CMBSs ABSs Other
Total
2020
1)
AAA
22,335 766 6,256 1,585 30,942
AA
5,657 4,181 1,352 - 11,190
A
1,056 26,438 1,224 - 28,718
BBB
1,175 26,769 320 - 28,264
BB
90 2,055 133 - 2,279
B
308 639 53 - 1,000
CCC or lower
6 282 949 - 1,237
Assets not rated
- 2 2 385 388
At December 31
30,627 61,132 10,289 1,970 104,018
1
2
Moody’s.
There are no individual issuers rated below investment grade in the RMBS sector, CMBS sector and ABS sector which have unrealized
loss position greater than EUR25million.
Credit risk concentrations
– mortgage loans 2021
Americas The Netherlands
United
Kingdom International
Asset
Management
Total 2021
Of which past
due and/or
impaired assets
Agricultural
59 - - - - 59 -
Apartment
5,085 - - - - 5,085 2
Industrial
1,349 - - - - 1,349 -
Office
1,560 - - - - 1,560 -
Retail
1,425 6 - - - 1,432 -
Other commercial
- 23 - - - 23 1
Residential
6 31,108 - 1 - 31,115 139
At December 31
9,485 31,138 - 1 - 40,624 142
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Notes to the consolidated financial statements
Note 4
Credit risk concentrations
– mortgage loans 2020
Americas The Netherlands
United
Kingdom International
Asset
Management
Total
2020
Of which past
due and/or
impaired assets
Agricultural
59 - - - - 59 -
Apartment
4,169 - - - - 4,169 86
Industrial
1,240 - - - - 1,240 -
Office
1,624 - - - -
1,625
-
Retail
1,383 7 - - - 1,390 1
Other commercial
223 25 - - - 248 1
Residential
8 30,559 - 1 - 30,568 173
At December 31
8,706 30,591 - 1 - 39,298 261
The fair value of Aegon Americas commercial and agricultural mortgage loan portfolio as per December 31, 2021, amounted
to EUR10,161million (2020: EUR9,518million). The loan to value (LTV) amounted to approximately 53% (2020: 55%).
Of the portfolio 0% (2020: 1%) is in delinquency (defined as 60 days in arrears). In 2021, Aegon Americas recognized EUR1million
of net impairments (2020: EUR1million net impairments) on this portfolio. In 2021, there were no foreclosures (2020: EUR0million)
and no impairments or recoveries associated with foreclosed loans (2020: EUR0million).
The fair value of Aegon the Netherlands mortgage loan portfolio as per December 31, 2021, amounted to EUR34,198million
(2020: EUR33,761million). The LTV amounted to approximately 56% (2020: 66%). A significant part of the portfolio 42% (2020:
45%) is government guaranteed. Of the portfolio, 0.1% (2020: 0.1%) is in delinquency (defined as 60 days in arrears). Impairments
in 2021 amounted to EUR1million (2020: EUR0million). During the last ten years defaults of the portfolio have been 5 basis
points on average.
Unconsolidated structured entities
Aegon's investments in unconsolidated structured entities such as RMBSs, CMBSs and ABSs and investment funds are presented
in the line item 'Investments' of the statement of financial position. Aegon's interests in these unconsolidated structured entities can
be characterized as basic interests, Aegon does not have loans, derivatives, guarantees or other interests related to these investments.
Any existing commitments such as future purchases of interests in investment funds are disclosed in note 45 Commitments and
contingencies.
For debt instruments, specifically for RMBSs, CMBSs and ABSs, the maximum exposure to loss is equal to the carrying amount which
is reflected in the credit risk concentration table regarding debt securities and money market investments. To manage credit risk Aegon
invests primarily in senior notes ofRMBSs, CMBSs and ABSs. The composition of the RMBSs, CMBSs and ABSsportfolios of Aegon
are widely dispersed looking at the individual amount per entity, therefore Aegon only has non-controlling interests in individual
unconsolidated structured entities. Furthermore these investments are not originated by Aegon.
Except for commitments as noted in note 45 Commitments and contingencies,Aegon did not provide, nor is required to provide
financial or other support to unconsolidated structured entities. Nor does Aegon have intentions to provide financial or other support
to unconsolidated structured entities in which Aegon has an interest or previously had an interest.
For RMBSs, CMBSs and ABSsin which Aegon has an interest at reporting date, the following table presents total income received
from those interests. The Investments column reflects the carrying values recognized in the statement of financial position
of Aegon's interests in RMBSs, CMBSs and ABSs.
2021
Total result 2021 December 31, 2021
Interest income
Total gains and
losses on sale of
assets
Total
Investments
Residential mortgage-backed securities
83 (28) 55 1,980
Commercial mortgage-backed securities
113 (31) 82 3,647
Asset-backed securities
29 - 29 1,878
ABSs - Other
70 (11) 59 2,323
Total
295 (69) 226 9,829
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
2020
Total result 2020 December 31, 2020
Interest income
Total gains and
losses on sale of
assets
Total
Investments
Residential mortgage-backed securities
120 25 144 2,565
Commercial mortgage-backed securities
128 92 220 3,599
Asset-backed securities
38 (5) 34 2,159
ABSs - Other
79 104 183 1,965
Total
366 215 581 10,289
Additional information on credit risk, unrealized losses and impairments
Debt instruments
The amortized cost and fair value of debt securities, money market investments and other, included in Aegon's available-for-sale (AFS)
portfolios, are as follows as of December 31, 2021, and December 31, 2020.
2021
Amortized
cost
Unrealized
gains
Unrealized
losses
Total fair
value
Fair value of
instruments
with
unrealized
gains
Fair value of
instruments
with
unrealized
losses
Debt securities, money market instruments and
other
United States government
8,942 2,386 (11) 11,317 10,938 379
Dutch government
3,456 1,238 (0) 4,694 4,688 6
Other government
9,060 2,794 (84) 11,769 10,414 1,356
Mortgage-backed securities
5,265 372 (56) 5,581 3,832 1,749
Asset-backed securities
4,088 118 (16) 4,189 2,334 1,855
Corporate
50,953 5,738 (343) 56,348 45,363 10,985
Money market investments
4,790 - (0) 4,790 4,547 243
Other
876 34 (66) 844 519 325
Total
87,431 12,679 (576) 99,533 82,635 16,898
Of which held by Aegon Americas and NL
78,468 11,865 (475) 89,859 74,954 14,905
2020
Amortized
cost
Unrealized
gains
Unrealized
losses
Total fair
value
Fair value of
instruments
with unrealized
gains
Fair value of
instruments
with unrealized
losses
Debt securities, money market instruments
and other
United States government
8,336 2,608 (9) 10,935 10,661 274
Dutch government
4,769 1,736 - 6,505 6,502 3
Other government
9,085 3,660 (8)
12,736
12,465 271
Mortgage-backed securities
5,678 482 (69) 6,092 5,314 777
Asset-backed securities
3,980 158 (17)
4,121
2,789 1,332
Corporate
45,986 7,404 (98) 53,292 51,252 2,039
Money market investments
4,559 - (1) 4,558 4,136 422
Other
1,032 39 (75) 996 616 380
Total
83,426 16,087 (277) 99,235 93,736 5,499
Of which held by Aegon Americas and NL
74,880 14,938 (249) 89,569 84,593 4,976
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Financial information
Non-financial information167
Notes to the consolidated financial statements
Note 4
Unrealized bond losses by sector
The composition by industry category of Aegon’s available-for-sale (AFS) debt securities, money market investments and other in an
unrealized loss position at December 31, 2021, and December 31, 2020, is presented in the following table:
Unrealized losses - debt securities, money market
investments and other
December 31, 2021
December 31, 2020
Carrying value of
instruments with
unrealized losses Unrealized losses
Carrying value of
instruments with
unrealized losses Unrealized losses
Residential mortgage-backed securities (RMBSs)
810 (21) 142 (17)
Commercial mortgage-backed securities (CMBSs)
803 (27) 543 (40)
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp.
bonds, Bank loans
1,244 (9) 1,183 (13)
ABSs - Other
558 (7) 123 (3)
Financial Industry - Banking
1,669 (32) 149 (7)
Financial Industry - Insurance
368 (11) 85 (7)
Financial Industry - Other
1,092 (29) 536 (9)
Industrial
5,630 (179) 1,141 (60)
Utility
1,564 (68) 333 (9)
Government
842 (28) 361 (10)
Other
325 (66) 380 (75)
Total held by Aegon Americas and NL
14,905 (475) 4,976 (249)
Held by other segments
1,994 (102) 523 (28)
Total
16,898 (576) 5,499 (277)
Impairment of financial assets
Aegon regularly monitors industry sectors and individual debt securities for indicators of impairment. These indicators may include one
or more of the following: 1) deteriorating market to book ratio, 2) increasing industry risk factors, 3) deteriorating financial condition
of the issuer, 4) covenant violations by the issuer, 5) high probability of bankruptcy of the issuer, or 6) downgrades by internationally
recognized credit rating agency. Additionally, for asset-backed securities, cash flow trends and underlying levels of collateral are
monitored. A security is impaired if there is objective evidence that aloss event has occurred after the initial recognition of the asset
that has anegative impact on the estimated future cash flows.
For details on impairments on financial assets, including receivables, refer to note 15 Impairment charges / (reversals).
Past due and impaired assets
The tables that follow provide information on past due and individually impaired financial assets for the whole Aegon Group. An asset
is past due when acounterparty has failed to make apayment when contractually due. Assets are impaired when an impairment loss
has been charged to the income statement relating to this asset. After the impairment loss is reversed in subsequent periods, the asset
is no longer considered to be impaired. When the terms and conditions of financial assets have been renegotiated, the terms and
conditions of the new agreement apply in determining whether the financial assets are past due.
Aegon's policy is to pursue realization of the collateral in an orderly manner as and when liquidity permits. Aegon generally does not
use the non-cash collateral for its own operations.
Past due but not impaired assets
2021
2020
0-6 months
6-12
months > 1 year
Total
0-6
months
6-12
months > 1 year
Total
Debt securities - carried at fair value
1,171 255 40 1,466 369 34 9 412
Mortgage loans
129 1 1 131 169 55 1 226
Other loans
19 5 10 35 24 8 5 36
Accrued interest
30 10 3 42 5 1 1 8
Other financial assets - carried at fair value
- - - - - - - -
At December 31
1,350 271 54 1,675 567 98 16 681
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
Impaired financial assets
Carrying amount 2021
Carrying amount 2020
Shares
62 38
Debt securities - carried at fair value
635 789
Mortgage loans
10 36
Other loans
2 3
Other financial assets - carried at fair value
14 2
At December 31
723 867
Equity market risk and other investments risk
Fluctuations in the equity, real estate and capital markets have affected Aegon's profitability, capital position and sales of equity
related products in the past and may continue to do so. Exposure to equity, real estate and capital markets exists in both assets
and liabilities. Asset exposure exists through direct equity investment, where Aegon bears all or most of the volatility in returns and
investment performance risk. Equity market exposure is also present in insurance and investment contracts for policyholders where
funds are invested in equities, backing variable annuities, unit-linked products and mutual funds. Although most of the risk remains
with the policyholder, lower investment returns can reduce the asset management fee earned by Aegon on the asset balance in these
products. In addition, some of this business has minimum return or accumulation guarantees.
In 2021, Transamerica expanded its dynamic hedge program to variable annuities with guaranteed minimum death benefit riders
(GMDB) and remaining policies with guaranteed minimum income (GMIB) riders. This builds on the effective dynamic hedge program
of policies with guaranteed minimum withdrawal benefits (GMWB). The dynamic hedge program now covers the equity risks (and
interest rate risk) embedded in the guarantees of its entire variable annuity portfolio. Dynamic hedging stabilizes cash flows and
reduces sensitivities to changes in equity markets (and interest rates) on an economic basis.
The general account equity, real estate and other non-fixed-income portfolio of Aegon is as follows:
Equity, real estate and
non-fixed income
exposure
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding and other
activities
Total
2021
Equity funds
175 34 - 63 9 - 280
Common shares
1)
190 - 29 5 - 1 226
Preferred shares
128 - - - - - 128
Investments in real estate
39 2,588 - 16 - - 2,643
Hedge funds
35 - - - - - 35
Other alternative investments
1,934 432 - - - - 2,366
Other financial assets
1,595 1,023 598 7 2 - 3,225
At December 31
4,097 4,076 628 91 10 1 8,903
1
Equity, real estate and
non-fixed income
exposure
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding
and other
activities
Total 2020
Equity funds
154 40 - 68 8 -
270
Common shares
1)
161 - 34 6 - 16 218
Preferred shares
127 - - - - 27
155
Investments in real estate
37 2,331 - 16 - - 2,385
Hedge funds
74 - - - - - 75
Other alternative investments
1,557 381 - - - 7 1,945
Other financial assets
1,104 1,046 800 6 1 - 2,957
At December 31
3,215 3,799 834 97 10 51 8,005
1
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Non-financial information169
Notes to the consolidated financial statements
Note 4
Market risk
concentrations – shares
Americas The Netherlands
United
Kingdom International
Asset
Management
Total 2021
1)
Of which
impaired
assets
Communication
1 - - - - 1 -
Consumer
5 - - - - 5 1
Financials
411 4 - 5 - 420 39
Funds
- 1,406 29 62 - 1,498 17
Industries
42 - - - - 42 5
Other
35 - - 5 9 49 -
At December 31
493 1,410 29 72 9 2,015 62
1
Market risk
concentrations – shares
Americas The Netherlands
United
Kingdom International
Asset
Management
Total 2020
1)
Of which
impaired
assets
Communication
1 - - - - 4 -
Consumer
4 - - - 1
6 -
Financials
368 14 - 5 3 400 3
Funds
- 1,363 34 63 - 1,470 14
Industries
42 - - 1 1 44 12
Other
27 - - 6 3 56 7
At December 31
442 1,376 34 74 9 1,979 35
1
The table that follows sets forth the closing levels of certain major indices at the end of the last five years.
2021
2020 2019 2018 2017
S&P 500
4,766 3,756 3,231 2,507 2,674
Nasdaq
15,645 12,888 8,973 6,635 6,903
FTSE 100
7,385 6,461 7,542 6,728 7,688
AEX
798 625 605 488 545
The sensitivity analysis of net result and shareholders' equity to changes in equity prices is presented in the table below. The sensitivity
of shareholders' equity and net result to changes in equity markets reflects changes in the market value of Aegon's portfolio, changes
in DPAC amortization, contributions to pension plans for Aegon's employees and the strengthening of the guaranteed minimum
benefits, when applicable. Aegon generally has positive income benefits from equity market increases and negative impacts from equity
market declines as it earns fees on policyholder account balances and provides minimum guarantees for account values. Aegon uses
options and other equity derivatives to provide protection against the negative impact of equity market declines.
Sensitivity analysis of net result and shareholders’ equity to equity markets
Immediate change of
Estimated approximate effects
on net result
Estimated approximate effects
on shareholders' equity
2021
Equity increase 10%
151 341
Equity decrease 10%
(212) (221)
Equity increase 25%
322 660
Equity decrease 25%
(529) (685)
2020
Equity increase 10%
146 394
Equity decrease 10%
(208) (199)
Equity increase 25%
290 725
Equity decrease 25%
(541) (715)
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
Interest rate risk
Aegon bears interest rate risk with many of its products. In cases where cash flows are highly predictable, investing in assets that
closely match the cash flow profile of the liabilities can offset this risk. For some Aegon country units, local capital markets are not
well developed, which prevents the complete matching of assets and liabilities for those businesses. For some products, cash flows are
less predictable as aresult of policyholder actions that can be affected by the level of interest rates.
In periods of rapidly increasing interest rates, policy loans, surrenders and withdrawals may 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 atime when the prices of those assets are adversely affected by the increase
in market interest rates; this may result in realized investment losses. These cash payments to policyholders result in adecrease
in total invested assets and adecrease in net result. Among other things, early withdrawals may also require accelerated amortization
of DPAC, which in turn reduces net result.
During periods of sustained low interest rates, Aegon may not be able to preserve margins as aresult of minimum interest rate
guarantees and minimum guaranteed crediting rates provided on policies. Also, investment earnings may be lower because the interest
earnings on new fixed-income investments are likely to have declined with the market interest rates. Mortgage loans and redeemable
bonds in the investment portfolio are more likely to be repaid as borrowers seek to borrow at lower interest rates and Aegon may
be required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, net result declines as aresult of adecrease
in the spread between returns on the investment portfolio and the interest rates either credited to policyholders or assumed
in reserves.
Aegon manages interest rate risk closely, taking into account all of the complexity regarding policyholder behavior and management
action. Aegon employs sophisticated interest rate measurement techniques and actively uses derivatives and other risk mitigation tools
to closely manage its interest rate risk exposure. Aegon operates an Investment & Counterparty Risk policy that limits the amount
of interest rate risk to which the Group is exposed. All derivative use is governed by Aegon's Derivative Use Policy. A detailed description
on the use of derivatives within Aegon is included in note 24 Derivatives.
In 2020 Transamerica commenced amulti-year plan to gradually reduce its economic interest rate risk, primarily by lengthening
the duration of the assets to provide acloser match to the liability duration and extending the existing forward starting swap program.
The program is due to be completed by mid-2022.
Furthermore, in 2021, Transamerica expanded its dynamic hedge program to variable annuities with guaranteed minimum death benefit
riders (GMDB) and remaining policies with guaranteed minimum income (GMIB) riders. This builds on the effective dynamic hedge
program of policies with guaranteed minimum withdrawal benefits (GMWB). The dynamic hedge program now covers the interest
rate (and equity risks) embedded in the guarantees of its entire variable annuity portfolio. Dynamic hedging stabilizes cash flows and
reduces sensitivities to changes in interest rates (and equity markets) on an economic basis.
The following table shows interest rates at the end of each of the last five years.
2021
2020 2019 2018 2017
3-month US LIBOR
0.21% 0.24% 1.91% 2.81% 1.69%
3-month EURIBOR
(0.57%) (0.55%) (0.38%) (0.31%) (0.33%)
10-year US Treasury
1.78% 0.91% 1.91% 2.69% 2.41%
10-year Dutch government
(0.03%) (0.48%) (0.06%) 0.39% 0.53%
The sensitivity analysis in the table below shows an estimate of the effect of aparallel shift in the yield curves on net result and
shareholders' equity arising from the impact on general account investments and offset due to liabilities from insurance and investment
contracts. Timing and valuation differences between assets and liabilities may cause short-term reductions in net result as rates rise.
Rising interest rates would also cause the fair value of the available-for-sale bond portfolio to decline and the level of unrealized gains
could become too low to support recoverability of the full deferred tax asset triggering an allowance charge to income.The offsetting
economic gain on the insurance and investment contracts is however not fully reflected in the sensitivities because many of these
liabilities are not measured at fair value. The short to medium term reduction in net result due to rising interest rates would be offset
by higher net result in later years, all else being equal. Therefore, higher interest rates are not considered along-term risk to the Group.
However, along sustained period of low interest rates will erode net result due to lower returns earned on reinvestments and due
to lower long term returns from decreased overall portfolio yields.
Aegon Integrated Annual Report
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Financial information
Non-financial information171
Notes to the consolidated financial statements
Note 4
Parallel movement of yield curve
Estimated approximate effects
on net result
Estimated approximate effects
on shareholders' equity
2021
Shift up 100 basis points
(340) (4,227)
Shift down 100 basis points
127 3,627
2020
Shift up 100 basis points
187 (2,316)
Shift down 100 basis points
(462) 2,064
Aegon’s sensitivity to interest rate risk has changed in 2021, compared to 2020.This is the net result of the expansion of the variable
annuities dynamic hedge program in the United States and the effect from the improvement of the
LAT
deficit in the Netherlands.The hedge strategy targets minimal mismatch according to the Aegon economic framework (which broadly aligns with Solvency II Own
Funds) and stabilizes Solvency II ratio volatility.
Risks and risks management arising from financial instruments subject to interest rate benchmark reform
The future of IBORs (Interbank Offered Rates) such as EURIBOR, EONIA and LIBOR has been amajor topic on the global agenda since
the G20 asked the Financial Stability Board (FSB) to undertake afundamental review of leading interest rate benchmarks in 2013.
The FSB proposed new standards to reform interest rate benchmarks and the use of transaction-based input data instead of non-
transactional/panel input data.
To prepare for the IBOR transition all Aegon units have written transition plan containing among others project solutions and actions,
timelines and ownership to ensure timely preparation and implementation. We are currently implementing the actions as described
in the transition plans.
There are no plans for the discontinuation for EURIBOR and appropriate fallback language has been implemented for derivatives via
the International Swaps and Derivatives Association ('ISDA') fallback protocol and rulebook changes by the clearing houses.
In the US the relevant USD LIBOR benchmark rates are expected to remain available for existing contracts until mid 2023 and these
instruments are expected to either be transitioned actively to Secured Overnight Funding Rate ('SOFR') before the 2023 deadline, via
the ISDA fallback protocol or via alegislative solution.
In July 2020 the discount rates of EURcleared derivatives switched from EONIA to €STR which impacted the valuation of derivatives
for which compensation was exchanged. All EURCredit Support Annex ('CSA') which have positions outstanding have been amended
from EONIA to €STR discounting. In the US, the cleared market has switched discount rates from Fed Funds to SOFR in October 2020.
The switch in discount rates is expected to lead to increased liquidity in the new risk free rates.
Aegon recognizes that the reform of IBORs and any transition to replacement rates entail risks for all our businesses across our assets
and liabilities. These risks include, but are not limited to:
•
Legal risks, as Aegon is required to make changes to documentation for new and existing transactions, such as funding instruments
issued with an IBOR reference and derivatives held with an IBOR reference;
•
Financial risks, arising from any changes in the valuation of financial instruments linked to benchmark rates, such as derivatives and
floating rate notes, issued by, or invested in by Aegon;
•
Pricing risks, as changes to benchmark indices could impact pricing mechanisms on some funding instruments or investments;
•
Operational risks, due to the potential requirement to adapt informational technology systems, trade reporting infrastructure and
operational processes; and
•
Conduct risks, relating to communication with potential impact on Aegon’s customers, and engagement during the transition period.
Various supranational institutions, central banks, regulators, benchmark administrators and industry working groups play arole
in the benchmark reform and the preparation for the replacement of IBORs. Although alot of work has been done, there is still
significant uncertainty around liquidity development, and the timetable and mechanisms for implementation, including application
of spread adjustments to the alternative reference rates. Accordingly, it is not currently possible to determine whether, or to what
extent, any such changes would affect Aegon. However, the implementation of alternative reference rates may have amaterial adverse
effect on Aegon’s business, financial condition, customers, and operations.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
The table below summarize the exposures of non-derivative financial assets and non-derivative liabilities that yet have to transition
to alternative benchmark rates.
Non derivative financial instruments to transition to alternative benchmark
2021
Financial assets
non-derivatives
Financial liabilities
non-derivatives
By benchmark rate
GBP LIBOR
19 -
USD LIBOR
822 1,143
Euribor
3,095 1,200
Fed Funds
102 -
Total
4,038 2,343
The table below summarize the exposures of derivatives that yet have to transition to alternative benchmark rates.
Derivative financial instruments to transition to alternative benchmark
2021
Nominal Value
By benchmark rate
GBP LIBOR
-
USD LIBOR
54,232
Euribor
113,593
Fed Funds
3,574
Total
171,399
Currency exchange rate risk
As an international group, Aegon is subject to foreign currency translation risk. Foreign currency exposure exists mainly when
policies are denominated in currencies other than the issuer's functional currency. Currency risk in the investment portfolios backing
insurance and investment liabilities is 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 self-imposed capital requirements. Therefore,
currency exchange rate fluctuations will affect the level of shareholders' equity as aresult of translation of subsidiaries into euro,
the Group's presentation currency. Aegon holds the remainder of its capital base (perpetual capital securities, subordinated and senior
debt) in various currencies in amounts that are targeted to correspond to the book value of the country units. This balancing mitigates
currency translation impacts on shareholders' equity and leverage ratios. Aegon does not hedge the income streams from the main
non-euro units and, as aresult, earnings may fluctuate due to currency translation. As Aegon has significant business segments
in the Americas and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences
between the US dollar and the euro and between the UK pound and the euro. Aegon may experience significant changes in net result
and shareholders' equity because of these fluctuations.
Aegon operates an Investment & Counterparty Risk Policy which applies currency risk exposure limits both at Group and regional
levels, and under which direct currency speculation or program trading by country units is not allowed unless explicit approval has
been granted by the Group Risk and Capital Committee and the Management Board. Assets should be held in the functional currency
of the business written or hedged back to that currency. Where this is not possible or practical, remaining currency exposure should
be sufficiently documented and limits are placed on the total exposure at both group level and for individual country units.
Information on Aegon's three year historical net result and shareholders' equity in functional currency are shown in the table below:
2021
2020 2019
Net result
Americas (in USD)
1,195 (611) 1,324
United Kingdom (in GBP)
104 60 (29)
Equity in functional currency
Americas (in USD)
18,324 19,127 18,123
United Kingdom (in GBP)
1,260 1,391 1,358
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Non-financial information173
Notes to the consolidated financial statements
Note 4
The exchange rates for US dollar and UK pound per euro for each of the last five year ends are set forth in the table below:
Closing rates
2021
2020 2019 2018 2017
USD
1.14
1.22 1.12 1.14 1.20
GBP
0.84 0.90 0.85 0.90 0.89
Aegon Group companies' foreign currency exposure from monetary assets and liabilities denominated in foreign currencies (that is,
other than the entity's functional currency), is not material.
The sensitivity analysis in the following table shows an estimate of the translation effect of movements in the exchange rates
of functional currencies of foreign subsidiaries against the euro presentation currency of the Group's financial statements, on net
income and shareholders' equity.
Sensitivity analysis of net result and shareholders' equity to translation risk
Movement of currency exchange rates
1)
Estimated approximate effects
on net result
Estimated approximate effects
on shareholders' equity
2021
Increase by 15% of USD currencies relative to the euro
205 3,249
Increase by 15% of GBP currencies relative to the euro
152 1,900
Increase by 15% of non-euro currencies relative to the euro
244 3,541
Decrease by 15% of USD currencies relative to the euro
(153) (2,441)
Decrease by 15% of GBP currencies relative to the euro
107 1,315
Decrease by 15% of non-euro currencies relative to the euro
(179) (2,616)
2020
Increase by 15% of USD currencies relative to the euro
(93) 2,848
Increase by 15% of GBP currencies relative to the euro
(43) 1,015
Increase by 15% of non-euro currencies relative to the euro
(52) 3,219
Decrease by 15% of USD currencies relative to the euro
74 (2,066)
Decrease by 15% of GBP currencies relative to the euro
(51) 631
Decrease by 15% of non-euro currencies relative to the euro
45 (2,325)
1
The effect of currency exchange movements is reflected as aone-time shift up or down in the value of the non-euro currencies relative to
the euro on December 31.
Liquidity risk
Liquidity risk is inherent in much of Aegon's business. Each asset purchased and liability incurred has its own liquidity characteristics.
Some liabilities are surrenderable while some assets, such as privately placed loans, mortgage loans, real estate and limited partnership
interests, have low liquidity. If Aegon requires significant amounts of cash on short notice in excess of normal cash requirements and
existing credit facilities, it may have difficulty selling these investments at attractive prices or in atimely manner. Liquidity risk is also
affected by the use of collateralized financial derivatives to mitigate other risks.
Aegon operates aLiquidity Risk Policy under which country units are obliged to maintain sufficient levels of highly liquid assets
to meet cash demands by policyholders and account holders over the next two years. Potential cash demands are assessed under
astress scenario including spikes in disintermediation risk due to rising interest rates and concerns over Aegon's financial strength due
to multiple downgrades of the Group's credit rating. At the same time, the liquidity of assets other than cash and government issues
is assumed to be severely impaired for an extended period of time. All legal entities and Aegon Group must maintain enough liquidity
in order to meet all cash needs under this extreme scenario.
Aegon held EUR31,101million of general account investments in cash, money market products and government bonds that are readily
saleable or redeemable on demand (2020: EUR33,465million). The Group expects to meet its obligations, even in astressed liquidity
event, from operating cash flows and the proceeds of maturing assets as well as these highly liquid assets. Further, the Group has
access to back-up credit facilities, as disclosed in note 37 Borrowings, amounting to EUR3,399million which were unused at the end
of the reporting period (2020: EUR3,288million).
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 4
The maturity analysis below shows the remaining contractual maturities of each category of financial liabilities (including coupon
interest). When the counterparty has achoice of when an amount is paid, the liability is included on the basis of the earliest date
on which it can be required to be paid. Financial liabilities that can be required to be paid on demand without any delay are reported
in the category 'On demand.' If there is anotice period, it has been assumed that notice is given immediately and the repayment has
been presented at the earliest date after the end of the notice period. When the amount payable is not fixed, the amount reported
is determined by reference to the conditions existing at the reporting date. For example, when the amount payable varies with changes
in an index, the amount disclosed may be based on the level of the index at the reporting date.
To manage the liquidity risk arising from financial liabilities, Aegon holds liquid assets comprising cash and cash equivalents and
investment grade investment securities for which there is an active and liquid market. These assets can be readily sold to meet
liquidity requirements. For this reason, Aegon believes that it is not necessary to disclose amaturity analysis in respect of these assets
to enable users to evaluate the nature and extent of liquidity risk.
Maturity analysis – gross undiscounted
contractual cash flows (for non-derivatives)
On demand
< 1 yr
amount
1 < 5 yrs
amount
5 < 10 yrs
amount
> 10 yrs
amount
Total
amount
2021
Trust pass-through securities
- 9 113 16 60 197
Subordinated loans
- 108 377 246 2,964 3,695
Borrowings
- 901 7,651 956 1,052 10,559
Lease liabilities
- 37 86 67 70 259
Other financial liabilities
4,993 1,749 325 154 224 7,444
Total financial liabilities (excluding
investment/insurance contracts)
4,993 2,803 8,551 1,439 4,368 22,154
Investment contracts
1)
17,254 2,681 2,114 1,101 655 23,804
Investment contracts for account of policyholders
1)
34,756 34,571 10 6 4 69,347
Total investment contracts
52,009 37,252 2,124 1,107 659 93,151
2020
Trust pass-through securities
- 8 33 91 58 191
Subordinated loans
- 103 382 283 2,842 3,610
Borrowings
- 1,033 6,627 747 1,002 9,410
Lease liabilities
- 45 97 60 76 278
Other financial liabilities
5,333 2,238 197 100 126 7,993
Total financial liabilities (excluding investment/
insurance contracts) 5,333 3,427 7,337 1,282 4,105 21,482
Investment contracts
1)
16,699 2,458 1,878 1,072 795 22,903
Investment contracts for account of policyholders
1)
30,515 27,513 8 4 3 58,043
Total investment contracts
47,214 29,971 1,886 1,077 798 80,946
1
Aegon's liquidity management is based on expected claims and benefit payments rather than on the contractual maturities.
The projected cash benefit payments in the table below are based on management's best estimates of the expected gross benefits
and expenses, partially offset by the expected gross premiums, fees and charges relating to the existing business in force. Estimated
cash benefit payments are based on mortality, morbidity and lapse assumptions based on Aegon's historical experience, modified
for recently observed trends. Actual payment obligations may differ if experience varies from these assumptions. The cash benefit
payments are presented on an undiscounted basis and are before deduction of tax and before reinsurance.
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Financial information
Non-financial information175
Notes to the consolidated financial statements
Note 4
Financial liabilities relating to insurance
and investment contracts
1)
On demand
< 1 yr
amount
1 < 5 yrs
amount
5 < 10 yrs
amount
> 10 yrs
amount
Total
amount
2021
Insurance contracts
- 4,260 16,215 18,438 127,344 166,257
Insurance contracts for account of policyholders
- 11,494 41,638 39,941 131,667 224,740
Investment contracts
- 8,324 7,975 3,847 4,438 24,584
Investment contracts for account of
policyholders
193 14,011 27,637 31,715 84,825 158,381
193 38,089 93,465 93,941 348,274 573,962
2020
Insurance contracts
- 4,269 16,104 18,382 119,092 157,847
Insurance contracts for account of policyholders
- 10,546 37,153 35,257 117,005 199,961
Investment contracts
- 8,733 8,000 2,998 3,957 23,688
Investment contracts for account of
policyholders
165 12,004 27,435 28,318 72,063 139,986
165 35,552 88,693 84,955 312,117 521,482
1
described above. As aresult, the sum of the cash benefit payments shown for all years in the table exceeds the corresponding liability amounts included in
notes 34 Insurance contracts and 35 Investments contracts.
The following table details the Group's liquidity analysis for its derivative financial instruments, based on the undiscounted contractual
net cash inflows and outflows on derivative instruments that settle on anet basis, and the undiscounted gross inflows and outflows
on those derivatives that require gross settlement.
Maturity analysis relating to derivatives
1)
(Contractual cash flows)
On demand
< 1 yr
amount
1 < 5 yrs
amount
5 < 10 yrs
amount
> 10 yrs
amount
Total
amount
2021
Gross settled
Cash inflows
- 4,300 3,728 5,034 104,335 117,396
Cash outflows
- (4,895) (7,080) (9,499) (105,376) (126,850)
Net settled
Cash inflows
- 683 3,442 3,640 5,375 13,140
Cash outflows
- (780) (3,032) (3,102) (12,591) (19,505)
2020
Gross settled
Cash inflows
- 23,118 3,073 3,119 7,554 36,863
Cash outflows
- (23,429) (2,267) (1,974) (4,782) (32,451)
Net settled
Cash inflows
- 612 2,293 2,870 5,418 11,193
Cash outflows
- (797) (1,784) (2,258) (6,604) (11,444)
1
These are presented together with the host contract. For interest rate derivatives only, cash flows related to the pay leg are taken into account for determining
the gross undiscounted cash flows.
For maturity information on other obligations, please refer to note 45 Commitments and contingencies.
5 Segment information
Aegon’s operating segments are based on the businesses as presented in internal reports that are regularly reviewed by the Executive
Board which is regarded as the chief operating decision maker. All reportable segments are involved in insurance or reinsurance
business, asset management or services related to these activities. The reportable segments are:
•
Americas: one operating segment which covers business units in the United States and Brazil, including any of the units’ activities
located outside these countries;
•
The Netherlands: which covers businesses activities from Aegon the Netherlands;
•
United Kingdom: which covers businesses activities from platform business and traditional insurance in the United Kingdom;
•
International: one operating segment which covers businesses operating in Hong Kong, Singapore, China, India, Indonesia, Hungary,
Poland, Turkey, Romania, Spain and Portugal including any of the units’ activities located outside these countries;
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 5
•
Asset Management: one operating segment which covers business activities fromAAM Global Platforms and Strategic Partnerships;
•
Holding and other activities: one operating segment which includes financing, employee and other administrative expenses
of holding companies.
Aegon’s segment information is prepared by consolidating on aproportionate basis Aegon’s joint ventures and associated companies.
Performance Measure
Aegon uses the non-EU-IFRS performance measure operating result.Operating resultreflects Aegon’s profit before tax from
underlying business operations and mainly excludes components that relate to accounting mismatches that are dependent on market
volatility, updates to best estimate actuarial and economic assumptions and model updates or events that are considered outside
the normal course of business. There is no standardized meaning to these measures under EU-IFRS or any other recognized set
of accounting standards.
Aegon believes that its performance measure operating result provides meaningful information about the operating results
of Aegon’s business, including insight into the financial measures that Aegon’s senior management uses in managing the business.
Among other things, Aegon’s senior management is compensated based in part on Aegon’s results against targets using operating
result. While many other insurers in Aegon’s peer group present substantially similar performance measures, the performance
measures presented in this document may nevertheless differ from the performance measures presented by other insurers.
The reconciliation from operating result to result before tax, being the most comparable EU-IFRS measure, is presented in the tables
in this note.
The items that are excluded from operating result as described further below are: fair value items, realized gains or losses
on investments, impairment charges/reversals, other income or charges and share in earnings of joint ventures and associates.
Change in naming convention of performance measure
Aegon has changed the naming convention of its primary performance measure to improve alignment with industry practice and
the way in which Aegon manages its business. As of 2021, Aegon no longer refers to underlying earnings before tax for segment
reporting purposes, instead Aegon refers to Operating result. Furthermore, Aegon introduced anew grouping of non-operating result
which is the sum of Fair value items, Realized gains and losses on investments, and Net impairments. Other income / charges remains
aseparate category outside of Aegon’s operating result.
Change in measurement of performance measure
In addition, Aegon has changed the measurement of its operating result from January 1, 2021. The following changes have been made:
•
The running cost of the US macro hedge related to the variable annuity portfolio is recorded within Operating result instead of in
Fair value items. Management views this as abetter reflection of Aegon’s operating performance and improves the relevance
of Aegon’s operating result.
•
The periodic intangibles unlocking, caused by short term market movements, in the US Life and TLB business is recorded in Fair
value items, instead of Operating result, to improve the insight in Aegon’s recurring operating result.
•
Results from run-off businesses, mainly related to US are part of Aegon’s operating result. The results of run-off businesses were
previously recorded outside of Aegon’s operating result. Based on management actions executed in prior years the importance
of run-off businesses has diminished and continuing to report this as aseparate line item is considered no longer relevant.
•
Following the announcement to sell Aegon’s operations in CEE, results from these businesses, previously reported in operating
result, are prospectively recorded within Other income / charges.
For segment reporting purposes, the impact of these changes in measurement on full year 2020 was a decrease
in Aegon’s consolidated operating result of EUR 19 million, (2019: a decrease of EUR 75 million),as certain losses are no longer
reported in Fair value items (2020: EUR 48 million, 2019: EUR 97 million) and results of Run-off businesses are no longer
separately reported (2020: EUR 29 million loss,2019: EUR 22 million loss). There is no impact on Aegon’s net result, shareholders’
equity, dividend per share, or any of the main schedules included in Aegon’s Financial Statements, in any of the reporting periods.
Comparative numbers have been restated in Aegon’s segment reporting note, enabling a like for like comparison, with the exception
of the reclassification of the results from Aegon’s operations in CEE to Other income / charges which is applied prospectively.
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Financial information
Non-financial information177
Notes to the consolidated financial statements
Note 5
Fair value items
Fair value items include the over- or underperformance of investments and guarantees held at fair value for which management's best
estimate investment return is included in operating result.
In addition, hedge ineffectiveness on hedge transactions, fair value changes on economic hedges without natural offset in earnings and
for which no hedge accounting is applied and fair value movements on real estate are included under fair value items.
Certain assets held by Aegon are carried at fair value and managed on atotal return basis, with no offsetting changes in the valuation
of related liabilities. These include assets such as investments in hedge funds, private equities, real estate (limited partnerships),
convertible bonds and structured products. Operating result exclude any over- or underperformance compared to management’s best
estimate investment return on assets. Based on current holdings and asset returns, the long-term expected return on an annual basis
is 3-10%, depending on asset class, including cash income and market value changes. The expected earnings from these asset classes
are net of deferred policy acquisition costs (DPAC) where applicable.
In addition, certain products offered by Aegon Americas contain guarantees and are reported on afair value basis and include the total
return annuities and guarantees on variable annuities. The earnings on these products are impacted by movements in equity markets
and risk-free interest rates. Short-term developments in the financial markets may therefore cause volatility in earnings.
The fair value movements of certain guarantees and the fair value change of derivatives that hedge certain risks on these guarantees
of Aegon's businesses in the Netherlands and Japan are excluded from operating result, because management's best estimate expected
return for these guarantees is set at zero. In addition, fair value items include market related results on the loyalty bonus reserves
in the United Kingdom. The value of these reserves are directly related to policyholder investments which value is directly impacted
by movements in equity and bond markets.
Holding and other activities include certain issued bonds that are held at fair value through profit or loss (FVTPL). The interest rate risk
on these bonds is hedged using swaps. The fair value movement resulting from changes in Aegon’s credit spread used in the valuation
of these bonds are excluded from operating result and reported under fair value items.
The periodic intangibles unlocking in the US Life and TLB business is recorded in fair value items instead of operating result.
Realized gains or losses on investments
Realized gains or losses on investments includes realized gains and losses on available-for-sale investments, mortgage loans and other
loan portfolios.
Impairment charges/(reversals)
Impairment charges/(reversals) include impairments on available-for-sale debt securities, shares including the effect of deferred
policyholder acquisition costs, mortgage loans and other loan portfolios at amortized cost, joint ventures and associates. Impairment
reversals include reversals on available-for-sale debt securities. For Aegon the Netherlands, the expected impairments on alternative
assets classes (e.g. illiquid investments – including consumer loans and catastrophe bonds – and residential real estate) are allocated
to operating result before tax in order to present management's best estimate investment return in operating result before tax.
Deviations from the expected impairments are presented as part of impairment charges / (reversals) in non-operating result.
Other income or charges
Other income or charges includes the following:
•
Items which cannot be directly allocated to aspecific line of business;
•
The impact of actuarial and economic assumption and model updates used to support calculations of our liabilities for insurance
and investment contracts sold to policyholders and related assets (refer to note 3 Critical accounting estimates and judgement
in applying accounting policies); and
•
Items that are outside the normal course of business, including restructuring charges.
In the Consolidated income statement, the restructuring charges are included in operating expenses. Actuarial assumption and model
updates are recorded in 'Policyholder claims and benefits' in the Consolidated income statement.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 5
Share in earnings of joint ventures and associates
Earnings from Aegon’s joint ventures in China, India, the Netherlands, Spain and Portugal, and Aegon’s associates in France,
the Netherlands and United Kingdom are reported as operating result.
The following table presents Aegon's segment results.
Income statement
- Operating result
Americas
The
Nether-
lands
United
Kingdom
Interna-
tional
Asset
Manage-
ment
Holding
and other
activities
Elimina-
tions
Segment
total
Joint
ventures
and
associates
elimina-
tions
Consoli-
dated
2021
Operating result
before tax
788 755 184 145 253 (219) (1)
1,906
421,948
Fair value items
698 (201) (62) (18) (1) 12 3 432 (123) 309
Realized gains /
(losses) on
investments
313 118 10 2 2 1 (0) 446 (9) 437
Impairment charges
(19) (19) - (0) (1) (11) (0) (49) - (49)
Impairment reversals
33 59 - 1 - 8 - 101 - 101
Non-operating items 1,025 (44) (51) (15) - 11 3 930 (132) 798
Other income /
(charges)
(667) (23) 1 65 (18) (138) - (780) 12 (768)
Result before tax 1,147 688 134 195 235 (344) 2 2,056 (77) 1,979
Income tax (expense)
/ benefit
(137) (183) (12) (36) (65) 77 (0) (355) 78 (278)
Net result
1,010 505 122 159 170 (267) 2 1,701 - 1,701
Inter-segment
operating result
(20) (95) (96) (31) 191 51
Revenues
2021
Life insurance gross
premiums
7,108 1,323 4,613 1,181 - - - 14,225 (825) 13,400
Accident and health
insurance
1,273 254 3 179 - - - 1,709 (67) 1,643
General insurance
- 136 - 432 - - - 569 (168) 401
Total gross premiums 8,381 1,713 4,616 1,793 - - (0) 16,504 (1,060) 15,444
Investment income
2,910 2,088 1,691 360 12 242 (261) 7,042 (75) 6,967
Fee and commission
income
1,920 300 223 59 800 - (183) 3,120 (335) 2,785
Other revenues
11 - - 2 2 12 - 27 (15) 13
Total revenues
13,222 4,101 6,531 2,215 814 254 (444) 26,693 (1,484) 25,209
Inter-segment
revenues
1 14 - - 182 247
The Americas recorded other charges of EUR667million in 2021 mainly due to aone-time charge as aresult of management actions
to release capital and increase the predictability of capital generation from the US variable annuity business and unfavorable impacts
from model and assumption updates.
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Financial information
Non-financial information179
Notes to the consolidated financial statements
Note 5
Income statement
- Operating result
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Holding and
other
activities Eliminations
Segment
total
Joint ventures
and associates
eliminations
Consolidated
2020
Operating result
before tax
792 665 144 164 182 (237) 1
1,710
311,741
Fair value items
(448) 50 (2) (7) 22 (36) - (421) (87) (508)
Realized gains /
(losses) on
investments
93 14 - 46 1 (3) - 150 (8) 142
Impairment charges
(173) (50) - (16) (1) (25) - (265) 1 (264)
Impairment reversals
27 1 - - - - - 28 - 28
Non-operating items (501) 15 (1) 22 22 (65) - (508) (94) (602)
Other income /
(charges)
(1,110) 78 (68) (1) (8) (130) - (1,239) 15 (1,224)
Result before tax
(819) 758 74 186 195 (433) 1 (37) (47) (84)
Income tax (expense)
/ benefit
284 (197) (7) (22) (44) 78 (0) 92 47 139
Net result
(535) 561 67 164 151 (355) 1 55 - 55
Inter-segment
operating result
(40) (87) (86) (35) 193 62
Revenues
2020
Life insurance gross
premiums
7,105 1,619 4,833 1,095 - 4 (3) 14,654 (726) 13,929
Accident and health
insurance
1,380 245 25 193 - - - 1,844 (59) 1,784
General insurance
- 130 - 388 - - (0) 519 (132) 386
Total gross premiums 8,485 1,994 4,858 1,677 - 5 (3) 17,016 (917) 16,099
Investment income
2,986 2,083 1,795 362 7 261 (281) 7,212 (63) 7,149
Fee and commission
income
1,653 255 194 50 750 (9) (180) 2,713 (308) 2,405
Other revenues
7 - - 1 2 3 - 14 (10) 4
Total revenues
13,131 4,332 6,847 2,091 759 260 (465) 26,955 (1,298) 25,657
Inter-segment
revenues
1 21 - - 188 264
The Americas recorded other charges of EUR1,110million in 2020 mainly due to unfavorable impacts from model and assumption
changes. In addition, the Americas incurred other charges due to avaluation allowance related to the ongoing rehabilitation process
of areinsurer, the restructuring of captives, and aprovision for asettlement of class action litigation related to monthly deduction rate
adjustments on certain universal life policies.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 5
Income statement
- Operating result
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Holding and
other
activities Eliminations
Segment
total
Joint ventures
and associates
eliminations
Consolidated
2019
Operating result
before tax
1,041 648 139 154 139 (228) 1
1,894
501,944
Fair value items
378 (365) (131) (7) - (4) - (128) (88) (217)
Realized gains /
(losses) on
investments
125 240 3 36 - 1 - 405 (2) 403
Impairment charges
(54) (30) - (1) - (10) - (95) - (95)
Impairment reversals
68 5 - 1 - - - 73 - 73
Non-operating items 517 (150) (128) 29 - (13) - 256 (90) 166
Other income /
(charges)
(156) (1) (38) 15 (7) (95) - (281) - (281)
Result before tax
1,403 496 (27) 198 133 (335) 1 1,868 (40) 1,828
Income tax (expense)
/ benefit
(220) (113) (7) (33) (36) 65 (0) (343) 40 (303)
Net result
1,183 383 (34) 165 97 (270) 1 1,525 - 1,525
Inter-segment
operating result
(61) (105) (87) (20) 193 79
Revenues
2019
Life insurance gross
premiums
7,279 1,765 6,282 1,289 - 11 (8) 16,617 (691) 15,926
Accident and health
insurance
1,416 228 28 201 - - - 1,872 (50) 1,823
General insurance
- 130 - 382 - 1 (1) 512 (122) 390
Total gross premiums 8,694 2,123 6,309 1,872 - 12 (9) 19,002 (864) 18,138
Investment income
3,172 2,224 1,830 379 5 269 (284) 7,595 (64) 7,531
Fee and commission
income
1,757 237 197 109 627 - (187) 2,740 (218) 2,523
Other revenues
8 - - 2 1 5 - 16 (10) 6
Total revenues
13,631 4,583 8,337 2,362 633 286 (480) 29,352 (1,155) 28,197
Inter-segment
revenues
1 12 - - 187 280
The Group uses operating result in its segment reporting as an important indicator of its financial performance.The reconciliation from
operating result to result before tax, being the most comparable EU-IFRS measure, is presented in the table below. For those items
that cannot be directly reconciled to the respective notes, the explanation is provided below the table. Aegon believes that operating
result, together with the other information included in this report, provides ameaningful measure for the investing public to evaluate
Aegon’s business relative to the businesses of its peers.
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Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information181
Notes to the consolidated financial statements
Note 5
Presentation Non-Operating result Note
2021
2020 2019
Operating result
1,906 1,710 1,894
Elimination of share in earnings of joint ventures and
associates
42 31 50
Premium income
6
(5) 4 (1)
Rental income
7
(71) (68) (76)
Dividend income
7
76 (40) 9
Fee and commission income
8
30 (5) -
Recovered claims and benefits
9
(31) (143) 7
Change in valuation of reinsurance ceded
9
(43) 86 -
Net fair value change of general account financial investments
at fair value through profit or loss, other than derivatives
10
(4) (421) (89)
Net fair value change on borrowings and other financial
liabilities
10
(13)
2 7
Realized gains and losses on financial investments
10
463 132 399
Gains and (losses) on investments in real estate
10
253 74 317
Net fair value change of derivatives
10
(893) 894 538
Other income
11
77 68 200
Benefits and claims paid life
12
(217) - -
Change in valuation of liabilities for insurance contracts
12
994 (1,422) (1,061)
Change in valuation of liabilities for investment contracts
12
(8) (7) (13)
Policyholder claims and benefits - Other
12
38 19 50
Commissions and expenses
14
(715)
(450) (319)
Impairment (charges) reversals
15
53 (318) (105)
Interest charges and related fees
16
- (82) 21
Other charges
17
(37) (150) (1)
Results of CEE businesses which were previously reported in
operating results
85 - -
Result before tax
1,979 (84) 1,827
•
Net fair value change of general account financial investments at fair value through profit or loss, other than derivatives is reported
as part of the respective line in note 10 and reflects the over- or underperformance of investments and guarantees held at fair value
for which the expected long-term return is included in operating result.
•
Net fair value change of derivatives is reported as part of the respective line in note 10 and includes: 1) the over-
or underperformance of derivatives of EUR 8million loss(2020: EUR 38million gain, 2019: EUR 34million gain) for which the
expected long-term return is included in operating result; 2) Net fair value change on economic hedges where no hedge accounting
is applied of EUR 908million loss (2020: EUR 907million gain, 2019: EUR 482million gain); 3) Ineffective portion of hedge
transactions to which hedge accounting is applied of EUR 23million gain(2020: EUR 25million gain, 2019: EUR 22million gain).
•
Net foreign currency gains and (losses) are reported as part of the respective line in note 10.
•
Benefits and claims paid life relate to the lump-sum buy-out program for certain variable annuities in the Americas and is reported
as part of the respective line in note 12.
•
Change in valuation of liabilities for insurance contracts is reported as part of the respective line in note 12.
•
Change in valuation of liabilities for investment contracts is reported as part of the respective line in note 12.
•
Policyholder claims and benefits - Other are reported as part of the 'Other' line in note 12 and is related to policyholder tax.
•
Commissions and expenses include: 1) Restructuring charges of EUR 240million (2020: EUR 266million charge, 2019:
EUR 220million charge) which are reported as part of Employee and Administration expenses lines in note 14; 2) Amortization
of deferred expenses of EUR 260million income(2020: income of EUR 35million, 2019: charge of EUR 32million) which
is reported as part of the respective line in note 14. This is offset against realized gains and losses and impairments on financial
investments; 3) Amortization of VOBA and future servicing rights of EUR 87million charge(2020: income of EUR 20million; 2019:
charge of EUR 5million) which is reported as part of the respective line in note 14. Commissions and expenses include aDPAC/
VOBA fair value adjustment of EUR 51million gain(2020: gain of EUR 159million; 2019: gain of EUR 151million).
•
Impairment (charges) reversals include: 1) Impairment charges and reversals on financial assets, excluding receivables
of EUR 45million reversal(2020: charge ofEUR 266million, 2019: charge ofEUR 60million) as shown in note 15; 2) Impairment
charges and reversals on non-financial assets and receivables of EUR 60million charge(2020: EUR 128million charge; 2019:
EUR 109million charge) reported as part of the respective line in note 15.
•
There are no interest charges and related fees that are classified for segment reporting purposes as non-operating results.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 5
Impact from assumption and model updates
The 2021 assumption changes and model updates resulted in a negative impact of EUR 298 million and mainly relates to Aegon’s
businesses in the Americas and the Netherlands. Assumption changes and model updates in the Americas led to a net negative impact
of EUR 250 million. This mainly reflects a charge of EUR 123 million related to an update of the minimum surrender rate assumption
for variable annuities with guaranteed lifetime withdrawal benefits from 2% to 1.5% to reflect latest portfolio and industry experience.
Assumption changes and model updates in the Netherlands led to a negative impact of EUR 52 million, mainly related to adverse
impacts from a more granular modeling driven by the conversion of the administration of defined benefit pensions to TKP. This was
partly offset bythe favorable impact of model updates relating to interest guarantees and indexation assumptions forcertain
pension products.
The 2020 assumption changes and model updates amounted to anegative impact of EUR580million and mainly relates to Aegon’s
businesses in the Americas and the Netherlands. Assumption changes and model updates in the Americas led to anet negative impact
of EUR805million. This reflects acharge of EUR460million related to the lowering the long-term interest rate assumption from
4.25% to 2.75% and the corresponding adjustment of the separate account bond return assumptions. Non-economic assumption
changes resulted in acharge of EUR345million, mainly related to Universal Life premium persistency and an increase in mortality rate
assumptions, as well as lowering the morbidity improvement assumption for Long-Term Care from 1.5% to 0.75% per year for the next
15 years. Assumption changes and model updates in the Netherlands led to afavorable impact of EUR225million mainly related to
favorable longevity assumption changes, partially offset by adverse impacts from mortgage prepayment model and expense
assumption updates.
The2019 assumption changes and model updates amounted to anegative impact of EUR196million and mainly relates to Aegon’s
businesses in the Americas and the Netherlands. Assumption changes and model updates in the Americas led to anet negative impact
of EUR64million mainly driven byupdates to Universal Life products for surrender, lapse and mortality to reflect actual experience,
partially offset by gains driven by updates to the annuitization of Variable Deferred Annuities Guaranteed Minimum Income Benefit and
to the returns on Equity-Index Universal Life. In the second half of 2019,a negative impact of EUR75million resulted mostly from
expenses assumption updates in the Americas. Assumption changes and model updatesin the Netherlands led to negative impact of
EUR57million mainlyrelated to model enhancements and expense assumption updates which more than offset favorable longevity
assumption changes.
Other selected income statementitems
Americas
The
Netherlands
United
Kingdom International
Asset
Management
Holding and
other activities
Total
2021
Amortization of deferred expenses, VOBA and
future servicing rights
929 - 113 61 - - 1,103
Depreciation
56 20 6 15 2 1 99
Impairment charges / (reversals) on financial
assets, excluding receivables
(23) (14) - - - (8) (45)
Impairment charges / (reversals) on non-
financial assets and receivables
37 12 - - 1 11 60
2020
Amortization of deferred expenses, VOBA and
future servicing rights
637 - 119 97 - -
854
Depreciation
56 20 9 12 2 1 101
Impairment charges / (reversals) on financial
assets, excluding receivables
151 86 - 15 - 11 262
Impairment charges / (reversals) on non-
financial assets and receivables
72 21 17 - 4 14 128
2019
Amortization of deferred expenses, VOBA and
future servicing rights
687 4 117 66 - - 875
Depreciation
44 18 12 11 1 2 87
Impairment charges / (reversals) on financial
assets, excluding receivables
(12) 72 - - - - 60
Impairment charges / (reversals) on non-
financial assets and receivables
3 94 - 3 - 10 109
Aegon Integrated Annual Report
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Financial information
Non-financial information183
Notes to the consolidated financial statements
Note 5
Number of employees
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding and other
activities
Total
2021
Number of employees - headcount
7,675 3,534 2,476 6,590 1,675 321 22,271
Of which Aegon's share of employees in
joint ventures and associates
733 - 59 3,245 191 - 4,228
2020
Number of employees - headcount
7,960 3,521 2,307 6,598 1,527 409 22,322
Of which Aegon's share of employees in
joint ventures and associates
669 - 47 3,294 183 - 4,193
2019
Number of employees - headcount
8,570 3,582 2,261 7,393 1,535 416 23,757
Of which Aegon's share of employees in
joint ventures and associates
651 - 62 4,276 173 - 5,162
Summarized assets and
liabilities per segment
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding and
other
activities Eliminations
Total
2021
Assets
Cash and Cash equivalents
1,127 3,718 210 282 311 1,242 - 6,889
Investments
80,938 67,017 1,876 8,315 296 21 - 158,463
Investments for account of
policyholders
115,596 25,673 108,713 974 - - (4) 250,953
Investments in joint ventures
56 343 - 936 368 39 - 1,743
Investments in associates
- 1,103 9 18 151 20 (12) 1,289
Deferred expenses
9,052 235 825 391 - - - 10,503
Other assets
27,268 9,318 2,125 2,064 199 32,203 (34,133) 39,044
Total assets
234,037 107,408 113,758 12,979 1,326 33,525 (34,149) 468,884
Liabilities
Insurance contracts
74,967 40,547 1,490 9,028 - - (1,611) 124,422
Insurance contracts for account
of policyholders
83,316 25,294 39,955 758 - - - 149,323
Investment contracts
9,804 11,767 194 2 - - - 21,767
Investment contracts for
account of policyholders
32,280 2,273 69,819 220 - - - 104,592
Other liabilities
17,382 20,038 799 518 540 6,685 (4,022) 41,940
Total liabilities
217,750 99,920 112,257 10,526 540 6,685 (5,633) 442,044
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 5
Summarized assets and
liabilities per segment
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding and
other activities Eliminations
Total
2020
Assets
Cash and Cash equivalents
903 5,689 257 211 374 938 - 8,372
Investments
77,431 69,615 1,994 8,238 208 108 - 157,595
Investments for account of policyholders
104,374 25,603 93,240 959 - - (3) 224,172
Investments in joint ventures
- 327 - 846 204 - - 1,376
Investments in associates
60 1,004 8 35 151 21 (15) 1,264
Deferred expenses
7,555 136 819 289 - - - 8,799
Other assets
26,552 13,642 2,664 1,905 171 31,756 (33,400) 43,290
Total assets
216,875 116,016 98,982 12,482 1,109 32,824 (33,419) 444,868
Liabilities
Insurance contracts
69,392 44,242 1,458 8,542 - - (1,488) 122,146
Insurance contracts for account of
policyholders
76,506 25,085 33,078 772 - - - 135,441
Investment contracts
8,156 12,732 185 2 - - - 21,075
Investment contracts for account of
policyholders
27,868 2,473 61,092 191 - - - 91,624
Other liabilities
19,265 24,505 1,614 573 515 9,658 (7,007) 49,124
Total liabilities
201,188 109,036 97,427 10,080 515 9,658 (8,495) 419,410
Amounts included in the tables on investments are presented on an IFRS basis, which means that investments in joint ventures and
associates are not consolidated on aproportionate basis. Instead, these investments are included on asingle line using the equity
method of accounting.
Investments
Americas The Netherlands
United
Kingdom International
Asset
Management
Holding and
other
activities Eliminations
Total
2021
Shares
493 1,410 29 72 9 1 - 2,015
Debt securities
61,014 26,951 1,159 8,060 11 - - 97,195
Loans
11,352 35,990 - 93 - 20 - 47,455
Other financial assets
8,040 79 687 73 276 - - 9,155
Investments in real estate
39 2,588 - 16 - - - 2,643
Investments general account 80,938 67,017 1,876 8,315 296 21 - 158,463
Shares
- 9,078 20,221 243 - - (4) 29,539
Debt securities
- 12,044 7,649 128 - - - 19,821
Unconsolidated investment funds
115,596 1,059 74,698 597 - - - 191,950
Other financial assets
- 3,493 5,581 6 - - - 9,080
Investments in real estate
- - 563 - - - - 563
Investments for account of policyholders 115,596 25,673 108,713 974 - - (4) 250,953
Investments on balance sheet
196,534 92,690 110,589 9,288 296 21 (4) 409,416
Off-balance sheet investments third parties
240,248 7,711 151,097 2,300 212,779 - - 614,136
Total revenue-generating investments
436,782 100,402 261,687 11,589 213,076 21 (4) 1,023,552
Investments
Available-for-sale
65,694 24,443 1,299 8,191 257 - - 99,884
Loans
11,352 35,990 - 93 - 20 - 47,455
Financial assets at fair value through profit
or loss
119,450 29,669 108,727 987 40 1 (4) 258,871
Investments in real estate
39 2,588 563 16 - - - 3,206
Total investments on balance sheet
196,534 92,690 110,589 9,288 296 21 (4) 409,416
Investments in joint ventures
56 343 - 936 368 39 - 1,743
Investments in associates
- 1,103 9 18 151 20 (12) 1,289
Other assets
37,447 13,271 3,160 2,736 510 33,444 (34,133) 56,436
Consolidated total assets
234,037 107,408 113,758 12,979 1,326 33,525 (34,149) 468,884
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information185
Notes to the consolidated financial statements
Note 5
Investments
Americas The Netherlands
United
Kingdom International
1)
Asset
Management
Holding and
other
activities Eliminations
Total
2020
Shares
442 1,376 34 74 9 44 - 1,979
Debt securities
59,419 30,880 1,077 7,926 48 1 - 99,350
Loans
10,477 34,936 - 120 - 40 - 45,573
Other financial assets
7,056 91 883 102 152 23 - 8,308
Investments in real estate
37 2,331 - 16 - - - 2,385
Investments general account 77,431 69,615 1,994 8,238 208 108 - 157,595
Shares
- 8,227 16,877 187 - - (3) 25,288
Debt securities
- 12,150 7,579 156 - - - 19,885
Unconsolidated investment funds
104,374 706 63,084 613 - - - 168,777
Other financial assets
- 4,520 5,232 3 - - - 9,755
Investments in real estate
- - 467 - - - - 467
Investments for account of policyholders 104,374 25,603 93,240 959 - - (3) 224,172
Investments on balance sheet
181,805 95,218 95,234 9,197 208 108 (3) 381,767
Off-balance sheet investments third parties
215,216 6,144 119,347 6,752 192,098 - (336) 539,220
Total revenue-generating investments
397,021 101,362 214,580 15,948 192,307 108 (339) 920,987
Investments
Available-for-sale
63,864 25,972 1,494 8,088 134 28 - 99,580
Loans
10,477 34,936 - 120 - 40 - 45,573
Financial assets at fair value through profit
or loss
107,427 31,979 93,272 973 74 40 (3) 233,762
Investments in real estate
37 2,331 467 16 - - -
2,853
Total investments on balance sheet
181,805 95,218 95,234 9,197 208 108 (3) 381,767
Investments in joint ventures
- 327 - 846 204 - - 1,376
Investments in associates
60 1,004 8 35 151 21 (15)
1,264
Other assets
35,010 19,467 3,740 2,405 545 32,695 (33,400) 60,461
Consolidated total assets
216,875 116,016 98,982 12,482 1,109 32,824 (33,419) 444,868
6 Premium income and premiums paid to reinsurers
2021
2020 2019
Life insurance
13,400 13,929 15,926
Non-life insurance
2,044 2,171 2,212
Total premium income
15,444 16,099 18,138
Accident and health insurance
1,643 1,784 1,823
General insurance
401 386 390
Non-life insurance premium income
2,044 2,171 2,212
Premium income decreased by EUR655million in 2021 (2020: EUR2,039million decrease) mainly driven by ashrinking life portfolio
in the Netherlands and areduction of upgraded Life insurance policies to the retirement platform in the UK.
2021
2020 2019
Life insurance
3,326 2,541 2,276
Non-life insurance
192 162 158
Total premiums paid to reinsurers
3,518 2,703 2,434
Accident and health insurance
164 137 138
General insurance
27 25 19
Non-life insurance premiums paid to reinsurers
192 162 158
Premium paid to reinsurers increased by EUR815million in 2021 (2020: EUR270million increase), mainly driven by areinsurance
transaction covering universal life policies with secondary guarantees in Americas.
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 6
7 Investment income
2021
2020 2019
Interest income
5,340
5,426 5,835
Dividend income
1,528 1,609 1,571
Rental income
99
114 125
Total investment income
6,967 7,149 7,531
Interest income accrued on impaired financial assets
53 70 146
Interest income on financial assets that are not carried at Fair value through
profit or loss
4,533 4,688 4,943
Lease income is included within rental income. Please refer to note 45 Commitments and Contingencies for future lease payments
(lease rights).
Total investment income from:
2021
2020 2019
Shares
1,528
1,609 1,571
Debt securities and money market instruments
3,548 3,663 3,959
Loans
1,649 1,710 1,779
Real estate
99 114 125
Other
142 53 97
Total
6,967 7,149 7,531
Investment income is split into:
2021
2020 2019
Investment income related to general account
4,952 5,005 5,291
Investment income for account of policyholders
2,015 2,145 2,240
Total
6,967 7,149 7,531
Investment income from financial assets held for general account:
Available-for-sale
3,009 3,075 3,267
Loans
1,649 1,710 1,779
Financial assets designated at fair value through profit or loss
247 130 125
Real estate
68 87 83
Derivatives
(6) (7) 39
Other
(15) 9 (2)
Total
4,952 5,005 5,291
8 Fee and commission income
2021
2020 2019
Fee income from asset management
1,904 1,725 1,824
Commission income
713 580 585
Other
168 99 114
Total fee and commission income
2,785 2,405 2,523
Included in fee and commission income:
Fees on trust and fiduciary activities
259 221 225
9 Income from reinsurance ceded
2021
2020 2019
Recovered claims and benefits
3,363 3,250 3,367
Change in technical provisions
761 310 1
Commissions
163 406 218
Amortization Charges
2 - -
Total
4,289 3,965 3,586
Aegon Integrated Annual Report
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Financial information
Non-financial information187
Notes to the consolidated financial statements
Note 7
10 Results from financial transactions
Results from financial transactions comprise:
2021
2020 2019
Net fair value change of general account financial investments at fair value
through profit or loss, other than derivatives
785 191 279
Realized gains and (losses) on financial investments
510
132 399
Gains and (losses) on investments in real estate
253 74 317
Net fair value change of derivatives
(1,890)
409 1,505
Net fair value change on account of policyholder financial assets at fair value
through profit or loss
23,811 20,982 33,188
Net fair value change on investments in real estate for account of policyholders
46 (36) (18)
Net foreign currency gains and (losses)
347 (93) 77
Net fair value change on borrowings and other financial liabilities
(13) 18 15
Total
23,848 21,677 35,761
Net fair value change of general account financial investments at fair
value through profit or loss, other than derivatives comprise:
2021
2020 2019
Shares
101 (42) 99
Debt securities and money market investments
(46) 30 85
Other
730 203 95
Total
785 191 279
Other mainly includes net fair value changes of limited partnerships such as hedge and private equity funds.
Realized gains and losses on financial investments comprise:
2021
2020 2019
Shares
17 3 11
Debt securities and money market investments
396 153 372
Loans
126 20 32
Other
(30) (43) (16)
Total
510 132 399
Realized gains and losses on financial investments comprise:
2021
2020 2019
Available-for-sale investments
384 112 368
Loans
126 20 32
Total
510 132 399
Net fair value change of derivatives comprise:
2021
2020 2019
Net fair value change on economic hedges where no hedge accounting is applied
(3,543) 2,436 2,636
Net fair value change on bifurcated embedded derivatives
1,630 (2,053) (1,153)
Ineffective portion of hedge transactions to which hedge accounting is applied
23
25 22
Total
(1,890) 409 1,505
The ineffective portion of hedge transactions to which hedge account-
ing is applied comprises:
2021
2020 2019
Fair value change on hedging instruments in afair value hedge
438 (245) (355)
Fair value change on hedged items in afair value hedge
(416) 270 377
Ineffectiveness fair value hedge
22 25 22
Ineffectiveness cash flow hedges
1 - -
Total
23 25 22
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2021
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 10
Net fair value change on for account of policyholder financial assets
atfair value through profit or loss comprise:
2021
2020 2019
Shares
4,560 1,396 4,591
Debt securities and money market investments
(1,007) 588 863
Unconsolidated investment funds
20,927 17,681 26,450
Derivatives
(669) 1,318 1,284
Total
23,811 20,982 33,188
Net fair value change on for account of policyholder financial assets at fair value through profit or lossincreased in 2021 compared
to 2020, mainly from more favorable equity markets. Net fair value changes on for account of policyholder financial assets at fair value
through profit or loss are offset by changes in technical provisions reported as part of the lines Change in valuation of liabilities for
insurance contracts and Change in valuation of liabilities for investment contracts in note 12 Policyholder claims and benefits.
Net fair value change on borrowings and other financial liabilities
2021
2020 2019
Borrowings
-
16 8
Other financial liabilities
(13) 2 7
Total
(13) 18 15
11 Other income
2021
2020 2019
Other income
77 68 200
Other income in 2021 of EUR77million includes again of EUR38million related to the sale of asmall-sized Individual Retirement
Account (IRA) portfolio to athird party anda release of aretirement benefit plan liability of EUR31million in the Netherlands.
Other income in 2020 of EUR68million includes abook gain of EUR53million on the divestment of the joint ventures in Japan.
Other income in 2019 of EUR200million includes again of EUR101million on pension plan amendments in the Netherlands
following the move from adefined benefit plan to adefined contribution plan, as well as abook gain of EUR70million
on the divestment of the business in Slovakia and Czech Republic.
Refer to note 48 Companies and businesses acquired and divested for more details on these divestments.
12 Policyholder claims and benefits
2021
2020 2019
Benefits and claims paid life
20,019 16,016 18,824
Benefits and claims paid non-life
1,441 1,489 1,635
Change in valuation of liabilities for insurance contracts
18,138 22,433 30,679
Change in valuation of liabilities for investment contracts
2,291 2,086 5,768
Other
(38)
(19) (50)
Total
41,852 42,006 56,856
Policyholder claims and benefits includes claims and benefits in excess of account value for products for which deposit accounting
is applied and the change in valuation of liabilities for insurance and investment contracts. The lines ''Change in valuation of liabilities
for insurance contracts'' and ''Change in valuation of liabilities for investment contracts'' reflect movements in technical provisions
resulting from "Net fair value change on for account of policyholder financial assets at fair value through profit or loss" included in note
10 Results from financial transactionsof EUR23,811million positive (2020: EUR20,982million positive, 2019: EUR33,188million
positive). In addition, the line ''Change in valuation of liabilities for insurance contracts'' includes adecrease of technical provisions for
life insurance contracts of EUR1,095million (2020: increase of EUR3,412million, 2019: increase of EUR2,490million).
Aegon launched alump-sum buy-out program in July 2021 for policyholders of variable annuities with GMIB riders whose financial
objectives may have changed since the issuance of their policies. The execution of the lump-sum buy-out program resulted in acharge
of EUR49million as recorded in “Policyholder claims and benefits”, to record actual and expected offer acceptances.
Aegon Integrated Annual Report
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Financial information
Non-financial information189
Notes to the consolidated financial statements
Note 11
13 Profit sharing and rebates
2021
2020 2019
Surplus interest bonuses
2 2 2
Profit appropriated to policyholders
13 7 15
Total
14 8 17
14 Commissions and expenses
2021
2020 2019
Commissions
2,562 2,283 2,423
Employee expenses
1,897 1,995 2,149
Administration expenses
1,581 1,593 1,537
Deferred expenses
(1,160) (741) (832)
Amortization of deferred expenses
933 767 755
Amortization of VOBA and future servicing rights
171 87 120
Total
5,984 5,983 6,153
Included in administration expenses:
Depreciation of equipment, software and real estate held for own use
99 101 87
Employee expenses
2021
2020 2019
Salaries
1,300 1,316 1,321
Post-employment benefit costs
172 199 287
Social security charges
128 125 127
Other personnel costs
254 318 378
Shares
44 37 36
Total
1,897 1,995 2,149
Included in employee expenses:
Defined contribution expenses
35 36 43
Aegon expanded the dynamic hedge covering the equity and interest rate risks of its US Variable Annuities block with guaranteed
minimum withdrawal benefits (GMWB) to the entire VA portfolio. Implementing the
VA
dynamic hedging program for variable annuities with interest sensitive guaranteed minimum income benefits (GMIBs) and guaranteed minimum death benefits (GMDBs) resulted in an
EUR350million one-time charge, of which EUR254million is reported as “Amortization of deferred expenses” and EUR96million
is reported as “Amortization of VOBA and future servicing rights”.
Long Term Incentive Plans
Selected senior employees within Aegon, who have not been classified as Material Risk Takers, can be made eligible for variable
compensation, which is partially paid in cash and partially in Aegon shares. The grant price of these shares is equal to the volume
weighted average price (VWAP) on the Euronext stock exchange in Amsterdam during the period between December 15 preceding
the plan year and January 15 of the plan year. The actual allocation of variable compensation in cash and shares depends
on Aegon's performance, the employee’s unit performance and individual performance against predefined financial and non-
financial performance indicators and targets, as well as the continued employment of the employee.Once variable compensation
is allocated, the cash part is paid directly and the payment of the shares is deferred for two years.These shares are paid out as soon
as the Integrated Annual Report has been adopted by the shareholders at the Annual General Meeting in the last deferral year.
Employees are not eligible to receive dividend during the deferral period. In exceptional circumstances Aegon's Supervisory Board
can adjust variable compensation downwards before allocation or pay-out (malus) or after pay-out (claw back), after considering
the outcomes of an ex-ante or ex-post risk assessment.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 13
Variable Compensation Material Risk Takers
Members of the Executive Board and the Management Board as well as other senior employees are classified as Material Risk Takers
in accordance with the Solvency II Legal Framework. In line with these rules, variable compensation for Material Risk Takers is partially
paid in cash and partly in Aegon shares. The grant price of these shares is equal to the volume weighted average price (VWAP)
on the Euronext stock exchange in Amsterdam during the period between December 15 preceding the plan year and January 15 of
the plan year. The actual allocation of variable compensation in cash and shares depends on Aegon's performance, the employee’s unit
performance and individual performance against predefined financial and non-financial performance indicators and targets, as well
as the continued employment of the employee. Once variable compensation is allocated, the cash part is paid directly and the payment
of the shares is deferred for three years. These shares are paid out as soon as the Integrated Annual Report has been adopted
by the shareholders at the Annual General Meeting in the last deferral year.Employees are not eligible to receive dividend during
the deferral period.For the Members of the Executive Board, the paid-out shares are subject to an additional holding period of two
years. During this holding period, the Executive Board member is not allowed to sell these shares. In exceptional circumstances
Aegon's Supervisory Board can adjust variable compensation downwards before allocation or pay-out (malus) or after pay-out (claw
back), after considering the outcomes of an ex-ante or ex-post risk assessment.
Shares as Fixed Compensation
Selected members of the Management Board as well as other senior employees receive part of their fixed compensation in Aegon
shares each pay round, next to receiving fixed compensation in cash. The grant price of these shares is equal to the volume weighted
average price (VWAP) on the Euronext stock exchange in Amsterdam during the period between December 15 preceding the plan
year and January 15 of the plan year. Once allocated these shares are unconditional and do not depend on the continued employment
of the employee. These shares are either paid as soon as the Integrated Annual Report has been adopted by the shareholders
at the
next Annual General Meeting
or the pay
-out is deferred until the Integrated Annual Report has been adopted
by the shareholders
at the Annual General Meeting three years after the plan year. In the former case, these paid-out shares are subject to an
additional holding period of three years, while in the latter case there is no holding period after pay-out. During the holding period
(if applicable), the employee is not allowed to sell these shares. During the deferral period (if applicable), the employee is not eligible
to receive dividend.
Shares as part of aSign-on Arrangement
Employees may be offered asign-on arrangement when joining Aegon, with payments in cash and Aegon shares, within the applicable
rules and regulations. Once allocated, the sign-on shares depend on the continued employment of the employee. These shares are
deferred and typically cliff-vest after one, two and three years after allocation as soon as the Integrated Annual Report has been
adopted by the shareholders at the Annual General Meeting of that year. Employees are not eligible to receive dividend during
the deferral period.
The following overview contains the cumulative number of shares and their status in relation to active Long Term Incentive Plans,
variable compensation allocated to Material Risk Takers, shares allocated as fixed compensation and shares allocated as part
of asign-on arrangement.
Number of shares per plan year
2017 2018 2019 2020
2021
TotalConditionally granted
1)
6,722,418 6,513,984 7,378,113 8,381,086 9,449,451 38,445,052
Allocated
2)
7,461,564 6,123,546 6,761,360 6,522,324 - 26,868,794
1
2
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Non-financial information191
Notes to the consolidated financial statements
Note 14
Number of shares per plan year
2017 2018 2019 2020 2021
Total
Unvested at January 1, 2020
6,516,995 5,663,455 8,330,014 - - 20,510,464
Conditionally granted as variable compensation
1)
- - - 8,381,086 - 8,381,086
Allocated
2)
4,436 38,502 (616,753) 954,850 -
381,035
Forfeited
(55,039) (199,587) (94,970) (17,644) - (367,240)
Vested
(2,604,178) (250,819) (277,523) (66,526) -
(3,199,046)
Unvested at December 31, 2020
3,862,214 5,251,551 7,340,768 9,251,766 - 25,706,299
Conditionally granted as variable compensation
1)
- - - - 9,449,451 9,449,451
Allocated
2)
3,928 4,010 (29,388) (1,858,762) 2,450,661 570,449
Forfeited
(92,665) (205,734) (254,543) (174,128) (4,729) (731,799)
Vested
(3,773,477) (2,037,774) (259,858) (221,441) (69,851) (6,362,401)
Unvested at December 31, 2021
- 3,012,053 6,796,979 6,997,435 11,825,532 28,631,999
Grant price (in EUR)
3)
5.246 5.405 4.162 4.083 3.2927
Fair value of shares at grant date (in EUR)
4)
4.040 to
4.933
4.143 to
5.054
2.741 to
3.737
1.794 to
3.796
1.625 to
3.978
1
2
(e.g. the 954,850 shares allocated during the calendar year 2020 in relation to the 2020 plan year). Shares allocated during acalendar year in relation to the
previous plan year concerns the difference between the conditionally granted shares for that plan year and the actual number of shares which have been
allocated (e.g. the 616,753 share correction during 2020 for the 2019 plan year). This number can therefore be positive or negative. Shares allocated during
acalendar year in relation to earlier plan years are backdated corrections to the administration (e.g. during 2020 acorrection of 38,502 shares was made to the
2018 plan year).
3
for the 2021 plan year, this is the VWAP for the period December 15, 2020 to January 15, 2021.
4
shareholder return as performance indicator for variable compensation (where applicable).
Aegon applies anet settlement option for participants in order to meet their income tax obligations when their shares are paid
out. This means that Aegon will not sell shares on the market, but hold these shares within Aegon and settle directly with the tax
authorities in cash.
Refer to the Remuneration Report for detailed information on conditional shares granted to the Executive Board.
15 Impairment charges / (reversals)
Impairment charges / (reversals) comprise:
2021
2020 2019
Impairment charges on financial assets, excluding receivables
52 291 133
Impairment reversals on financial assets, excluding receivables
(98) (29) (73)
Impairment charges and reversals on non-financial assets and receivables
60 128 109
Total
15 391 169
Impairment charges on financial assets, excluding receivables, from:
2021
2020 2019
Shares
3 42 7
Debt securities and money market instruments
9
162 50
Loans
40 87 76
Total
52 291 133
Impairment reversals on financial assets, excluding receivables, from:
2021
2020 2019
Shares
(8) - -
Debt securities and money market instruments
(30) (26) (67)
Loans
(55) (2) (5)
Other
(4) (1) (1)
Total
(98) (29) (73)
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 15
Impairment charges on financial assets in 2020 were mainly driven by Americas impairments on public fixed income holdings, primarily
in the energy sector, as aconsequence of the weakening demand related to the nationwide lockdown due to COVID-19.
Impairment charges on non-financial assets and receivables in 2020 amount to EUR128million and are mainly related to avaluation
allowance due to the ongoing rehabilitation process of areinsurer of Aegon Americas for EUR68million and the impairment of an
associate company of Aegon the Netherlands for EUR17million.
Impairment charges/(reversals) on non-financial assets and receivables in 2019 amounted to EUR109million and were mainly
related to awrite-off of VOBA and DPAC amounting to EUR76million as aresult of aliability adequacy test (LAT) deficit in Aegon
the Netherlands. Refer to note 34 “Insurance contracts” for further details on the
LAT
impact. In addition, 2019 included the dilution of the capital injections in India (ALIC) of EUR10million and impairments to software in the Netherlands of EUR9million.
For more details on impairments on financial assets, excluding receivables, refer to note 4 Financial risks.
16 Interest charges and related fees
2021
2020 2019
Subordinated loans
110
110 88
Trust pass-through securities
8 9 8
Borrowings
153 194 252
Other
65 191 164
Total
335 505 513
Included in interest charges and related fees:
Interest charges accrued on financial liabilities not carried at fair value through
profit or loss
210 232 298
Other includes interest charges on short term borrowings and bank fees.
17 Other charges
2021
2020 2019
Other charges
104 150 1
Other charges in 2021 of EUR104million are mainly related to settlements of certain universal life policies in the US. For more details
refer to Note 45 commitments and contingencies.
Other charges in 2020 of EUR 150 million are mainly driven by charges of EUR 91 million (USD 104 million) related tosettlements
of certain universal life policies in the US. Furthermore, other charges include a provision of EUR 45 million related to the resolution
of pending litigation in the Netherlands. Refer to note 38 Provisions and note 45 Commitments and contingencies for further details.
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Financial information
Non-financial information193
Notes to the consolidated financial statements
Note 16
18 Income tax
Note
2021
2020 2019
Current tax
Current year
116 (105) 118
Adjustments to prior years
(5) (205) (14)
111 (310) 103
Deferred tax
40
Origination / (reversal) of temporary differences
190 (29) 162
Changes in tax rates / bases
(20)
9 25
Changes in deferred tax assets as aresult of recognition /
write off of previously not recognized / recognized tax
losses, tax credits and deductible temporary differences
(5) 12 4
Non-recognition of deferred tax assets
9 7 17
Adjustments to prior years
(6)
171 (8)
167 171 200
Income tax for the period (income) / charge
278 (139) 303
Adjustments to prior years include shifts between current and deferred tax.
Reconciliation between standard and effective income tax:
2021
2020 2019
Result before tax
1,979 (84) 1,828
Income tax calculated using weighted average applicable statutory tax rates
403 (29) 385
Difference due to the effects of:
Non-taxable income
(69) (46) (76)
Non-tax deductible expenses
21 22 22
Changes in tax rate/base
(20) 9 25
Tax credits
(48) (57) (67)
Other taxes
38 (2) 57
Adjustments to prior years
(11) (33) (22)
Change in uncertain tax positions
(16) - -
Changes in deferred tax assets as aresult of recognition / write off of previously
not recognized / recognized tax losses, tax credits and deductible temporary
differences
(5) 12 4
Non-recognition of deferred tax assets
9 7 17
Tax effect of (profit) / losses from joint ventures and associates
(18) (17) (11)
Other
(5) (4) (32)
(125) (110) (82)
Income tax for the period (result) / charge
278 (139) 303
The weighted average applicable statutory tax rate for 2021 is 20.4% (2020: 34.0%, 2019: 21.1%). The weighted average applicable
statutory tax rate decreased compared to 2020 due to high contribution of income before tax in the United Stated and relatively high
income in 2021 from equity accounted joint ventures and associates - compared to the total consolidated income - which is presented
net of tax in the consolidated income statement.
Non-taxable income in 2021 is comprised of the regular non-taxable items such as the dividend received deduction in the United States
and the participation exemption in the Netherlands. Compared to 2020 non-taxable income increased due to more exempt income
in the Netherlands and the United Kingdom.
In the Netherlands, the enacted future corporate income tax rate increased from 25% to 25.8% as from January 1, 2022 which
resulted in an unfavorable tax rate impact. In the United Kingdom, the enacted future corporate income tax rate will increase from 19%
to 25% as of April 1, 2023 which resulted in abeneficial tax rate impact.
Tax credits mainly include tax benefits from United States investments that provide affordable housing to individuals and families that
meet median household income requirements.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 18
Other taxes are higher compared to 2020 due to favorable equity markets which yielded higher policyholder taxes in the United
Kingdom and state tax expenses in the United States due to positive income.
In 2020, 'Adjustments to prior years' mainly consist of ashift between current and deferred tax in the Netherlands due
to the recalculation of the technical insurance provisions for tax purposes.
Changes in uncertain tax positions relate to apartial release of certain reassessed tax provisions in the United States and
the Netherlands.
In 2019, ‘Other’ mainly relates to the one-off tax benefit in the United Kingdom due to the release of the historic deferred tax balances
held in respect of the pension scheme deficit when the defined benefit pension scheme moved to surplus.
The following tables present income tax related to components of other comprehensive income and retained earnings.
2021
2020 2019
Items that will not be reclassified to profit and loss:
Changes in revaluation reserve real estate held for own use
1 (2) 1
Remeasurements of defined benefit plans
(102) 140 90
(101) 138 92
Items that may be reclassified subsequently to profit and loss:
(Gains) / losses on revaluation of available-for-sale investments
222 (666) (726)
(Gains) / losses transferred to the income statement on disposal and impairment
of available-for-sale investments
100 2 94
Changes in cash flow hedging reserve
47 54 3
Movement in foreign currency translation and net foreign investment hedging
reserve
3 (7) (5)
372 (616) (634)
Total income tax related to components of other comprehensive income
270 (479) (542)
2021
2020 2019
Income tax related to equity instruments and other
Income tax related to equity instruments
31
13 18 51
Other
3 1 (1)
Total income tax recognized directly in retained
earnings
16 19 50
19 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the net result attributable to owners, after deduction of coupons on perpetual
securities and non-cumulative subordinated notes by the weighted average number of common shares, excluding common shares
purchased by the Company and held as treasury shares (refer to note 30.1 Share capital – par value and 30.3 Treasury shares
respectively).
2021
2020 2019
Net result attributable to owners of AegonN.V.
1,651 45 1,524
Coupons on perpetual securities
(39) (38) (88)
Net result attributable to owners for basic earnings per share
calculation
1,613 7 1,437
Net result attributable to common shareholders
1,602 7 1,427
Net result attributable to common shareholders B
11 - 10
Weighted average number of common shares outstanding (inmillion)
2,043 2,044 2,042
Weighted average number of common shares B outstanding (inmillion)
559 561 572
Basic earnings per common share (EUR per share)
0.78 - 0.70
Basic earnings per common share B (EUR per share)
0.02 - 0.02
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Notes to the consolidated financial statements
Note 19
Diluted earnings per share
The diluted earnings per share equaled the basic earnings per share forall years disclosed since there were no Long Term Incentive
Plans which were considered dilutive.
20 Dividend per common share
Final dividend 2021
At the Annual General Meeting of Shareholders currently scheduled for May 31, 2022, the Executive Board will, in line with its
earlier announcement and barring unforeseen circumstances, propose afinal dividend for the year 2021 of EUR0.09 per common
share and EUR0.00225 per common share B, which has financial rights attached to it of 1/40
th
of acommon share. If approved
and in combination with the interim dividend 2021 of EUR0.08 per common share, Aegon’s total dividend over 2021 will amount
to EUR0.17 per common share. After taking into account the interim dividend 2021 of EUR0.002 per common share B, Aegon’s total
dividend over 2021 will amount to EUR0.00425 per common share B.
Interim dividend 2021
The interim dividend 2021 was paid in cash or stock at the election of the shareholder. Approximately 42% of holders of common
shares elected to receive the cash dividend. The remaining 58% of shareholders elected to receive the interim dividend in stock.
The cash dividend amounted to EUR0.08 per common share, the stock dividend amounted to one new Aegon common share for
every 52 common shares held. The stock dividend and cash dividend are approximately equal in value. The dividend was payable as of
September 17, 2021. The interim dividend 2021 for common shares B amounted to 1/40
th
of the dividend paid on common shares.
To neutralize the dilutive effect of the 2021 interim dividend paid in shares, Aegon executed aprogram to repurchase 21,531,927
common shares. The repurchase of shares commenced on October 1, 2021 and was completed on October 27, 2021. Aegon engaged
athird party to execute the transactions on its behalf. The common shares were repurchased at amaximum of the average of the daily
volume-weighted average prices during the repurchase period.
Final dividend 2020
It was decided at the Annual General Meeting of Shareholders on June 3, 2021 to pay afinal dividend for 2020 of EUR0.06 per
common share and EUR0.0015 per common share B. After taking into account the interim dividend of EUR0.06 per common share
and EUR0.0015 per common share B, this resulted in atotal 2020 dividend of EUR0.12 per common share and EUR0.0030 per
common share B.
The final dividend for 2020 was paid in cash or stock at the election of the shareholder. The value of the dividend in common shares
was approximately equal to the cash dividend. Those who elected to receive astock dividend received one Aegon common share for
every 59 common shares held. The stock fraction was based on Aegon’s average share price as quoted on Euronext Amsterdam, using
the high and low of each of the five trading days from June 24 up to and including June 30, 2021. The average price calculated on this
basis amounted to EUR3.52. The dividend was paid as of July 7, 2021.
To neutralize the dilutive effect of the 2020 final dividend paid in shares, Aegon executed a share buyback program to repurchase
35,933,035 common shares. Between July 8, 2021 and August 20, 2021, these common shares were repurchased at an average price
of EUR 3.7013 per share. These shares are held as treasury shares and are used to cover future stock dividends.
Interim dividend 2020
The interim dividend 2020 was paid in cash or stock at the election of the shareholder. Approximately 52% of holders of common
shares elected to receive the cash dividend. The remaining 48% of shareholders elected to receive the interim dividend in stock.
The cash dividend amounted to EUR0.06 per common share, the stock dividend amounted to one new Aegon common share for
every 39 common shares held. The stock dividend and cash dividend are approximately equal in value. The dividend was payable as of
September 18, 2020. The interim dividend 2020 for common shares B amounted to 1/40
th
of the dividend paid on common shares.
To neutralize the dilutive effect of the 2020 interim dividend paid in shares, Aegon executed aprogram to repurchase 24,028,645
common shares. The repurchase of shares commenced on October 1, 2020 and was completed on October 27, 2020. Aegon engaged
athird party to execute the transactions on its behalf. The common shares were repurchased at amaximum of the average of the daily
volume-weighted average prices during the repurchase period.
Final dividend 2019
At the Annual General Meeting of Shareholders on May 15, 2020 it was decided to forego the 2019 final dividend. Aegon decided
to comply with the call made by European Insurance and Occupational Pensions Authority (EIOPA) and Dutch Central Bank (DNB)
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 20
to postpone all dividend distributions on April 2, 2020. Furthermore, in 2020 Aegon took several actions to strengthen its balance
sheet and improve its risk profile. In this context, Aegon decided to retain the final dividend for 2019. Taking into account the interim
dividend paid in September 2019, this results in atotal dividend for the financial year 2019 of EUR0.15 per common share and
EUR0.00375 per common share B, paid in September 2019.
Interim dividend 2019
The interim dividend 2019 was paid in cash or stock at the election of the shareholder. Approximately 55% of holders of common
shares elected to receive the cash dividend. The remaining 45% opted for stock dividend. The cash dividend amounted to EUR0.15 per
common share, the stock dividend amounted to one new Aegon common share for every 25 common shares held. The stock dividend
and cash dividend are approximately equal in value. The interim dividend was payable as of September 20, 2019. The interim dividend
2019 for common shares B amounted to 1/40
th
of the dividend paid on common shares.
To neutralize the dilutive effect of the 2019 interim dividend paid in shares, Aegon executed aprogram to repurchase 43,149,667
common shares. Between October 1, 2019, and November 8, 2019, these common shares were repurchased at an average price
of EUR3.89 per share. These shares are held as treasury shares and are used to cover future stock dividends.
21 Cash and cash equivalents
2021
2020 2019
Cash at bank and in hand
3,638 4,907 4,619
Short-term deposits
1,576 2,214 2,518
Money market investments
1,675 1,247 5,116
Short-term collateral
- 4 11
At December 31
6,889 8,372 12,263
Cash collateral received related to securities lending, repurchase agreements and
margins on derivatives transactions
5,776 9,208 7,166
Income from security lending programs
3 9 6
Weighted effective interest rate on short-term deposits
(0.72%) (0.64%) (0.38%)
Average maturity days on short-term deposits
16 10 19
The carrying amounts disclosed reasonably approximate the fair values as at the year-end.
For cash collateral received related to securities lending, repurchase agreements and margins on derivatives transactions,
acorresponding liability to repay the cash is recognized in other liabilities (refer to note 41 Other liabilities). Also, refer to note
46 Transfer of financial assets for details on collateral received and paid. Investment of cash collateral received is restricted through
limitations on credit worthiness, duration, approved investment categories and borrower limits. Short-term collateral relates to cash
collateral received included in cash and cash equivalents and the remainder is included in other asset classes as that collateral
is typically reinvested. Aegon earns ashare of the spread between the collateral earnings and the rebate paid to the borrower
of the securities which is reflected in Income from securities lending programs.
Cash and cash equivalents include cash and demand balances held at the Dutch Central Bank. The Dutch Central Bank requires
Aegon Bank N.V. to place 1% of their deposits with agreed maturity or the savings accounts (without restrictions to withdraw their
money) in an account with the Dutch Central Bank. This deposit is renewed every 42-49 days, based on an updated valuation of total
assets.The interest paid on this minimum reserve deposit is equal to the ECB deposit facility rate amounting to -50bp. The year-end
minimum required balance on deposit by the Dutch Central Bank was EUR74million (2020: EUR84million, 2019: EUR79million).
These deposits are therefore not freely available.
Summary cash flow statement
2021
2020 2019
Net cash flows from operating activities
(1,796) (2,854) 7,302
Net cash flows from investing activities
(54) (139) (86)
Net cash flows from financing activities
300 (778) (3,730)
Net increase / (decrease) in cash and cash equivalents
(1,550) (3,770) 3,486
Net cash and cash equivalents are impacted by:
Positive (negative) effects of changes in exchange rates
67 (121) 33
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Non-financial information197
Notes to the consolidated financial statements
Note 21
Analysis of cash flows
2021 compared to 2020
Net cash flows from operating activities
Total net cash flow from operating activities increased by EUR1,058million to aEUR1,796million outflow (2020: EUR2,854million
outflow). The main movements are the decreased cash outflows regarding purchase of investments and the increasedcash inflows
from disposal of investments (refer to note 22 Investment), partially offset by outflow from insurance and investment liabilities (refer
to note 34 Insurance contracts) and by the increased outflow fromresults from financial transactions (refer to note 10 Results from
financial transactions).
Net cash flows from investing activities
Net cash flows from investing activities increased by EUR85million to aEUR54million outflow (2020: EUR139million outflow).
The main movements are the decreased cash outflows regarding acquisition/capital contribution joint ventures and associates,
partially offset by decreased inflow from disposal joint ventures and associates (refer to note 48 Business combinations and note
49 Group companies.
Net cash flows from financing activities
Net cash flow from financing activities increased by EUR1,078million to aEUR300million inflow (2020: EUR778million outflow).
The increase is aresult of lower repayments of borrowingsand higher proceeds (refer to note 37 Borrowings), partially offset by higher
purchases of treasury shares (refer to the table below and note 31 Other equity instruments).
2020 compared to 2019
Net cash flows from operating activities
Total net cash flow from operating activities decreased by EUR10,156million to aEUR2,854million outflow (2019:
EUR7,302million inflow). The main movements are the cash inflows regarding insurance and investment liabilities general account
and for account of policyholders (refer to note 34 Insurance contracts and note 35 Investment contracts), cash inflows from disposal
of investments (other than money market investments, refer to note 22 Investments), partially offset by outflow from results from
financial transactions (refer to note 10 Results from financial transactions).
Net cash flows from investing activities
Net cash flows from investing activities decreased by EUR53million to aEUR139million outflow (2019: EUR86million outflow).
The total consideration paid for acquisitions/capital contributions in joint ventures and associates, was EUR305million. The total
consideration received for disposals, excluding transferred assets and reinsurance assets from reinsurance transactions, was
EUR154million. The outflow in 2020 is mainly driven by the expansion of the joint venture arrangement with Banco Santander
in Spain, offset by the sale of its 50% stake in the variable annuity joint ventures in Japan(refer to note 48 Companies and businesses
acquired and divested).
Net cash flows from financing activities
Net cash flow from financing activities increased by EUR2,952million to aEUR778million outflow (2019: EUR3,730million
outflow). The increase is aresult of lower repayments of borrowingsand other equity instruments redeemed (refer to note 31 Other
equity instruments) offset by lower proceeds (refer to the table below and note 37 Borrowings).
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 21
Reconciliation of liabilities arising from financing activities
The table below shows the reconciliation between the net cash flows from financing activities and the liabilities as included
in the consolidated statement of financial position.
Reconciliation of debt from
financing activities
Cash flows Non-cash changes
At
January
1, 2021 Addition
Repay-
ment
Realized
gains /
losses in
income
state-
ment
Move-
ments
related
to fair
value
hedges
Amorti-
zation
Transfer
to/from
other
headings Other
Net
exchange
differ-
ence
At
Decem-
ber 31,
2021
Subordinated borrowings
2,085 - - - 3 - - 105 2,194
Trust pass-through securities
126 - - - (9) - - - 9 126
Borrowings
8,524 3,914 (3,000) - (1) 1 - - 222 9,661
Assets held to hedge Trust
pass-through securities
12 - - (9) - - - - 1 3
Assets held to hedge
Borrowings
62 - (61) (1) - - - - - -
Reconciliation of debt from
financing activities
Cash flows Non-cash changes
At
January
1, 2020 Addition
Repay-
ment
Realized
gains /
losses in
income
state-
ment
Move-
ments
related
to fair
value
hedges
Amorti-
zation
Transfer
to/from
other
headings Other
Net
exchange
difference
At
Decem-
ber 31,
2020
Subordinated borrowings
2,207 - - - - 3 - - (125) 2,085
Trust pass-through securities
136 - - - 2 - - - (11) 126
Borrowings
9,307 3,444 (3,985) (16) 1 1 - - (228) 8,524
Assets held to hedge Trust
pass-through securities
11 - - 2 - - - - (1) 12
Assets held to hedge
Borrowings
- 63 - (1) - - - - - 62
22 Investments
Investments for general account comprise financial assets, excluding derivatives, as well as investments in real estate.
Note
2021
2020
Available-for-sale (AFS)
99,884 99,580
Loans
47,455 45,573
Financial assets at fair value through profit or loss (FVTPL)
8,481 10,057
Total financial assets, excluding derivatives
22.1
155,820 155,210
Investments in real estate
22.2
2,643 2,385
Total investments for general account
158,463 157,595
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Non-financial information199
Notes to the consolidated financial statements
Note 22
22.1 Financial assets, excluding derivatives
AFS FVTPL Loans
Total
Fair value2021
Shares
350 1,665 - 2,015 2,015
Debt securities
93,899 3,296 - 97,195 97,195
Money market and other short-term investments
4,790 120 - 4,910 4,910
Mortgage loans
- - 40,624 40,624 44,366
Private loans
- - 4,883 4,883 5,491
Deposits with financial institutions
- - 52 52 52
Policy loans
- - 1,893 1,893 1,893
Other
844 3,401 3 4,248 4,248
At December 31, 2021
99,884 8,481 47,455 155,820 160,171
2020
Shares
345 1,634 -
1,979
1,979
Debt securities
93,681 5,669 - 99,350 99,350
Money market and other short-term investments
4,558 109 - 4,667 4,667
Mortgage loans
- - 39,298 39,298 43,258
Private loans
- - 4,358 4,358 5,280
Deposits with financial institutions
- - 92 92 92
Policy loans
- - 1,801 1,801 1,801
Other
996 2,645 25 3,665 3,665
At December 31, 2020
99,580 10,057 45,573 155,210 160,093
2021
2020
Current portion:
Debt securities, money market and other short-term investments, mortgage and private loans
12,989 14,777
Refer to note 44 Fair value for further details on fair value measurement.
Loan allowance
Movement on the loan allowance account during the year were as follows:
2021
2020
At January 1
(188) (165)
Addition charged to income statement
(40) (87)
Reversal to income statement
55 2
Amounts written off
55 62
At December 31
(118) (188)
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 22
22.2 Investments in real estate
2021
2020
At January 1
2,385 2,901
Additions
47 148
Subsequent expenditure capitalized
1
2
Disposals
(60) (726)
Transfer from real estate for own use and equipment
14
-
Fair value gains / (losses)
253 74
Net exchange differences
3
(14)
At December 31
2,643 2,385
Investments in real estate held by:
Americas
39 37
The Netherlands
2,588
2,331
Value of Aegon's properties which were appraised in the current year
98%
99%
Appraisals performed by independent external appraisers
98% 99%
Aegon the Netherlands has invested in long-term residential property leases that can be terminated subject to ashort-term notice.
Under Dutch law, the maximum annual rent increase on residential property rented in the affordable housing segment is specified
by the Dutch national government and equals the annual inflation rate plus asmall margin.
Refer to note 45 Commitments and contingencies for adescription of non-cancellable lease rights.
2021
2020 2019
Rental income reported as part of investment income
68 87 83
Direct operating expenses (Including repairs and maintenance expenses):
- From investment property that generated rental income
32 47 59
- From investment property that did not generate rental income
2 2 2
There are no restrictions on the realizability of investment property or the remittance of income and proceeds of disposal.
Refer to note 45 Commitments and contingencies for asummary of contractual obligations to purchase investment property.
23 Investments for account of policyholders
Investments for account of policyholders comprise financial assets at fair value through profit or loss, excluding derivatives, and
investments in real estate.
Note
2021
2020
Shares
29,539 25,288
Debt securities
19,821 19,885
Money market and other short-term investments
1,482 1,051
Deposits with financial institutions
4,105
4,185
Unconsolidated investment funds
191,950 168,777
Other
3,493
4,520
Total investments for account of policyholders at fair value through
profit or loss, excluding derivatives
250,390 223,705
Investments in real estate
23.1
563 467
Total investments for account of policyholders
250,953 224,172
Investments for account of policyholders in 2021 increased, compared to 2020, mainly due to positive market movements.
Refer to note 44 Fair value for asummary of all financial assets and financial liabilities at fair value through profit or loss.
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Notes to the consolidated financial statements
Note 23
23.1 Investments in real estate for account of policyholders
2021
2020
At January 1
467 586
Additions
54 -
Subsequent expenditure capitalized
6
4
Disposals
(43) (56)
Fair value gains / (losses)
46
(36)
Net exchange differences
32 (31)
At December 31
563 467
The investment properties are leased out under operating leases.
2021
2020 2019
Rental income reported as part of investment income
30
27 42
Direct operating expenses from investment in real estate for account of policyholders
4 8 6
There are no restrictions on the realizability of investment property or the remittance of income and proceeds of disposal.
Refer to note 45 Commitments and contingencies for asummary of contractual obligations to purchase investment property.
24 Derivatives
Derivative asset Derivative liability
2021
2020
20212020
Derivatives for general account
Derivatives not designated in ahedge
8,138 12,522 8,920 12,599
Derivatives designated as fair value hedges
224 183 673 1,082
Derivatives designated as cash flow hedges
346 338 948 608
Derivatives desginated as Net foreign investment hedges
73 196 59 161
8,780 13,238 10,600 14,450
Derivatives for account of policyholders
Derivatives not designated in ahedge
46 747 39 167
Total derivatives
1)
8,827 13,986 10,639 14,617
Of which:
Current
723 673 2,803 4,220
1
The derivatives are measured at fair value through profit or loss in accordance with IAS 39. For more detailson fair value measurement
of derivatives refer to note 44 Fair value.
Aegon the Netherlands partially hedges the risk of future longevity increases in the Netherlands related to apart of its insurance
liabilities. These longevity derivatives are constructed to pay out if the mortality rates in future years decrease more than apre-
determined percentage compared with the base scenario at the moment of signing the contract. These derivatives are used to enhance
Aegon’s risk-return profile and to improve capital efficiency. The value of the longevity derivatives are calculated using an internal
model as there is no active market for this type of derivatives. As per December 31, 2021 no longevity derivatives are in place. Refer
to note 26 Reinsurance assets for further information on the risk of future longevity of Aegon the Netherlands.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 24
Use of derivatives
Derivatives not designated in ahedge - general account
Derivatives not designated in ahedge – general
account
Derivative asset Derivative liability
2021
2020
20212020
Derivatives held as an economic hedge
8,121 12,500 5,334 7,567
Bifurcated embedded derivatives
17
22
3,586
5,032
Total
8,138 12,522 8,920 12,599
Aegon utilizes derivative instruments as a
part
of its asset liability risk management practices. The derivatives held for risk management purposes are classified as economic hedges to the extent that they do not qualify for hedge accounting, or that Aegon has elected not
to apply hedge accounting. The economic hedges of certain exposures relate to an existing asset, liability or future reinvestment risk.
In all cases, these are in accordance with internal risk guidelines and are closely monitored for continuing compliance.
Bifurcated embedded derivatives that are not closely related to the host contracts have been bifurcated and recorded at fair value
in the consolidated statement of financial position. These bifurcated embedded derivatives are embedded in various institutional
products, modified coinsurance and unit-linked insurance contracts in the form of guarantees for minimum benefits. Please refer
to note 36 Guarantees in insurance contracts for more disclosures about these guarantees.
Credit Default Swaps
Aegon has entered into free-standing credit derivative transactions. The positions outstanding at the end of the year were:
Credit derivative disclosure by quality
2021
2020
Notional Fair value
Notional Fair value
AAA
14 - 13 -
AA
173 3 168 4
A
926 14 762 9
BBB
2,925 50 2,677 46
BB
263 1 205 4
B or lower
148 2 121 -
Total
4,449 70 3,945 63
Certain derivatives are used to add risk by selling protection in the form of single name and index based credit default swaps. This
involves the purchase of high quality, low risk assets and the sale of credit derivatives. The table above provides abreakdown in credit
quality of these credit derivatives.The credit ratings relate to the underlying exposuresof these credit derivatives.
Derivatives designated as fair value hedges
Aegon's fair value hedges includes interest rate swaps, swaptions, equity and fixed income total return swaps, equity options, equity
futures, bond futures and variance swaps that are used to protect against changes in the fair value of interest rate and equity sensitive
instruments or liabilities. Gains and losses on derivatives designated under fair value hedge accounting are recognized in the income
statement. The effective portion of the fair value change on the hedged item is also recognized in the income statement. As aresult,
only the net accounting ineffectiveness has an impact on the net result.
Aegon has entered into interest rate swap agreements that effectively convert certain fixed-rate assets and liabilities to afloating-rate
basis (generally to six months or less LIBOR). These hedges are used for portfolio management to better match assets to liabilities or
to protect the value of the hedged item from interest rate movements. These agreements involve the payment or receipt of fixed-rate
interest amounts in exchange for floating-rate interest amounts over the life of the agreement without the exchange of the underlying
principal amounts. Some of the arrangements use forward starting swaps to better match the duration of assets and liabilities.
Aegon has entered into cross-currency interest rate swap agreements that effectively convert certain foreign currency fixed-rate
and floating-rate assets and liabilities to US dollar floating-rate assets and liabilities. These agreements involve the exchange
of the underlying principal amounts.
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Notes to the consolidated financial statements
Note 24
For the years ended December 31, 2021, 2020 and 2019, the gains and (losses) related to the ineffectiveness portion of designated
fair value hedges Aegon recognized are as follows:
2021
2020 2019
Gains (losses) related to the ineffectiveness portion of designated fair value hedges
22 25 22
For the year ended December 31, 2021, Aegon the Netherlands recognized EUR422million negative fair value changes on mortgage
loans using fair value hedge accounting under the EU carve out version of IAS 39 in the income statement (2020: EUR280million
positive). This amount was offset by EUR442million positive fair value changes recognized on the derivatives used as hedging
instrument (2020: EUR255million negative).
Derivatives designated as cash flow hedges
Aegon has entered primarily into interest rate swap agreements that effectively convert certain variable-rate assets and liabilities
to afixed-rate basis in order to match the cash flows of the assets and liabilities within Aegon’s portfolio more closely. These
agreements involve the payment or receipt of variable-rate interest amounts in exchange for fixed-rate interest amounts over the life
of the agreement without the exchange of the underlying principal amounts. Aegon hedges its exposure to the variability of future
cash flows from the interest rate movements for terms up to 23 years for hedges converting existing floating-rate assets and liabilities
to fixed-rate assets.
Aegon uses forward starting interest rate swap agreements to hedge the variability in future cash flows associated with the forecasted
purchase of fixed-income assets. These agreements reduce the impact of future interest rate changes on the forecasted transaction.
Fair value adjustments for these interest rate swaps are deferred and recorded in equity until the occurrence of the forecasted
transaction at which time the interest rate swaps will be terminated. The accumulated gain or loss in equity will be amortized into
investment income as the acquired asset affects income. Aegon hedges its exposure to the variability of future cash flows from interest
rate movements for terms up to 22 years. The cash flows from these hedging instruments are expected to affect the profit and loss
for approximately the next 40 years. For the year ended December 31, 2021, the contracts for which cash flow hedge accounting was
terminated resulted in deferred gains of EUR60million (2020: EUR186million) that are recognized directly in equity to be reclassified
into net result during the period when the cash flows occur of the underlying hedged items. During the year ended December 31, 2021,
none of Aegon's cash flow hedges were discontinued as it was highly probable that the original forecasted transactions would occur
by the end of the originally specified time period documented at the inception of the hedging relationship.Aegon projects investment
needs many years into the future in order to support the insurance liabilities and pay all contractual obligations arising from the policies
in force today.
In addition, Aegon also makes use of cross currency swaps to convert variable or fixed foreign currency cash flows into fixed cash flows
in local currencies. The cash flows from these hedging instruments are expected to occur over the next 35 years. These agreements
involve the exchange of the underlying principal amounts.
Hedge ineffectiveness and reclassification of gains (losses)
2021
2020 2019
Hedge ineffectiveness on cash flow hedges
1 - -
Gains (losses) reclassified from equity into the income statement
(38) 74 51
Expected deferred gain (loss) to be reclassified from equity into net result during
the next 12 months
113 92 89
The periods when the cash flows are expected to occur are as follows:
< 1 year 1 – 5 years 5 – 10 years > 10 years
2021 Total
Cash inflows
535 2,158 1,640 5,868 10,201
Cash outflows
- 4 - - 4
Net cash flows
535 2,154 1,640 5,868 10,197
< 1 year 1 – 5 years 5 – 10 years > 10 years
2020 Total
Cash inflows
268 761 767 5,402 7,197
Cash outflows
- 4 - - 4
Net cash flows
267 757 767 5,402 7,193
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Non-financial informationNotes to the consolidated financial statements
Note 24
Effect of uncertainty of IBOR reform on derivatives designated as fair value and cash flows hedges
The future of IBORs (Interbank Offered Rates) such as EURIBOR, EONIA and LIBOR has been amajor topic on the global agenda since
the G20 asked the Financial Stability Board (FSB) to undertake afundamental review of leading interest rate benchmarks in 2013.
The FSB proposed new standards to reform interest rate benchmarks and the use of transaction-based input data instead of non-
transactional/panel input data. In the EU this is adopted in the new Benchmark Regulation (BMR) which stipulates that from January
2020 only BMR compliant benchmarks may be used within the EU.
In order to prepare for the IBOR transition all Aegon units have written transition plans containing among others project solutions
and actions, timelines and ownership to ensure timely preparation and implementation. We are currently implementing the actions
as described in the transition plans.
In July 2020 the discount rates of EURcleared derivatives switched from EONIA to €STR which impacted the valuation of derivatives for
which compensation was exchanged. All EURCredit Support Annex ('CSA') which have positions outstanding have been amended from
EONIA to €STR discounting. In the US, the cleared market has switched discount rates from Fed Funds to Secured Overnight Funding
Rate ('SOFR') in October 2020. The switch in discount rates is expected to lead to increased liquidity in the new risk free rates.
The majority of the fair value and cash flow hedges are directly exposed to changes in benchmark rates (predominantly EURIBOR
and USD LIBOR). There are no plans for the discontinuation of EURIBOR and appropriate fallback language has been implemented
via the International Swaps and Derivatives ('ISDA') fallback protocol and rulebook changes by the clearing houses. The relevant
USD LIBOR benchmark rates are expected to remain available for existing contracts until mid 2023 and these derivatives will either
be actively transitioned to SOFR before the 2023 deadline or via the ISDA fallback protocol. The total notional of financial instruments
designated as fair value or cash flow hedges with aUSD LIBOR reference that have amaturity date beyond June 30, 2023 amount
to EUR3,439million (2020: EUR1,283million).
Aegon applies the reliefs offered in IAS 39 to ensure that this uncertainty does not result in the early termination of hedge accounting,
whilst also assuming for measurement purposes that, owing to the general principle of equivalence, transitions to alternative rates will
not result in significant contract modifications.
Net foreign investment hedges
Aegon funds its investments in insurance subsidiaries with amixture of debt and equity. Aegon aims to denominate debt funding
in the same currency as the functional currency of the investment. Investments outside the Eurozone, the United States and the United
Kingdom are funded in euros. When the debt funding of investments is not in the functional currency of the investment, Aegon uses
derivatives to swap the currency exposure of the debt instrument to the appropriate functional currency. This policy will ensure that
total capital will reflect currency movements without distorting debt to shareholders’ equity ratios. Aegon utilizes various financial
instruments as designated hedging instruments of its foreign investments. These instruments include long-term and short-term
borrowings, short-term debts to credit institutions, cross currency swap contracts and forward foreign exchange contracts.
25 Investments in joint ventures and associates
Joint ventures Associates
2021
2020
20212020
At January 1
1,376 1,983 1,264 363
Additions
61 254 12 59
Disposals
- (105) - (5)
Share in net result
265 184 112 111
Share in changes in equity (note 30.6)
25 12 (6) 7
Impairment reversals / (charges)
- (4) 3 (20)
Dividends
(88)
(94)
(39)
(44)
Net exchange difference
45 (7) 2 (28)
Transfer to / (from) other headings
58 (836) (58) 818
Other
- (11) - 1
At December 31
1,743 1,376 1,289 1,264
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Notes to the consolidated financial statements
Note 25
In 2021, Aegon amended its agreement related to the investment in MAG Seguros and injected EUR40million in the undertaking.
Following the amendment the investment required reclassification from Investments in associates to Investments in joint ventures
as the level of influence was affected. The transfer to / (from) other headings in 2021 reflect the carrying amount of the investment
of EUR58million prior to the capital injection of EUR40million.
With the exception of alimited number of immaterial venture capital entities, all joint ventures and associates are unlisted and
are accounted for using the equity method and are considered to be non-current. The investments in joint ventures and associates
include interest in insurance companies that are required to maintain aminimum solvency margin based on local directives. Such
restrictions can affect the ability of these joint ventures and associates to transfer funds in the form of cash dividends, or repayment
of loans or advances, and therefore, there can be no assurance that these restrictions will not become alimitation in the future.
Refer to note 45 Commitments and contingencies for any commitments and contingencies related to investments in joint ventures.
There are no unrecognized shares of losses in joint ventures and associates. The financial statements of the principal joint ventures
and associates have the same reporting date as the Group. Refer to note 49 Group companies for alisting of the investments in joint
ventures and associates and the Group’s percentage holding.
Summarized financial information of joint ventures
The summarized financial information presented in the following table presents the joint ventures on a100% basis. Aegon considers
its investments in Santander Vida Seguros y Reaseguros S.A. ('Santander Spain Life') and Aegon Industrial Fund Management Co.Ltd.
('AIFMC') asmaterial joint ventures and are therefore presented separately.
Santander Spain Life AIFMC Other Joint ventures
2021
2020
20212020
20212020
Summarized statement of financial
position
Cash and cash equivalents
20 14 351 227 157 198
Other current assets
130 35 810 423 697 588
Total current assets
150 50 1,161 650 854 785
Non-current assets
1,134 700 204 127 5,574 6,442
Total assets
1,284 750 1,364 777 6,428 7,227
Current financial liabilities excluding trade
payables and other provisions
- - - - 7 -
Other current liabilities
126 79 613 360 501 445
Total current liabilities
126 79 613 360 509 445
Non-current financial liabilities excluding
trade payables and other provisions
- - - - 183 50
Other non-current liabilities
510 272 - - 3,921 4,996
Total non-current financial liabilities
510 272 - - 4,104 5,046
Total liabilities
636 351 613 360 4,613 5,490
Net assets
648 399 752 417 1,816 1,737
Summarized statement of
comprehensive income
Revenue
247 357 858 584 1,866 2,058
Results from financial transactions
- (4) - - 51 20
Depreciation and amortization
(25) (18) (3) (4) (21) (8)
Interest income
2 3 8 5 25 8
Interest expense
- - - - (13) -
Profit or loss
61 57 386 252 247 157
Income tax (expense) or result
(12) (14) (109) (71) (40) 36
Post-tax profit or (loss)
48 43 277 181 208 194
Other comprehensive income
(2) 2 - - 53 10
Total comprehensive income
47 45 277 181 260 203
Dividends received
- 19 - 33 18 43
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 25
For 2021,Aegon Industrial Fund Management Co.Ltd. ('AIFMC')is classified as amaterial joint venture as aresult of the growth
of the joint venture.
An overview of the summarized financial information of the carrying amount of the joint ventures is as follows:
Santander Spain Life AIFMC Other Joint ventures
2021
2020
20212020
20212020
Net assets of joint venture as presented
above
648 399 752 417 1,816 1,737
Net assets of joint venture excluding
goodwill
568 66 751 416 1,681 1,343
Group share of net assets of joint venture,
excluding goodwill
290 34 368 204 857 562
Goodwill on acquisition
80 333 1 1 148 244
Carrying amount
369 366 369 205 1,005 806
Aegon’s group share of net assets of joint ventures, as presented in the table above, is less than Aegon’s share of the net assets
as presented in the summarized financial information on a100% basis, due to the inclusion of third parties in the joint ventures.
The following table includes the summarized financial information of the joint ventures based on the Group’s relative holding.
Santander Spain Life AIFMC Other Joint ventures
2021
2020
20212020
20212020
Post-tax profit or loss
25 22 136 89 104 81
Other comprehensive income
(1) 1 - - 26 (10)
Total comprehensive income
24 23 136 89 131 71
Summarized financial information of associates
The summarized financial information presented in the following table presents the material associates on a100% basis. Aegon
considers its investment in Amvest Residential Core Fund as amaterial associate and is therefore presented below.
Amvest Residential Core Fund Other Associates
2021
2020
20212020
Summarized statement of financial position
Current assets
49 34 132 167
Non-current assets
4,380 3,876 426 787
Total assets
4,429 3,910 558 955
Current liabilities
50 55 61 155
Non-current liabilities
921 671 82 255
Total liabilities
971 726 144 410
Net assets
3,458 3,184 414 545
Summarized statement of comprehensive income
Revenue
109 104 595 965
Interest expense
- - - (35)
Profit or loss
433 281 (76) 39
Income tax (expense) or result
- - - (30)
Post-tax profit or (loss)
433 281 (76) 8
Other comprehensive income
-
-
(13)
109
Total comprehensive income
433 281 (89) 117
Dividends received
27 32 35 45
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Notes to the consolidated financial statements
Note 25
The summarized financial information of associates presented below is based on the Group’s relative holding.
Amvest Residential Core Fund Other Associates
2021
2020
20212020
Post-tax profit or loss
126 80 (14) 23
Other comprehensive income
-
-
(6)
7
Total comprehensive income
126 80 (20) 31
Carrying amount
1,020 919 269 345
26 Reinsurance assets
Assets arising from reinsurance contracts related to:
2021
2020
Life insurance general account
19,409 17,421
Non-life insurance
1,245 1,144
Investment contracts
338
345
At December 31
20,992 18,910
Current
16 16
Non-current
20,976 18,895
Amounts due from reinsurers in respect of claims already paid by the Group are included in note 28 Other assets and receivables.
Movements during the year in reinsurance assets relating to life insurance:
Life insurance general account
At January 1, 2021
17,421
Gross premium and deposits – existing and new business
1,825
Unwind of discount / interest credited
828
Insurance liabilities released
(1,890)
Fund charges released
(83)
Changes to valuation of expected future benefits
(38)
Net exchange differences
1,342
Transfer to/from insurance contracts
2
Other movements
1
At December 31, 2021
19,409
At January 1, 2020
18,464
Gross premium and deposits – existing and new business
2,080
Unwind of discount / interest credited
839
Insurance liabilities released
(2,529)
Fund charges released
(103)
Changes to valuation of expected future benefits
195
Net exchange differences
(1,536)
Transfer to/from insurance contracts
8
Other movements
4
At December 31, 2020
17,421
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Non-financial informationNotes to the consolidated financial statements
Note 26
Movements during the year in reinsurance assets relating to non-life insurance:
2021
2020
At January 1
1,144
1,376
Gross premium and deposits – existing and new business
129 97
Unwind of discount / interest credited
83
87
Insurance liabilities released
(113) (191)
Changes in unearned premiums
(75)
(38)
Incurred related to current year
91 20
Incurred related to prior years
49
32
Release for claims settled current year
(29) (24)
Release for claims settled prior years
(108) (130)
Change in IBNR
1 4
Net exchange differences
84 (103)
Other movements
(11) 13
At December 31
1,245 1,144
Assets arising from reinsurance contracts related to:
2021
2020
Normal course of business
7,809
6,485
Exit of abusiness
13,183 12,426
At December 31
20,992 18,910
27 Deferred expenses
2021
2020
DPAC for insurance contracts and investment contracts with discretionary participation features
9,303 8,253
Deferred cost of reinsurance
766 141
Deferred transaction costs for investment management services
434 404
At December 31
10,503 8,799
Current
683 679
Non-current
9,820 8,120
2021
2020
DPAC
Deferred costs
of reinsurance
Deferred
transaction costs
DPAC
Deferred costs
of reinsurance
Deferred
transaction costs
At January 1
8,253 141 404 9,974 389 442
Costs deferred during the year
636 619 25 725 (4) 20
Amortization through income statement
(899) (32) (26) (753) (24) (23)
Shadow accounting adjustments
699 17 - (950) (17) -
Impairments
- - - - - -
Net exchange differences
621 21 30 (739) (1) (36)
Disposal of Group Assets
- - - - - -
Other
(7) - - (4) (202) -
At December 31
9,303 766 434 8,253 141 404
The increase in deferred cost on reinsurance in 2021 is mainly the result of an EUR 480 million reinsurance agreement between
Transamerica and a third party to reinsure a portfolio of universal life secondary guarantee policies. Furthermore, in the Netherlands
a reinsurance agreement protecting against longevity risk was closed with Reinsurance Group of America (RGA) leading to a deferred
cost of reinsurance of EUR 115 million.
In 2020, amodel change and updated parameters regarding education and mortality experience factors in Aegon the Netherlands led
to adecrease in the deferred cost of reinsurance of EUR214million, which is included in the line Other.
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Notes to the consolidated financial statements
Note 27
28 Other assets and receivables
Note
2021
2020
Real estate held for own use and equipment
28.1
455 472
Receivables
28.2
5,622 6,826
Accrued income
28.3
1,366 1,356
Right-of-use assets
28.4
199 211
At December 31
7,642 8,865
28.1 Real estate held for own use and equipment
Total real estate held for own use and equipment
2021
2020
General account real estate held for own use
185 209
Equipment
270 263
At December 31
455 472
General account real estate held for own use
2021
2020
Net book value
At January 1
209 208
Additions
- 9
Capitalized subsequent expenditure
7 (2)
Disposals
- (5)
Transfer to investments in real estate
(14) -
Unrealized gains/(losses) through equity
(4) 20
Realized gains/(losses) through income statement
- (5)
Depreciation through income statement
(5) (5)
Impairment losses
(13) (4)
Impairment losses reversed
- 1
Net exchange differences
5 (8)
At December 31
185 209
Gross carrying value
218 269
Accumulated depreciation and impairment losses
(33) (60)
Net book value
185 209
General account real estate held for own use:
Carrying amount under ahistorical cost model
165 201
% of real estate appraised in the current year
50% 93%
% of appraisals performed by independent external appraisers
100% 99%
General account real estate held for own use are mainly held by Aegon Americas and Aegon the Netherlands, with relatively smaller
holdings at Aegon Hungary and Aegon Spain.
General account real estate held for own use has not been pledged as security for liabilities, nor are there any restrictions on title.
Depreciation expenses are recorded in Commissions and expenses in the income statement. The useful lives of buildings range between
40 and 50 years.
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Non-financial informationNotes to the consolidated financial statements
Note 28
Equipment
2021
2020
Net book value
At January 1
263 281
Additions
69
73
Disposals
(2) (1)
Depreciation through income statement
(71)
(71)
Impairment losses
(4) -
Net exchange differences
16
(19)
Other
(1) -
At December 31
270 263
Gross carrying value
679 628
Accumulated depreciation and impairment losses
(409) (365)
Net book value
270 263
None of the equipment is held for lease (2020: none). Equipment has not been pledged as security for liabilities, nor are there any
restrictions on title. Depreciation expenses have been recorded in Commissions and expenses in the income statement. Equipment
is generally depreciated over aperiod of three to five years.
28.2 Receivables
2021
2020
Loans to associates
8 9
Receivables from policyholders
691 637
Receivables from brokers and agents
310 264
Receivables from reinsurers
750 733
Cash outstanding from assets sold
160 112
Trade receivables
1,393 1,956
Cash collateral
314 997
Income tax receivable
229 285
Other
1,885 1,921
Provision for doubtful debts
(120) (88)
At December 31
5,622 6,826
Current
5,600 6,801
Non-current
21 25
With the exception of receivables from reinsurers, the receivables balances presented above are mostly not externally rated.
The movements in the provision for doubtful debts during the year were as follows:
2021
2020
At January 1
(88) (34)
Additions charged to earnings
(33) (71)
Unused amounts reversed through the income statement
5 2
Used during the year
3
8
Net exchange differences
(6) 6
At December 31
(120) (88)
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Note 28
28.3 Accrued income
2021
2020
Accrued interest
1,363 1,352
Other
3 4
At December 31
1,366 1,356
Current
1,366 1,356
Non-current
- -
28.4 Right-of-use assets
Real estate for
own use Equipment Other
Total
Net book value
At January 1, 2021
193 15 3 211
Additions
12 9 2 23
Disposals
(14) (0) - (14)
Modification of lease contracts
17 - - 17
Depreciation through income statement
(36) (11) (2) (49)
Net exchange differences
10 1 (1) 10
At December 31, 2021
182 14 3 199
Gross carrying value
287 43 8 339
Accumulated depreciation and impairment losses
(105) (29) (6) (140)
Net book value 2021
182 14 3 199
Net book value
At January 1, 2020
227 25 3 255
Additions
17 3 2 23
Disposals
(2) - - (2)
Modification of lease contracts
1 - - 1
Depreciation through income statement
(38) (12) (2) (52)
Net exchange differences
(12) (2) -
(13)
At December 31, 2020
193 15 3 211
Gross carrying value
262 37 7 306
Accumulated depreciation and impairment losses
(69) (22) (4) (95)
Net book value 2020
193 15 3 211
Right-of-use assets are mainly held by Aegon UK and Aegon Americas and they are mainly office buildings held for own use.
For information on the Lease liabilities and respective maturity analysis, please refer to note 41 Other liabilities and note 4 Financial
risks, respectively.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 28
29 Intangible assets
Goodwill VOBA
Future
servicing
rights Software Other
Total
Net book value
At January 1, 2021
375 815 71 79 45 1,386
Additions
- - - 25 3 29
Amortization through income statement
- (163) (8) (20) (4) (194)
Impairment losses
- - - (7) (1) (8)
Shadow accounting adjustments
- 41 - - - 41
Capital expenditure
- - - 14 - 14
Business combinations, disposals and other
changes
- - - (7) 1 (6)
Net exchange differences
16 57 1 (1) (1) 72
At December 31, 2021
391 750 65 83 44 1,333
Gross carrying value
561 6,923 350 408 185 8,427
Accumulated amortization, depreciation and
impairment losses
(169) (6,174) (285) (325) (141) (7,094)
Net book value 2021
391 750 65 83 44 1,333
Net book value
At January 1, 2020
392 952 84 69 61 1,559
Additions
- - - 33 11 44
Amortization through income statement
- (79) (7) (18) (7) (112)
Impairment losses
- - - (6) (17) (23)
Shadow accounting adjustments
- 15 - - - 15
Capital expenditure
- - - 11 - 11
Business combinations, disposals and other
changes
8 - - (10) - (2)
Net exchange differences
(25) (73) (5) - (2) (105)
At December 31, 2020
375 815 71 79 45 1,386
Gross carrying value
537 6,447 339 379 174 7,875
Accumulated amortization, depreciation and
impairment losses
(161) (5,632) (268) (300) (129) (6,489)
Net book value 2020
375 815 71 79 45 1,386
Amortization and depreciation through income statement is included in Commissions and expenses. None of the intangible assets have
titles that are restricted or have been pledged as security for liabilities.
With the exception of goodwill, all intangible assets have afinite useful life and are amortized accordingly. VOBA and future servicing
rights are amortized over the term of the related insurance contracts, which can vary significantly depending on the maturity
of the acquired portfolio.The amortization is based on either the expected future premiums, revenues or the expected gross profit
margins, which for the most significant blocks of business ranges between 50 and 80 years. Future servicing rights are amortized over
aperiod of 10 to 30 years of which 13 years remain at December 31, 2021 (2020: 13 years). Software is generally depreciated over
an average period of 3 to 5 years (no changes compared to 2020).
Goodwill
The goodwill balance has been allocated across the cash-generating units which are expected to benefit from the synergies inherent
in the goodwill. Goodwill is tested for impairment both annually and when there are specific indicators of apotential impairment.
The recoverable amount is the higher of the value in use and fair value less costs of disposal for acash-generating unit. The operating
assumptions used in all the calculations are best estimate assumptions and based on historical data where available.
The economic assumptions used in all the calculations are based on observable market data and projections of future trends. All
the cash-generating units tested showed that the recoverable amount was higher than their carrying values, including goodwill.
A reasonably possible change in any key assumption is not expected to cause the carrying value of the cash-generating units to exceed
its recoverable amount.
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Financial information
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Notes to the consolidated financial statements
Note 29
A geographical summary of the cash-generating units to which the goodwill is allocated is as follows:
Goodwill
2021
2020
Americas
181
168
The Netherlands
97 97
United Kingdom
57 54
International
23 26
Asset Management
33 31
At December 31
391 375
Within the Americas, Transamerica's goodwill is allocated to groups of cash-generating units including variable annuities, fixed
annuities and the retirement plans cash-generating unit. Transamerica uses the value in use concept to determine the recoverable
amount and it is calculated annually in the fourth quarter. Transamerica reviewed the recoverable amount of the annuities and
retirement plan cash-generating units under the Economic Available Capital (EAC) approach. This approach measures the difference
between the market value of assets assigned to ablock of business and the market value of liabilities. The EAC is reflective
of market conditions where apre-tax benchmark discount rate ranged from approximately 0.10% to 2.14% from the one month
to 30-year tenors. Based on the value in use tests, Transamerica's goodwill for the group of annuities cash-generating units (2021:
EUR125million: 2020: EUR116million) and the retirement plans cash-generating unit (2021: EUR56million: 2020: EUR52million)
remain unchanged from prior year except for the impact of currency translation adjustments.
For Aegon the Netherlands, goodwill was allocated to Robidus - acash generating unit whose value in use exceeds its carrying value.
The value in use calculations were based on business plans covering aperiod of five years, pre-tax and post-tax discount rate of 7.2%,
and terminal growth rate at 1%. The goodwill arises mainly from new customers, future software platform developments, synergies,
and assembled workforce.
30 Shareholders’ equity
Issued share capital and reserves attributable to shareholders of AegonN.V.
Note
2021
2020 2019
Share capital – par value
30.1
321 320 323
Share premium
30.2
7,033 7,160 7,213
Total share capital
7,354 7,480 7,536
Retained earnings
12,635 11,124 11,262
Treasury shares
30.3
(273) (181) (281)
Total retained earnings
12,362 10,943 10,981
Revaluation reserves
30.4
6,442 7,480 5,873
Remeasurement of defined benefit plans
30.5
(2,199) (2,534) (2,397)
Other reserves
30.6
325 (553) 456
Total shareholders' equity
24,282 22,815 22,449
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 30
Share capital transactions relating to common shares
2021
2020 2019
Number of shares
(thousands)
Number of shares
(thousands)
Number of shares
(thousands)
Transactions in 2021:
Final dividend 2020
1)
(15,274)
Share buyback program (final dividend 2020)
19,452
Interim dividend 2021
1)
(17,314)
Share buyback program (interim dividend 2021)
21,532
Transactions in 2020:
Interim dividend 2020
1)
(22,947)
Share buyback program (interim dividend 2020)
24,029
Transactions in 2019:
Final dividend 2018
1)
(32,874)
Share buyback program (final dividend 2018)
32,874
Interim dividend 2019
1)
(35,370)
Share buyback program (interim dividend 2019)
43,150
1
In 2022, Aegon executed a program to repurchase 10,158,360 common shares for an amount of EUR 50 million to meet its obligations
resulting from the 2021 and 2022 share-based compensation plans for senior management. Between January 7, 2022 and January 24,
2022, these common shares were repurchased at an average price of EUR 4.9227 per share. These shares are held as treasury shares
and are used to cover future stock dividends. Aegon engaged a third party to execute the transactions on its behalf. The common
shares were repurchased at a maximum of the average of the daily volume-weighted average prices during the repurchase period.
30.1 Share capital – par value
2021
2020 2019
Common shares
253 252 253
Common shares B
68 69 70
At December 31
321 320 323
Common shares
2021
2020 2019
Authorized share capital
720 720 720
Number of authorized shares (inmillion)
6,000 6,000 6,000
Par value in cents per share
12 12 12
Common shares B
2021
2020 2019
Authorized share capital
360 360 360
Number of authorized shares (inmillion)
3,000 3,000 3,000
Par value in cents per share
12 12 12
Common shares Common shares B
Number of shares
(thousands)
Total amount
Number of shares
(thousands)
Total amount
At January 1, 2019
2,095,648 251 585,022 70
Dividend
- - - -
At December 31, 2019
2,105,139 253 585,022 70
Shares withdrawn
(9,491) (1) (13,227) (2)
Dividend
2,466 - - -
At December 31, 2020
2,098,114 252 571,795 69
Shares withdrawn
(2,466) (0) (2,956) (0)
Dividend
10,665 1 - -
At December 31, 2021
2,106,313 253 568,839 68
Aegon Integrated Annual Report
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Financial information
Non-financial information215
Notes to the consolidated financial statements
Note 30
The common shares and common shares B withdrawn in 2021 are the result of the cancellation of 2,466 and 2,956 shares,
respectively, following the repurchase by the Company in connection with the share buyback program. This share buy back program was
executed following the 2020 interim dividend distribution in order to reduce the number of own shares, which are not used to cover
obligations arising from share-based incentive plans or other obligations.
The table below represents weighted average number of common shares including treasury shares attributable to AegonN.V.:
Weighted average number of
common shares (thousands)
Weighted average number of
common shares B (thousands)
2019
2,098,326 585,022
2020
2,101,749 579,312
2021
2,101,231 570,629
All issued common shares and common shares B each have anominal value of EUR0.12 and are fully paid up. Repayment of capital
can only be initiated by the Executive Board, is subject to approval of the Supervisory Board and must be resolved by the General
Meeting of Shareholders. Moreover, repayment on common shares B needs approval of the related shareholders. Refer to 'Other
information' for further information on dividend rights.
Vereniging Aegon, based in The Hague, the Netherlands, holds all of the issued and outstanding common shares B.
Under the terms of the 1983 Amended Merger Agreement, dated May 2013, Vereniging Aegon has acall option relating to common
shares B. Vereniging Aegon may exercise its call optionat fair value of acommon share B (being 1/40
th
of the market value
of acommon share in the capital of the Company at the time of issuance) to keep or restore its total stake at 32.6%, irrespective
of the circumstances which cause the total shareholding to be or become lower than 32.6%. Refer to Note 50 Related party
transactions for transactions between AegonN.V. and Vereniging Aegon.
30.2 Share premium
2021
2020 2019
At January 1
7,160 7,213 7,487
Share dividend
(127) (54) (273)
At December 31
7,033 7,160 7,213
Share premium relating to:
- Common shares
5,380 5,507 5,560
- Common shares B
1,653 1,653 1,653
Total share premium
7,033 7,160 7,213
The share premium account reflects the balance of paid-in amounts above par value at issuance of new shares less the amounts
charged for share dividends.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 30
30.3 Treasury shares
On the reporting date, AegonN.V. and its subsidiaries held 71,780,196(2020: 53,747,701) of its own common shares and 30,588,800
(2020: 12,884,400) own common shares B with apar value of EUR0.12 each.
Movements in the number of treasury common shares held by AegonN.V. were as follows:
2021
2020 2019
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
At January 1
52,686 171 65,540 269 61,418 326
Transactions in 2021:
Sale: transactions, average price 3.90
(4,139) (16)
Shares withdrawn: 1 transaction average price
3.89
(2,466) (10)
Sale: 1 transaction, average price 3.89
(15,274) (59)
Purchase: 1 transaction average price 3.70
35,933 133
Sale: 1 transaction, average price 3.02
(17,314) (52)
Purchase: 1 transaction average price 4.46
21,532 96
Transactions in 2020:
Sale: transactions, average price 4.52
(4,445) (20)
Shares withdrawn: 1 transaction average price
4.52
(9,491) (43)
Sale: 1 transaction, average price 4.13
(22,947) (95)
Purchase: 1 transaction average price 2.46
24,029 59
Transactions in 2019:
Sale: transactions, average price 5.10
(3,657) (19)
Sale: 1 transaction, average price 5.25
(32,874) (173)
Purchase: 1 transaction average price 4.52
32,874 149
Sale: 1 transaction, average price 5.16
(35,370) (183)
Purchase: 1 transaction average price 3.89
43,150 168
At December 31
70,958 262 52,686 171 65,540 269
Movements in the number of treasury common shares B held by AegonN.V. were as follows:
2021
2020 2019
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
At January 1
12,884 1 25,310 3 13,856 2
Transactions in 2021:
Sale: 1 transaction, average price 0.10
(1,983) -
Shares withdrawn: 1 transaction average price
0.10
(2,956) -
Purchase: 1 transaction average price 0.10
22,643 2
Transactions in 2020:
Sale: 1 transaction, average price 0.13
(2,154) -
Shares withdrawn: 1 transaction average price
0.13
(13,227) (2)
Purchase: 1 transaction average price 0.08
2,956 -
Transactions in 2019:
Sale: 1 transaction, average price 0.12
(1,774) -
Purchase: 1 transaction average price 0.10
13,227 1
At December 31
30,589 3 12,884 1 25,310 3
Aegon Integrated Annual Report
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Financial information
Non-financial information217
Notes to the consolidated financial statements
Note 30
As part of their insurance and investment operations, subsidiaries within the Group also hold AegonN.V. common shares, both
for their own account and for account of policyholders. These shares have been treated as treasury shares and are (de)recognized
at the consideration paid or received.
2021
2020 2019
Number of shares
(thousands)
Total
amount
Number of shares
(thousands) Total amount
Number of shares
(thousands) Total amount
Common shares
Held by AegonN.V.
70,958 262 52,686 171 65,540 269
Held by subsidiaries
822 8 1,062 9 1,043 9
Common shares B
Held by AegonN.V.
30,589 3 12,884 1 25,310 3
At December 31
102,369 273 66,632 181 91,893 281
Weighted average number of
treasury shares, including
treasury shares held by
subsidiaries (thousands)
Weighted average number
of treasury shares B
(thousands)
2019
56,467 13,070
2020
58,224 18,386
2021
57,989 11,621
30.4 Revaluation reserves
Available-for-sale
investments
Real estate held for
own use
Cash flow hedging
reserve
Total
At January 1, 2021
6,248 35 1,197 7,480
Gross revaluation
(3,930) (4) (122) (4,057)
Shadow accounting adjustment
2,759 - - 2,759
Net (gains) / losses transferred to income statement
(450) - (106) (556)
Foreign currency translation differences
362 1 84 447
Tax effect
322 1 47 370
Other
(1) - - (1)
At December 31, 2021
5,309 32 1,100 6,442
At January 1, 2020
4,352 19 1,502 5,873
Gross revaluation
5,728 20 (141) 5,607
Shadow accounting adjustment
(2,738) - - (2,738)
Net (gains) / losses transferred to income statement
13 - (106) (94)
Foreign currency translation differences
(443) (2) (111)
(556)
Tax effect
(664) (2) 54 (612)
At December 31, 2020
6,248 35 1,197 7,480
At January 1, 2019
1,910 46 1,479
3,435
Gross revaluation
6,619 (4) 89 6,705
Shadow accounting adjustment
(3,142) - - (3,142)
Net (gains) / losses transferred to income statement
(412) - (97) (509)
Net (gains) / losses transferred to retained earnings
- (32) - (32)
Foreign currency translation differences
8 1 27 37
Tax effect
(632) 8 3 (621)
At December 31, 2019
4,352 19 1,502 5,873
The revaluation accounts for both available-for-sale investments and for real estate held for own use include unrealized gains and
losses on these investments, net of tax. Upon sale, the amounts realized are recognized in the income statement (for available-for-sale
investments)or transferred to retained earnings (forreal estate held for own use). Upon impairment, unrealized losses are recognized
in the income statement.
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 30
The closing balances of the revaluation reserve for available-for-sale investments relate to the following instruments:
2021
2020 2019
Shares
49
46 25
Debt securities
5,276 6,218 4,353
Other
(15) (17) (26)
Revaluation reserve for available-for-sale investments
5,309 6,248 4,352
The cash flow hedging reserve includes (un)realized gains and losses on the effective portions of hedging instruments, net of tax.
The amounts are recognized in the income statement at the moment of realization of the hedged position to offset the gain or loss
from the hedged cash flow. No amounts have been released from equity to be included in the initial measurement of non-financial
assets or liabilities.
30.5 Remeasurement of defined benefit plans
2021
2020 2019
At January 1
(2,534)
(2,397) (1,850)
Remeasurements of defined benefit plans
501 (360) (612)
Tax effect
(102) 140 90
Net exchange differences
(65) 83 (25)
Total remeasurement of defined benefit plans
(2,199) (2,534) (2,397)
30.6 Other reserves
Foreign currency
translation
reserve
Net foreign
investment
hedging reserve
Equity movements of
joint ventures and
associates
Total
At January 1, 2021
(403) (199) 48 (554)
Movement in foreign currency translation and net foreign
investment hedging reserves
1,013 (165) - 848
Disposal of abusiness
10 (2) - 8
Tax effect
(24) 27 - 3
Equity movements of joint ventures
- - 25 25
Equity movements of associates
- - (6) (6)
At December 31, 2021
596 (338) 67 325
At January 1, 2020
799 (374) 31 456
Movement in foreign currency translation and net foreign
investment hedging reserves
(1,209) 195 - (1,015)
Disposal of abusiness
(5) - (2) (7)
Tax effect
12 (19) -
(7)
Equity movements of joint ventures
- - 12 12
Equity movements of associates
- - 7 7
At December 31, 2020
(402) (199) 48 (553)
At January 1, 2019
499 (370) 19 149
Movement in foreign currency translation and net foreign
investment hedging reserves
311 (10) -
301
Disposal of abusiness
(1) - - (1)
Tax effect
(10) 5 - (5)
Equity movements of joint ventures
- - 8 8
Equity movements of associates
- - 4 4
At December 31, 2019
799 (374) 31 456
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Notes to the consolidated financial statements
Note 30
The foreign currency translation reserve includes the currency results from investments in non-euro denominated subsidiaries.
The amounts are released to the income statement upon the sale of the subsidiary.
The net foreign investment hedging reserve is made up of gains and losses on the effective portions of hedging instruments, net of tax.
The amounts are recognized in the income statement at the moment of realization of the hedged position to offset the gain or loss
from the net foreign investment.
The equity movements of joint ventures and associates reflect Aegon's share of changes recognized directly in the joint venture's and
associat
e’
s equity. 31 Other equity instruments
Perpetual
contingent
convertible
securities
Junior
perpetual
capital
securities
Perpetual
cumulative
subordinated
bonds
Long Term
Incentive
Plans
1)
Total
At January 1, 2021
500 1,564 454 50 2,569
Shares granted
- - - 27 27
Shares vested
- - - (21) (21)
Securities redeemed
- (212) - - (212)
At December 31, 2021
500 1,352 454 57 2,363
At January 1, 2020
500 1,564 454 53 2,571
Shares granted
- - - 22 22
Shares vested
- - - (25) (25)
At December 31, 2020
500 1,564 454 50 2,569
At January 1, 2019
- 2,808 454 58 3,320
Shares granted
- - - 21 21
Shares vested
- - - (26) (26)
Securities issued
500 - - - 500
Securities redeemed
- (1,244) - - (1,244)
At December 31, 2019
500 1,564 454 53 2,571
1
Perpetual contingent
convertible securities
Coupon rate Coupon date
Year of next
call
2021
2020 2019
EUR 500million
5.625%
1)
Semi-annually,
April 15 2029 500 500 500
At December 31
500 500 500
1
The securities have been issued at par and have subordination provisions, rank junior to all other liabilities and senior to shareholders'
equity only. The conditions of the securities contain certain provisions for optional and required coupon payment cancelation. Although
the securities have no stated maturity, Aegon has the right to call the securities for redemption at par for the first time between
April15, 2029 and October 15, 2029 and every reset date (October 15, with five year intervals) thereafter. Upon breach of certain
regulatory capital requirement levels, the securities convert into common shares.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 31
Junior perpetual capital
securities
Coupon rate Coupon date
Year of
next call
2021
2020 2019
USD 250million
floating LIBOR rate
1)
Quarterly, December 15
Called in
2021 - 212 212
USD 500million
floating CMS rate
2)
Quarterly, July 15 2022 402 402 402
EUR 950million
floating DSL rate
3)
Quarterly, July 15 2022 950 950 950
At December 31
1,352 1,564 1,564
1
aspread of 87.5 basis points, with aminimum of 4%.
2
yield plus aspread of ten basis points, with amaximum of 8.5%.
3
plus aspread of ten basis points, with amaximum of 8%.
The interest rate exposure on some of these securities has been swapped to athree-month LIBOR and/or EURIBOR based yield.
With effect on September 15, 2021, Aegon has exercised its right to redeem USD 250million floating rate perpetual capital securities
with aminimum coupon of 4% issued in 2005. The securities had no stated maturity, however Aegon had the right to call the securities
for redemption and exercised this right with effect on September 15, 2021.
The securities have been issued at par. The securities have subordination provisions, rank junior to all other liabilities and senior
to shareholders' equity only. The conditions of the securities contain certain provisions for optional and required coupon payment
deferral and, in situations under Aegon's control, mandatory coupon payment events. Although the securities have no stated maturity,
Aegon has the right to call the securities for redemption at par for the first time on the coupon date in the years as specified, or on any
coupon payment date thereafter.
Perpetual cumulative
subordinated bonds
Coupon rate Coupon date
Year of next
call
2021
2020 2019
EUR 114million
1.506%
1),4)
Annually, June 8 2025 114 114 114
EUR 136million
1.425%
2),4)
Annually, October 14 2028 136 136 136
EUR 203million
0.496%
3),4)
Annually, March 4 2031 203 203 203
At December 31
454 454 454
1
and 1.506% until June 8, 2025.
2
October 14, 2018 and 1.425% until October 14, 2028.
3
2021 and 0.496% until March 4, 2031.
4
of ten-year Dutch government securities plus aspread of 85 basis points.
These bonds have the same subordination provisions as dated subordinated debt. In addition, the conditions of the bonds contain
provisions for interest deferral.
Although the bonds have no stated maturity, Aegon has the right to call the bonds for redemption at par for the first time
on the coupon date in the year of next call.
32 Subordinated borrowings
Coupon rate Coupon date
Issue /
Maturity Year of next call
2021
2020
Fixed to floating subordinated notes
EUR 700million
4%
2)
Annually, April 25 2014/44 2024 698 697
USD 800million
5.5%
3)
Semi-annually, April 11 2018/48 2028 697 648
Fixed subordinated notes
USD 925million
1)
5.1% Quarterly, March 15 2019/49 2024 798 740
At December 31
2,194 2,085
Fair value of subordinated borrowings
2,438 2,351
1
2
3
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Notes to the consolidated financial statements
Note 32
These securities are subordinated and rank senior to the junior perpetual capital securities and the perpetual contingent convertible
securities, equally with the perpetual cumulative subordinated bonds and junior to all other liabilities. The conditions of the securities
contain certain provisions for optional and required deferral of interest payments. There have been no defaults or breaches
of conditions during the period.
33Trust pass-through securities
Coupon rate Coupon date
Issue /
Maturity
Year of
next call
2021
2020
USD 225million
1)
7.65% Semi-annually, December 1 1996/2026 n.a. 82 85
USD 190million
1)
7.625% Semi-annually, November 15 1997/2037 n.a. 43 40
At December 31
126 126
Fair value of trust pass-through securities
139 142
1
Trust pass-through securities are securities through which the holder participates in atrust. The assets of these trusts consist of junior
subordinated deferrable interest debentures issued by Transamerica Corporation. The trust pass-through securities carry provisions
with regard to deferral of distributions for extension periods up to amaximum of 10 consecutive semi-annual periods. The trust pass-
through securities are subordinated to all other unsubordinated borrowings and liabilities of Transamerica Corporation.
There were no defaults or breaches of conditions during the period.
34 Insurance contracts
34.1 Underwriting risk
Aegon’s earnings depend significantly upon the extent to which actual claims experience differs from the assumptions used in setting
the prices for products and establishing the technical liabilities and liabilities for claims.
To
the extent that actual claims experience is less favorable than the underlying assumptions used in establishing such liabilities, income would be reduced. Furthermore, if these
higher claims were part of apermanent trend, Aegon may be required to change best estimate assumptions for future claims which
could increase the required reserves for these future claims, which could reduce income. In addition, certain acquisition costs related
to the sale of new policies and the purchase of policies already in force have been recorded as assets on the statement of financial
position and are being amortized into the income statement over time. If the assumptions relating to the future profitability of these
policies (such as future claims, investment income and expenses) are not realized, the amortization of these costs could be accelerated
and may even require write offs should there be an expectation of unrecoverability. This could have amaterially adverse effect
on Aegon’s business, results of operations and financial condition.
Sources of underwriting risk include policyholder behavior (such as lapses, surrender of policies or partial withdrawals), policy claims
(such as mortality, longevity or morbidity) and expenses. For some product lines, Aegon is at risk if policy lapses increase as sometimes
Aegon is unable to fully recover upfront expenses in selling aproduct despite the presence of commission recoveries or surrender
charges and fees. There are also products where Aegon is at risk if lapses decrease, for example where this would result in ahigher
utilization rate of product guarantees. For mortality and morbidity risk, Aegon sells certain types of policies that are at risk if mortality
or morbidity increases, such as term life insurance and accident insurance, Aegon also sells certain types of policies that are at risk
if mortality decreases (longevity risk) such as annuity products. Aegon is also at risk if expenses are higher than the expenses assumed
beforehand by management and that were priced into the products.
Aegon monitors and manages its underwriting risk by underwriting risk type. Attribution analysis is performed on earnings and reserve
movements in order to understand the source of any material variation in actual results from what was expected. Aegon’s units
also perform experience studies for underwriting risk assumptions, comparing Aegon’s experience to industry experience as well
as combining Aegon’s experience and industry experience based on the depth of the history of each source to Aegon’s underwriting
assumptions. Where policy charges are flexible in products, Aegon uses these analyses as the basis for modifying these charges, with
aview to maintain abalance between policyholder and shareholder interests. Aegon also has the ability to reduce expense levels over
time, thus mitigating unfavorable expense variation.
Another way to mitigate underwriting risk is through reinsurance. Aegon uses reinsurance to primarily manage and diversify risk, limit
volatility, improve capital positions, limit maximum losses and gain access to reinsurer support. While the objectives and use can vary
by region due to local market considerations and product offerings, the use of reinsurance is coordinated and monitored globally.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 33
The key areas where reinsurance is used is to reduce our exposure to mortality and morbidity risk primarily through acombination
of quota-share and Excess of Loss reinsurance. Also, Excess of Loss reinsurance is used to limit our exposure to large losses on non-life
business. In addition, in recent years in the Netherlands, we have used longevity reinsurance to manage our longevity exposure in line
with our Risk Appetite, and Aegon the Netherlands entered into anew contract taking the level of longevity reinsurance to around
40%in December 2021.
In order to minimize its reinsurer defaults exposure, Aegon regularly monitors the creditworthiness of its reinsurers, and where
appropriate, arranges additional protection through letters of credit, trust agreements and over-collateralization. For certain
agreements, funds are withheld for investment rather than relying on the reinsurer to meet investment expectations. Default exposure
is further reduced by using multiple reinsurers within certain reinsurance agreements.
External reinsurance counterparties are, in general, major global reinsurers. At the same time, local reinsurers are utilized to ensure
abalance for local capacity and diversification.
Sensitivity analysis of net result and shareholders’ equity to various underwriting risks is shown in the table that follows. Aegon's best
estimate assumptions already include expected future developments and the sensitivities represent an increase or decrease of lapse
rates, mortality rates and morbidity rates, compared to Aegon's best estimate assumptions. These underwriting sensitivities were run
using apermanent shock applied to all of Aegon's products, exposed to an increase and to adecrease in the rates. The table below
indicates that the morbidity sensitivity has the largest impact and in aggregate, Aegon is exposed to adecrease in mortality rates.
Sensitivity analysis of net result and shareholders’ equity to changes in various underwriting risks
Estimated approximate effect
2021
2020
On shareholders'
equity On net result
On shareholders'
equity On net result
20% increase in lapse rates
108 109 (151) 156
20% decrease in lapse rates
(110) (115) 47 (157)
5% increase in mortality rates
340 295 52 344
5% decrease in mortality rates
(434) (378) (217) (354)
10% increase in morbidity rates
(292) (284) (225) (235)
10% decrease in morbidity rates
178 175 134 140
34.2 Insurance contracts for general account
2021
2020
Life insurance
110,691 109,062
Non-life insurance
- Unearned premiums and unexpired risks
6,548 6,117
- Outstanding claims
2,247 2,120
- Incurred but not reported claims
816
881
Incoming reinsurance
4,120 3,965
At December 31
124,422 122,146
2021
2020
Non-life insurance:
- Accident and health insurance
9,374 8,887
- General insurance
237 231
Total non-life insurance
9,611 9,118
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Notes to the consolidated financial statements
Note 34
Movements during the year in life insurance:
2021
2020
At January 1
109,062 109,310
Portfolio transfers and acquisitions
(26) (29)
Gross premium and deposits – existing and new business
6,033 6,758
Unwind of discount / interest credited
4,037 3,725
Insurance liabilities released
(9,490) (9,557)
Changes in valuation of expected future benefits
(1,635) 1,918
Loss recognized as aresult of liability adequacy testing
(236) 903
Shadow accounting adjustments
(1,821) 1,419
Net exchange differences
4,713 (5,842)
Transfer (to) / from reinsurance assets
36 (12)
Transfer (to) / from insurance contracts for account of policyholders
-
465
Other
17 3
At December 31
110,691 109,062
The LAT deficit per December 31, 2021 in Aegon the Netherlands amounted to EUR5.2billion (2020: EUR7.0billion), which was
partially offset by the shadow loss recognition of EUR3.0billion (2020: EUR4.5billion), resulting in anet deficit of EUR2.2billion
(2020: EUR2.5billion).
During 2021, the net LAT deficit of Aegon the Netherlands reduced by EUR 0.3billion, which is recorded in the income statement.
The net LAT deficit was positively impacted by the impact of higher interest rate of EUR0.7billion (2020: EUR1.5billion negative)
and positive credit spread movements (tightened mortgage spreads and liquidity premium) of EUR0.4billion (2020: EUR0.3billion
negative). This was partly offset by other unfavorable impacts (model and assumptions updates and portfolio changes) totaling
EUR0.9billion (2020: EUR1.0billion positive).
As aresult of the current deficit, changes in the
LAT
of Aegon the Netherlands, triggered by up or down movements in interest rates, are directly recognized in the income statement.However, net result is less sensitive to interest rate movements as the results from
interest rate hedging are also recognized in net result.
Furthermore, as aresult of the current negative LAT deficit position, results are volatile due to changes in credit spreads as these are
not hedged. Please find below the estimated sensitivities on shareholders’ equity and on net result, for up and down shocks for credit
spreads, mortgage spreads for the bond and mortgage portfolio and liquidity premium shocks for general account insurance liabilities.
Sensitivity analysis of net result and shareholders’ equity
Estimated approximate effects
on net result
Estimated approximate effects
on shareholders' equity
2021
Shift up 50 basis points - Bond credit spreads
(192) (2,418)
Shift down 50 basis points - Bond credit spreads
169 2,387
Shift up 50 basis points - Mortgage spreads
(444) (401)
Shift down 50 basis points - Mortgage spreads
452 496
Shift up 5 basis points - Liquidity premium
136 178
Shift down 5 basis points - Liquidity premium
(148) (104)
2020
Shift up 50 basis points - Bond credit spreads
(185) (1,998)
Shift down 50 basis points - Bond credit spreads
172 1,873
Shift up 50 basis points - Mortgage spreads
(449) (449)
Shift down 50 basis points - Mortgage spreads
476 477
Shift up 5 basis points - Liquidity premium
162 159
Shift down 5 basis points - Liquidity premium
(164) (161)
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 34
Movements during the year in non-life insurance:
2021
2020
At January 1
9,118
9,190
Disposals
(25) -
Portfolio transfers and acquisitions
1
6
Gross premiums – existing and new business
1,508 1,551
Unwind of discount / interest credited
479
499
Insurance liabilities released
(992) (1,080)
Changes in valuation of expected future claims
(36)
77
Change in unearned premiums
(731) (724)
Change in unexpired risks
- 2
Incurred related to current year
670 670
Incurred related to prior years
267 259
Release for claims settled current year
(269) (257)
Release for claims settled prior years
(757) (860)
Shadow accounting adjustments
(153) 385
Change in IBNR
(59) 117
Net exchange differences
592 (709)
Other
(1) (6)
At December 31
9,611 9,118
Movements during the year in incoming reinsurance:
2021
2020
At January 1
3,965 4,385
Gross premium and deposits – existing and new business
1,276 1,306
Unwind of discount / interest credited
192 203
Insurance liabilities released
(1,562) (1,656)
Changes in valuation of expected future benefits
(36) 66
Shadow accounting adjustments
(7) 8
Loss recognized as aresult of liability adequacy
(3) 10
Net exchange differences
296 (358)
Other
(1) 2
At December 31
4,120 3,965
34.3 Insurance contracts for account of policyholders
Insurance contracts for account of policyholders
2021
2020
At January 1
135,441 135,710
Portfolio transfers and acquisitions
(547) (64)
Gross premium and deposits – existing and new business
5,532 7,030
Unwind of discount / interest credited
14,994 13,858
Insurance liabilities released
(13,199)
(10,160)
Fund charges released
(1,680) (1,644)
Changes in valuation of expected future benefits
(145) (266)
Transfer (to) / from insurance contracts
783 (465)
Net exchange differences
8,144 (8,558)
Other
1 -
At December 31
149,323 135,441
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Notes to the consolidated financial statements
Note 34
35 Investment contracts
35.1 Investment contracts for general account
Without discretionary
participation features
With discretionary
participation features
Total
At January 1, 2021
20,889 185 21,075
Deposits
20,947 - 20,947
Withdrawals
(21,936) - (21,936)
Investment contracts liabilities released
- (3) (3)
Interest credited
256 - 256
Net exchange differences
660 12 672
Transfer (to)/from other headings
780 - 780
Other
(23) - (23)
At December 31, 2021
21,573 194 21,767
At January 1, 2020
18,382 211 18,594
Deposits
16,189 - 16,189
Withdrawals
(16,047) -
(16,047)
Investment contracts liabilities released
- (15) (15)
Interest credited
246 - 246
Net exchange differences
(698) (11) (709)
Transfer (to)/from other headings
2,828 - 2,828
Other
(12) - (12)
At December 31, 2020
20,889 185 21,075
Investment contracts consist of the following:
2021
2020
Institutional guaranteed products
187 295
Fixed annuities
9,543 7,786
Savings accounts
11,586 12,540
Investment contracts with discretionary participation features
194 185
Other
256 268
At December 31
21,767 21,075
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 35
35.2 Investment contracts for account of policyholders
Without discretionary
participation features
With discretionary
participation features
Total
At January 1, 2021
59,625 31,999 91,624
Gross premium and deposits – existing and new business
11,185 810 11,995
Withdrawals
(10,716) - (10,716)
Interest credited
7,572 3,130 10,702
Investment contracts liabilities released
- (3,815) (3,815)
Fund charges released
(209) - (209)
Net exchange differences
4,256 2,097 6,353
Transfer (to)/from other headings
(473) (871) (1,344)
Other
1 - 1
At December 31, 2021
71,242 33,350 104,592
At January 1, 2020
59,956 33,870 93,826
Gross premium and deposits – existing and new business
11,116 786
11,902
Withdrawals
(10,404) - (10,404)
Interest credited
5,902 2,895 8,797
Investment contracts liabilities released
- (3,457) (3,457)
Fund charges released
(196) - (196)
Net exchange differences
(4,008) (1,808) (5,816)
Transfer (to)/from other headings
(2,740) (287) (3,027)
Other
(1) - (1)
At December 31, 2020
59,625 31,999 91,624
36 Guarantees in insurance contracts
For financial reporting purposes Aegon distinguishes between the following types of minimum guarantees:
a. Financial guarantees: these guarantees are treated as bifurcated embedded derivatives, valued at fair value and presented as
derivatives (refer to note 2.9 and note 44 Fair value);
b. Total return annuities: these guarantees are not bifurcated from their host contracts because they are presented and valued at fair
value together with the underlying insurance contracts (refer to note 2.19);
c. Life contingent guarantees in the United States: these guarantees are not bifurcated from their host contracts, presented and
valued in accordance with insurance accounting together with the underlying insurance contracts (refer to note 2.19); and
d. Minimum investment return guarantees in the Netherlands: these guarantees are not bifurcated from their host contracts, valued at
fair value and presented together with the underlying insurance contracts (refer to note 2.19 and note 44 Fair value).
In addition to the guarantees mentioned above, Aegon has traditional life insurance contracts that include minimum guarantees that
are not valued explicitly; however, the adequacy of all insurance liabilities, net of VOBA and DPAC, and including all guarantees, are
assessed periodically (refer to note 2.19).
a. Financial guarantees
In the United States, aguaranteed minimum withdrawal benefit (GMWB) is offered directly on some variable annuity products Aegon
issues and is also assumed from aceding company. Variable annuities allow acustomer to provide for the future on atax-deferred
basis and to participate in equity or bond market performance. Variable annuities allow acustomer to select payout options designed
to help meet the customer’s need for income upon maturity, including lump sum payment or income for life or for aperiod of time. This
benefit guarantees that apolicyholder can withdraw acertain percentage of the account value, starting at acertain age or duration, for
either afixed period or during the life of the policyholder.
In the Netherlands, individual variable unit-linked products have aminimum benefit guarantee if premiums are invested in certain
funds. The sum insured at maturity or upon the death of the beneficiary has aminimum guaranteed return (in the range of 3% to 4%)
if the premium has been paid for aconsecutive period of at least ten years and is invested in amixed fund and/or fixed-income funds.
No guarantees are given if the invested amount is in equity only.
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Notes to the consolidated financial statements
Note 36
The following table provides information on the liabilities for financial guarantees for minimum benefits, net of present value
of the expected future premiums that are received to cover these guarantees:
2021
2020
United States
1)
The Netherlands
2)
Total
3)
United States
1)
The Netherlands
2)
Total
3)
At January 1
2,715 2,032 4,747 1,296 1,735 3,031
Incurred guarantee benefits
4)
(1,047) (619) (1,666) 1,638 297
1,935
Paid guarantee benefits
(2) - (2) (2) - (2)
Net exchange differences
164 - 164 (217) -
(217)
At December 31
1,830 1,413 3,243 2,715 2,032 4,747
Account value
5)
34,945 9,748 44,693 32,870 8,968 41,838
Net amount at risk
6)
314 1,538 1,852 661 2,427 3,088
1
2
3
4
value movements during the reporting year.
5
6
The net amount at risk represents the sum of the positive differences
between the discounted maximum amount payable under the guarantees and the accountvalue.
The decrease of incurred guarantee benefits in 2021 mainly relates to increasing interest rates and rising equity markets with some
offset from policyholder behavior assumption updates. The increased account value in 2021 was mainly driven by foreign currency
translation differences, partially offset by the impact from significantly reduced sales of guaranteed living benefits in the US after
the first quarter.
Transamerica mitigates the exposure from the elective guaranteed minimum withdrawal benefit rider issued with aceding
company’s variable annuity contracts. The rider is essentially areturn of premium guarantee, which is payable over aperiod of at least
14years from the date that the policyholder elects to start withdrawals. At contract inception, the guaranteed remaining balance
is equal to the premium payment. The periodic withdrawal is paid by the ceding company until the account value is insufficient
to cover additional withdrawals. Once the account value is exhausted, Aegon pays the periodic withdrawals until the guaranteed
remaining balance is exhausted. At December 31, 2021, the reinsured account value was EUR1.8billion (2020: EUR1.7billion) and
the guaranteed remaining balance was EUR0.9billion (2020: EUR0.8billion).
The GMWB rider Aegon assumed from the ceding company is accounted for as aderivative and is carried in Aegon’s statement
of financial position at fair value. At December 31, 2021, the contract had avalue of EUR39million (2020: EUR46million).
Aegon entered into aderivative program to mitigate the overall exposure to equity market and interest rate risks associated with
the reinsurance contract. This program involves selling equity futures contracts and equity total return swap contracts (S&P 500,
Midcap, Russell 2000, and the MCSI EAFE index in accordance with Aegon’s exposure) to mitigate the effect of equity market
movement on the reinsurance contracts and the purchase of interest rate swaps, treasury futures and treasury forwards to mitigate
the effect of movements in interest rates on the reinsurance contracts.
Aegon the Netherlands provides guarantees to its customers on expiry date for certain insurance contracts. In order to mitigate
the risks related to the guarantees Aegon the Netherlands has setup ahedging program. Aegon the Netherlands does not use
reinsurance in order to mitigate risks related to insurance contracts with aguarantee component.
b. Total return annuities
Total Return Annuity (TRA) is an annuity product in the United States which provides customers with apass-through of the total
return on an underlying portfolio of investment securities (typically amix of corporate and convertible bonds) subject to acumulative
minimum guarantee. Both the assets and liabilities are carried at fair value, however, due to the minimum guarantee not all
of the changes in the market value of the asset will be offset in the valuation of the liability. This product exists for the fixed annuity
line of business and represents aclosed block.
The fixed annuities product balance as of December 31, 2021, amounted to EUR179million (2020: EUR186million).
c. Life contingent guarantees in the United States
Certain variable insurance contracts in the United States also provide guaranteed minimum death benefits (GMDB) and guaranteed
minimum income benefits (GMIB). Under aGMDB, the beneficiaries receive the greater of the account balance or the guaranteed
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 36
amount upon the death of the insured. The net amount at risk for GMDB contracts is defined as the current GMDB in excess
of the capital account balance at the reporting date.
The GMIB feature provides for minimum payments if the contract holder elects to convert to an immediate payout annuity.
The guaranteed amount is calculated using the total deposits made by the contract holder, less any withdrawals and sometimes
includes aroll-up or step-up feature that increases the value of the guarantee with interest or with increases in the account value.
The additional liability for guaranteed minimum benefits that are not bifurcated are determined each period by estimating the expected
value of benefits in excess of the projected account balance and recognizing the excess over the accumulation period based on total
expected assessments. The estimates are reviewed regularly and any resulting adjustment to the additional liability is recognized
in the income statement. The benefits used in calculating the liabilities are based on the average benefits payable over arange
of stochastic scenarios. Where applicable, the calculation of the liability incorporates apercentage of the potential annuitizations that
may be elected by the contract holder.
The following table provides information on the liabilities for guarantees for minimum benefits that are included in the valuation
of the host contracts:
2021
2020
GMDB
1)
GMIB
2)
Total
4)
GMDB
1)
GMIB
2)
Total
4)
At January 1
488 638 1,127 448 686 1,133
Incurred guarantee benefits
5)
27 (127) (99) 144 44 189
Paid guarantee benefits
(49) (25) (75) (61) (34) (95)
Net exchange differences
36 42 79 (43) (57) (100)
At December 31 502 529 1,031 488 638 1,127
GMDB
1)
,
3)
GMIB
2)
,
3)
GMDB
1)
,
3)
GMIB
2)
,
3)
Account value
6)
56,426 5,186 52,481 5,337
Net amount at risk
7)
843 472 919 542
Average attained age of contract holders
71 72 70 72
1
2
3
mutually exclusive.
4
5
changes as aconsequence of interest movements during the reporting year.
6
7
with the terms of the contract in excess of the current account balance.
d. Minimum investment return guarantees in the Netherlands
The traditional life and pension products offered by Aegon in the Netherlands include various products that accumulate acash value.
Premiums are paid by customers at inception or over the term of the contract. The accumulation products pay benefits on the policy
maturity date, subject to survival of the insured. In addition, most policies also pay death benefits if the insured dies during the term
of the contract. The death benefits may be stipulated in the policy or depend on the gross premiums paid to date. Premiums and
amounts insured are established at inception of the contract. The amount insured can be increased as aresult of profit sharing,
if provided for under the terms and conditions of the product. Minimum interest guarantees exist for all generations of traditional
accumulation products written. Older generations contain a4% guarantee; in 1999 the guarantee decreased to 3% and in 2013
the guarantee decreased to 0%.
The traditional group pension contracts offered by Aegon in the Netherlands include large group insurance contracts that have
an individually determined asset investment strategy underlying the pension contract. The guarantee given is that the profit
sharing is the minimum of 0% and the realized return on an asset portfolio specified in the policy conditions, adjusted for technical
interest rates ranging from 3% to 4%. If the adjusted return is negative, the 0% minimum is effective, but the loss in any given year
is carried forward to be offset against any future surpluses within the contract period. In general, aguarantee is given for the life
of the underlying employees so that their pension benefit is guaranteed. Large group contracts also share technical results (mortality
risk and disability risk). The contract period is typically five years and the premiums are fixed over this period.
These guarantees are valued at fair value and are included as part of insurance liabilities with the underlying host insurance contracts
in note 34 Insurance contracts.
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Notes to the consolidated financial statements
Note 36
The following table provides information on the liabilities for guarantees that are included in the valuation of the host contracts, net
of the present value of the expected future premiums that are received to cover these guarantees:
2021
2020
GMI
1),2)
GMI
1),2)
At January 1
7,973 6,422
Incurred guarantee benefits
3)
(1,544) 1,551
At December 31 6,429 7,973
Account value
4)
20,176 20,202
Net amount at risk
5)
6,794 7,931
1
2
3
value movements during the reporting year.
4
5
policies only positive differences are included, for Group pensions contracts carry forwards of negative differences are recognized.
Fair value measurement of guarantees in insurance contracts
The fair values of guarantees mentioned above (with the exception of life contingent guarantees in the United States) are calculated
as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable
to the guarantees. For further details refer to note 44 Fair value.
For equity volatility, Aegon uses aterm structure assumption with market-based implied volatility inputs for the first five years
and along-term forward rate assumption of 25% thereafter. The volume of observable option trading from which volatilities are
derived generally declines as the contracts’ term increases, therefore, the volatility curve grades from implied volatilities for five
years to the ultimate rate. The resulting volatility assumption in year 20 for the S&P 500 index (expressed as aspot rate) was
22.3% at December 31, 2021, and 22.6% at December 31, 2020. Correlations of market returns across underlying indices are based
on historical market returns and their inter-relationships over anumber of years preceding the valuation date. Assumptions regarding
policyholder behavior, such as lapses, included in the models are derived in the same way as the assumptions used to measure
insurance liabilities.
These assumptions are reviewed at each valuation date, and updated based on historical experience and observable market data,
including market transactions such as acquisitions and reinsurance transactions. Disclosure on interest rate risk, including interest rate
risk sensitivity is included in note 4 Financial risks.
Aegon utilizes different risk management strategies to mitigate the financial impact of the valuation of these guarantees on the results
including asset and liability management and derivative hedging strategies to hedge certain aspects of the market risks embedded
in these guarantees.
Guarantees valued at fair value contributed anet gain before tax of EUR63million (2020: gain of EUR539million) to earnings.
The main drivers of this gain before tax are again of EUR1,214million related to an increase in equity markets (2020: EUR380million
gain),a gain of EUR2,795million related increases in risk free rates (2020: EUR3,775million loss) and a gain of EUR16million
related to increases in equity volatility (2020: EUR134million loss). These gains are partly offset by afair value loss on hedges related
to the guarantee reserves of EUR3,855million (2020: EUR3,199million gain), aloss of EUR19million related to widening own credit
spread (2020: EUR234million gain) and other and DPAC offset contributed aloss of EUR65million (2020: EUR305million gain).
Guarantee reserves decreased by EUR2,997million in 2021 (2020: increase of EUR3,230million) to EUR9,878million (2020:
EUR12,875million).
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Note 36
37 Borrowings
2021
2020
Capital funding
1,292 1,241
Operational funding
8,369 7,283
At December 31
9,661 8,524
Current
824 950
Non-current
8,837 7,574
Fair value of borrowings
10,171 9,165
Aegon’s borrowings are defined separately as capital funding and operational funding. Capital funding includes debt securities that
are issued for general corporate purposes and for capitalizing its business units. Capital funding is part of the Company’s total
capitalization that is used for financing its subsidiaries and the cash held at the holding company. Operational funding includes debt
securities that are issued for financing of dedicated pools of assets. These assets are either legally segregated or tracked as separate
portfolios.
The difference between the contractually required payment at maturity date and the carrying amount of the borrowings amounted
to EUR25million negative (2020: EUR15million negative).
Capital funding
A detailed composition of capital funding is included in the following table:
(sorted at maturity)
Coupon rate Coupon date
Issue /
Maturity
2021
2020
EUR 500million Senior Unsecured Notes
1.00% December 8 2016 / 23 499
498
GBP 250million Medium-Term Notes
6.125% December 15 1999 / 31 296 278
GBP 400million Senior Unsecured Notes
6.625% Semi-annually 2009 / 39 472
442
Other
26 24
At December 31
1,292 1,241
These loans are considered senior debt in calculating financial leverage in note 43 Capital management and solvency.
Operational funding
During 2021, the operational funding increased by EUR 1.1 billion mainly due to the latest securitization of mortgage loans originated
by Aegon the Netherlands “SAECURE 20” ofEUR 0.6 billion, new covered bonds of EUR 0.5 billion, as well as an increase in Federal
Home Loan Bank advances of EUR 0.5 billion. This is offset by a decrease of other mortgage loan funding of EUR 0.5 billion.
During 2020, operational funding decreased by EUR0.3billion mainly due to the redemption of ‘SAECURE 15’ of EUR0.9billion
and the redemption of acovered bond for EUR0.7billion. This is partly offset by an increase in other mortgage loan funding
of EUR0.7billion and the issuance of acovered bond in the Netherlands of EUR0.5billion.
Aegon Integrated Annual Report
2021
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Financial information
Non-financial information231
Notes to the consolidated financial statements
Note 37
Coupon rate Coupon date
Issue /
Maturity
2021
2020
Revolving Loan Facility Warehouse Mortgage Loans
1)
Floating Monthly - / 22 592 743
Revolving Loan Facility Warehouse Mortgage Loans
1)
Floating Monthly - / 24 494 802
EUR 875million "SAECURE 16" RMBS Note
1),2)
Floating Quarterly 2018 / 23 676 758
EUR 512million "SAECURE 18" RMBS Note
1),3)
Floating Quarterly 2019 / 25 355 422
EUR 657million "SAECURE 20" RMBS Note
1),4)
Floating Quarterly 2021 / 27 625 -
EUR 500million Conditional Pass-Through Covered Bond
1),5)
0.250% Annual 2016 / 23 499 498
EUR 500million Conditional Pass-Through Covered Bond
1),6)
0.375% Annual 2017 / 24 499 498
EUR 500million Conditional Pass-Through Covered Bond
1),7)
0.010% Annual 2020 / 25 506 508
EUR 500million Conditional Pass-Through Covered Bond
1),8)
0.750% Annual 2017 / 27 492
491
EUR 500million Conditional Pass-Through Covered Bond
1),9)
0.375% Annual 2021 / 36 494 -
FHLB Secured borrowings
1)
Floating Quarterly 2021 / 24 2,634 2,055
Aegon Bank Senior Non-Preferred debt
1)
0.625% Annual 2019 / 24 499 498
Other
5 9
At December 31
8,369 7,283
1
2
which are part of Aegon’s general account investments.
3
part of Aegon’s general account investments.
4
are part of Aegon’s general account investments.
5
6
7
8
9
Other
Undrawn committed borrowing facilities:
2021
2020
Floating-rate
- Expiring within one year
408 666
- Expiring beyond one year
2,991 2,622
At December 31
3,399 3,288
There were no defaults or breaches of conditions during the period.
38 Provisions
2021
2020
At January 1
309 214
Additional provisions
91 180
Disposals
(6) (38)
Unused amounts reversed through the income statement
- (1)
Used during the year
(209)
(32)
Net exchange differences
9 (15)
At December 31
193 309
Current
139 253
Non-current
54 56
The provisions as at December 31, 2021 consisted of litigation provisions of EUR93million (2020: EUR191million) mainly related
to asettlement in the US relating to increases in monthly deduction rates on universal life products(refer to note 45 Commitments
and contingencies), restructuring provisions of EUR30million (2020: EUR54million)and other provisions of EUR70million (2020:
EUR63million).
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 38
39 Defined benefit plans
2021
2020
Retirement benefit plans
3,547
4,318
Other post-employment benefit plans
277 275
Total defined benefit plans
3,824 4,593
Retirement benefit plans in surplus
119
43
Total defined benefit assets
119 43
Retirement benefit plans in deficit
3,666 4,361
Other post-employment benefit plans in deficit
277
275
Total defined benefit liabilities
3,944 4,636
Movements during the year in defined
benefit plans
2021
2020
Retirement
benefit plans
Other post-
employment
benefit plans
Total
Retirement
benefit plans
Other post-
employment
benefit plans
Total
At January 1
4,318 275 4,593 4,076 283 4,359
Defined benefit expenses
(8) 16 8 104 18 122
Remeasurements of defined benefit plans
(487) (14) (501) 350 10 360
Contributions paid
(164) - (164) (54) - (54)
Benefits paid
(110) (15) (125) (103) (16) (119)
Net exchange differences
29 16 45 (61) (19) (80)
Other
(32) - (32) 5 - 5
At December 31
3,547 277 3,824 4,318 275 4,593
The amounts recognized in the statement of financial position are determined as follows:
2021
2020
Retirement
benefit plans
Other
post-em-
ployment
benefit plans
Total
Retirement
benefit plans
Other
post-employ-
ment benefit
plans
Total
Present value of wholly or partly funded obligations
4,604 - 4,604 4,858 - 4,858
Fair value of plan assets
(4,717) - (4,717) (4,466) - (4,466)
(112) - (112) 392 - 392
Present value of wholly unfunded obligations
1)
3,660 277 3,937 3,926 275 4,201
At December 31
3,547 277 3,824 4,318 275 4,593
1
2,783million (2020: EUR 2,845million) do not meet the definition of plan assets and as such were not deducted in calculating this amount. Instead, these
assets are recognized as general account assets. Consequently, the return on these assets does not form part of the calculation of defined benefit expenses.
The fair value of Aegon’s own transferable financial instruments included in plan assets and the fair value of other assets used
by Aegon included in plan assets was nil in both 2021 and 2020.
Defined benefit expenses
2021
2020
Retirement
benefit plans
Other post-
employment
benefit plans
Total
Retirement
benefit plans
Other post-
employment
benefit plans
Total
Current year service cost
48 11 59 52 11 63
Net interest on the net defined benefit
liability (asset)
32 5 37 52 7
59
Past service cost
(88) - (88) 1 - 1
Total defined benefit expenses
(8) 16 8 104 18 122
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Notes to the consolidated financial statements
Note 39
2019
Retirement
benefit plans
Other post-employment
benefit plans
Total
Current year service cost
148 8 157
Net interest on the net defined benefit liability (asset)
80 9 89
Past service cost
(1) - (1)
Total defined benefit expenses
227 17 244
Defined benefit expenses are included in 'Commissions and expenses' in the income statement.
Movements during the year of the present value of the defined benefit obligations
2021
2020
At January 1
9,059
8,779
Current year service cost
59 63
Interest expense
131
175
Remeasurements of the defined benefit obligations:
- Actuarial gains and losses arising from changes in demographic assumptions
(59)
(51)
- Actuarial gains and losses arising from changes in financial assumptions
(299) 859
Past service cost
(88)
1
Benefits paid
(455) (362)
Amounts paid in respect of settlements
(140) -
Net exchange differences
364 (409)
Other
(32) 5
At December 31
8,541 9,059
Movements during the year in plan assets for retirement benefit plans
2021
2020
At January 1
4,466 4,420
Interest income (based on discount rate)
94 116
Remeasurements of the net defined liability (asset)
144 448
Contributions by employer
164 54
Benefits paid
(330) (243)
Amounts paid in respect of settlements
(140) -
Net exchange differences
319 (329)
At December 31
4,717 4,466
Breakdown of plan assets for
retirement benefit plans
2021
2020
Quoted Unquoted
Total
in % of total
plan assets
Quoted Unquoted Total
in % of total
plan assets
Equity instruments
- - - 0% 154 - 154 3%
Debt instrument
603 387 990 21% 450 717 1,167 26%
Real estate
- 142 142 3% - 110 110 2%
Derivatives
- (3) (3) (0%) - 16 16 0%
Investment funds
- 3,069 3,069 65% 2 2,449 2,451 55%
Other
2 516 518 11% 3 563 567 13%
At December 31
605 4,112 4,717 100% 610 3,856 4,466 100%
Defined benefit plans are mainly operated by Transamerica, Aegon the Netherlands and Aegon UK. The following sections contain
ageneral description of the plans in each of these subsidiaries and asummary of the principal actuarial assumptions applied
in determining the value of defined benefit plans.
Transamerica
Transamericahas defined benefit plans covering substantially all its employees that are qualified under the Internal Revenue Service
Code, including all requirements for minimum funding levels. The defined benefit plans are governed by the Board of Directors
of Transamerica Corporation. The Board of Directors has the full power and discretion to administer the plan and to apply all of its
provisions, including such responsibilities as, but not limited to, developing the investment policy and managing assets for the plan,
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 39
maintaining required funding levels for the plan, deciding questions related to eligibility and benefit amounts, resolving disputes
that may arise from plan participants and for complying with the plan provisions, and legal requirements related to the plan and its
operation. The benefits are based on years of service and the employee’s eligible annual compensation. The plans provide benefits
based on atraditional final average formula or acash balance formula (which defines the accrued benefit in terms of astated
account balance), depending on the age and service of the plan participant. The defined benefit plans have adeficit of EUR7million
at December 31, 2021 (2020: EUR436million deficit).Transamerica amended some of their defined benefit pension plans in 2021.
The amendments included an updated pay credit percentage and interest credit rates resulting in adecrease of the defined benefit
obligation of EUR88million.
Investment strategies are established based on asset and liability studies by actuaries which are updated as they consider appropriate.
These studies, along with the investment policy, assist to develop the appropriate investment criteria for the plan, including asset
allocation mix, return objectives, investment risk and time horizon, benchmarks and performance standards, and restrictions and
prohibitions. The overall goal is to maximize total investment returns to provide sufficient funding for the present and anticipated
future benefit obligations within the constraints of aprudent level of portfolio risk and diversification. Aegon believes that the asset
allocation is an important factor in determining the long-term performance of the plan. The plan uses multiple asset classes as well
as sub-classes to meet the asset allocation and other requirements of the investment policy, which minimizes investment risk. From
time to time the actual asset allocation may deviate from the desired asset allocation ranges due to different market performance
among the various asset categories. If it is determined that rebalancing is required, future additions and withdrawals will be used
to bring the allocation to the desired level.
Transamerica maintains minimum required funding levels as set forth by the Internal Revenue Code. If contributions are required,
the funding would be provided from the Company’s general account assets. Pension plan contributions were not required for
Transamerica in 2021 or 2020. However, with the Transamerica Management Board approval of aproposal from Transamerica
Corporation, Transamerica Corporation made apension plan contribution of EUR91million in August 2021 that was over and above
the minimum required funding levels as set forth by the Internal Revenue Code. In 2020, Transamerica Corporation did not make
avoluntary pension plan contributions.
Transamericaalso sponsors supplemental retirement plans to provide senior management with benefits in excess of normal
retirement benefits. The plans are unfunded and are not qualified under the Internal Revenue Code. The supplemental retirement
plans are governed by either Transamerica Corporation, or the Compensation Committee of the Board of Directors of Transamerica
Corporation. Transamerica Corporation, or the Compensation Committee of the Board of Directors has the full power and discretion
to apply all of the plan’s provisions, including such responsibilities as, but not limited to, interpret the plan provisions, to make factual
determinations under the plan, to determine plan benefits, and to comply with any statutory reporting and disclosure requirements.
The benefits are based on years of service and the employee’s eligible annual compensation. The plans provide benefits based
on atraditional final average formula or acash balance formula (which defines the accrued benefit in terms of astated account
balance), depending on the age and service of the plan participant. The company funds the benefit payments of the supplemental
retirement plans from its general account assets. The unfunded amount related to these plans, for which aliability has been recorded,
was EUR235million (2020: EUR249million unfunded).
Transamerica provides health care benefits to retired employees through continuation of coverage primarily in self funded plans,
and partly in fully insured plans, which are classified as unfunded per IAS 19 financial guidance. The postretirement health care
benefits under the Plans are administered by Transamerica Corporation, which has delegated the claims administration to third-party
administrators. Transamericamaintains two plans which provide continuation of coverage for retiree medical benefits. For each
plan, Transamerica has the fiduciary responsibility to administer the plan in accordance with its terms, and decides questions related
to eligibility and determines plan provisions and benefit amounts.
Under the Employee Retirement Income Security Act (ERISA), Transamericahas the fiduciary responsibility to monitor the quality
of services provided by the third-party claims administrator and to replace the third-party administrator if needed. In addition,
Transamericahas the fiduciary obligation to interpret the provisions of the plans, and to comply with any statutory reporting and
disclosure requirements. Finally, Transamericareviews the terms of the plans and makes changes to the plans if and when appropriate.
Transamericafunds the benefit payments or premium payments of the post-retirement health care plans from its general account
assets. The post-retirement health benefit liability amounted to EUR220million (2020: EUR214million).
The weighted average duration of the defined benefit obligation is 12.9 years (2020: 12.9 years).
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Notes to the consolidated financial statements
Note 39
The principal actuarial assumptions that apply for the year ended December 31 are as follows:
Actuarial assumptions used to determine defined benefit obligations at year-end
2021
2020
Demographic actuarial assumptions
Mortality
US mortality table
1)
US mortality table
1)
Financial actuarial assumptions
Discount rate
2.80%/2.61% 2.47%/2.18%
Salary increase rate
4.00% 4.00%
Health care trend rate
6.10% 6.30%
1
Comparative figures are as included in the Integrated Annual Report 2020.
The principal actuarial assumptions have an effect on the amounts reported for the defined benefit obligation. A change as indicated
in the table below in the principal actuarial assumptions would have the following effects on the defined benefit obligation
per year-end:
Estimated approximate effects on the
defined benefit obligation
2021
2020
Demographic actuarial assumptions
10% increase in mortality rates
(69)
(86)
10% decrease in mortality rates
77 95
Financial actuarial assumptions
100 basis points increase in discount rate
(357) (422)
100 basis points decrease in discount rate
436 521
100 basis points increase in salary increase rate
- 29
100 basis points decrease in salary increase rate
- (25)
100 basis points increase in health care trend rate
13 13
100 basis points decrease in health care trend rate
(12) (12)
The above sensitivity analysis is based on achange in an assumption while holding all other assumptions constant. In practice, this
is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated
with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability
recognized within the statement of financial position.
Target allocation of plan assets for retirement benefit plans
for the next annual period is:
Equity instruments
5%-24%
Debt instruments
57%-88%
Other
4%-22%
Aegon the Netherlands
Aegon the Netherlands has anumber of defined benefit plans and defined contribution plans. The defined benefit plans are subject
to Dutch Pension regulations and governed by the Board of Directors of Aegon the Netherlands. The Board of Directors has the full
power and discretion to administer the plan including developing investment policy and managing assets for the plans (although these
assets do not qualify as ‘plan assets’ as defined by IFRS), deciding questions related to eligibility and benefit amounts, and any disputes
that may arise from plan participants and for complying with the plan provisions, and legal requirements related to the plan and its
operation. Aegon the Netherlands runs, in principle, full actuarial and investment risk regarding the defined benefit plans. This includes
the risks of low interest rates, low returns and increased longevity. A part of this risk can be attributed to plan participants by lowering
indexation or by increasing employee contributions.
Furthermore, the specific statutory requirements governing the administration of group pension schemes have been laid down
in the Pension Act (Pensioenwet / Pw). Insurers are subject to prudential supervision pursuant to the Financial Supervision Act (Wet
op het financieel toezicht / Wft).
Aegon Integrated Annual Report
2021
236
About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 39
Investment strategies are established based on asset and liability studies. The overall goal is to maximize total investment returns
to provide sufficient funding for the present and anticipated future benefit obligations within the constraints of aprudent level
of portfolio risk. These studies use for example return objectives and various investment instruments. Investment restrictions are
updated regularly and they result in asset allocation mix and hedges.
As at December 31, 2019, Aegon the Netherlands amended the defined benefit pension plan for their own employees. As of January 1,
2020, the defined benefit pension plan is closed for new members and there will be no further accrual of benefits to existing members.
Entitlements before January 1, 2020, will remain unchanged and the indexation for those accruals will remain in force.
The contributions to the retirement benefit plan of Aegon the Netherlands are paid by both the employees and the employer, with
the employer contribution being variable
1
. The benefits covered are retirement benefits, disability, death and survivor pension.
The defined benefit plans were unfunded by EUR3,409million at December 31, 2021. (2020: EUR3,658million). The defined benefit
plans are largely backed by investment, although these assets do not qualify as ‘plan assets’ as defined by IFRS. The average remaining
duration of the defined benefits obligation is 20.9 years (2020: 22.5 years).
Aegon the Netherlands also has apost-retirement medical plan that contributes to the health care coverage of employees and
beneficiaries after retirement. For this plan, Aegon the Netherlands has the responsibility to administer the plan in accordance with
its terms, and decides on questions related to eligibility and determines plan provisions and benefit amounts. In addition, Aegon
the Netherlands has the obligation to interpret the provisions of the plans, and to comply with any statutory reporting and disclosure
requirements. Finally, Aegon the Netherlands reviews the terms of the plans and makes changes to the plans if and when appropriate.
The liabilities related to these other post-employment benefit plans are fully unfunded and amount to EUR57million at December
31, 2021 (2020: EUR61million). The weighted average duration of the other post-employment benefit plans is 12.7 years (2020:
11.1 years).
The principal actuarial assumptions that apply for the year-ended December 31 are as follows:
1
Aegon Nederland deducts employee contributions from the total pension expenses.
Actuarial assumptions used to determine defined benefit obligations at year-end
2021
2020
Demographic actuarial assumptions
Mortality
NL mortality table
1)
NL mortality table
1)
Financial actuarial assumptions
Discount rate
1.01% 0.51%
Salary increase rate
2)
Curve 2021 Curve 2020
Indexation
3)
53.05% of Curve
2021
55.6% of Curve
2020
1
2
3
The principal actuarial assumptions have an effect on the amounts reported for the defined benefit obligation. A change as indicated
in the table below in the principal actuarial assumptions of the retirement benefit plan would have the following effects per year-end:
Estimated approximate effects on the
defined benefit obligation
2021
2020
Demographic actuarial assumptions
10% increase in mortality rates
(100) (110)
10% decrease in mortality rates
112 124
Financial actuarial assumptions
100 basis points increase in discount rate
(622) (703)
100 basis points decrease in discount rate
849 977
100 basis points increase in salary increase rate
- -
25 basis points increase in indexation
187 213
25 basis points decrease in indexation
(170) (192)
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Notes to the consolidated financial statements
Note 39
The above sensitivity analysis is based on achange in one assumption while holding all other assumptions constant. In practice, this
is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit
obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with
the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit obligation
recognized within the statement of financial position.
Aegon UK
Aegon UK operated adefined benefit pension scheme providing benefits for staff based on final pensionable salary and years
of service. The scheme closed to new entrants anumber of years ago and closed to future accrual on March 31, 2013. Aegon UK now
offers adefined contribution pension scheme to all employees.
The pension scheme is administered separately from Aegon UK and is governed by Trustees, who are required to act in the best
interests of the pension scheme members.
The pension scheme Trustees are required to carry out triennial valuations on the scheme’s funding position, with the latest
valuation being as at March 31, 2019. As part of this triennial valuation process, aschedule of contributions is agreed between
the Trustees and Aegon UK in accordance with UK pensions legislation and guidance issued by the Pensions Regulator in the UK.
The schedule of contributions includes deficit reduction contributions to clear any scheme deficit. Under IAS 19, the defined benefit
plan has asurplus of EUR119million at December 31, 2021 (2020: EUR43million surplus).During 2021, EUR73million (2020:
EUR54million) of contributions were paid into the scheme.
The investment strategy for the scheme is determined by the trustees in consultation with Aegon UK. Currently 30% of assets are
invested in growth assets (i.e. primarily equities) and 70% are income and liability driven investments where the investments are
aportfolio of fixed interest and inflation-linked bonds and related derivatives, selected to broadly match the interest rate and inflation
profile of liabilities.
Under the scheme rules, pensions in payment increase in line with the UK Retail Price Index, and deferred benefits increase in line
with the UK Consumer Price Index. The pension scheme is therefore exposed to UK inflation changes as well as interest rate risks,
investment returns and changes in the life expectancy of pensioners.
The scheme purchased abuy-in policy in the name of the Trustee to cover full scheme benefits for agroup of pensioners
in 2019. The liability (and matching asset) calculated on the year end assumptions has been included in the funded position as at
31 December 2020.
The weighted average duration of the defined benefit obligation is 21.0 years (2020: 22.0 years).
The principal actuarial assumptions that apply for the year ended December 31 are as follows:
Actuarial assumptions used to determine defined benefit obligations at year-end
2021
2020
Demographic actuarial assumptions
Mortality
UK mortality table
1)
UK mortality table
2)
Financial actuarial assumptions
Discount rate
1.79% 1.45%
Price inflation
3.34% 2.95%
1
2
Aegon Integrated Annual Report
2021
238
About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 39
The principal actuarial assumptions have an effect on the amounts reported for the defined benefit obligation. A change as indicated
in the table below in the principal actuarial assumptions would have the following effects on the defined benefit obligation
per year-end:
Estimated approximate effects on the
defined benefit obligation
2021
2020
Demographic actuarial assumptions
10% increase in mortality rates
(55) (55)
10% decrease in mortality rates
62 63
Financial actuarial assumptions
100 basis points increase in discount rate
(322) (330)
100 basis points decrease in discount rate
433 448
100 basis points increase in price inflation
202 172
100 basis points decrease in price inflation
(237) (316)
The above sensitivity analysis is based on achange in an assumption while holding all other assumptions constant. In practice, this
is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined
benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated
with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability
recognized within the statement of financial position.
Target allocation of plan assets for
retirement benefit plans for the next
annual period is:
Equity instruments
16.7%
Debt instruments
83.3%
All other operating segments
Businesses included in all other operating segments mostly operate defined contribution plans. Please refer to note 14 Commissions
and expenses for the employee expenses regarding these contribution plans.
40 Deferred tax
2021
2020
Deferred tax assets
131 101
Deferred tax liabilities
1,722 1,681
Total net deferred tax liability / (asset)
1,591 1,580
Deferred tax assets comprise temporary differences on:
2021
2020
Financial assets
(7) 13
Insurance and investment contracts
(8) (5)
Deferred expenses, VOBA and other intangible assets
(133) (110)
Defined benefit plans
3 -
Tax losses and credits carried forward
264 321
Other
11 (118)
At December 31
131 101
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Non-financial information239
Notes to the consolidated financial statements
Note 40
Deferred tax liabilities comprise temporary differences on:
2021
2020
Real estate
776
663
Financial assets
1,979 2,426
Insurance and investment contracts
(1,410)
(1,539)
Deferred expenses, VOBA and other intangible assets
1,573 1,323
Defined benefit plans
(151)
(206)
Tax losses and credits carried forward
(754) (502)
Other
(291)
(484)
At December 31
1,722 1,681
The following table provides amovement schedule of net deferred tax broken-down by those items for which adeferred tax asset
or liability has been recognized.
Real estate
Financial
assets
Insurance
and
investment
contracts
Deferred
expenses,
VOBA and
other
intangible
assets
Defined
benefit
plans
Tax losses
and credits
carried
forward Other
Total
At January 1, 2021
663 2,413 (1,533) 1,433 (206) (823) (366) 1,580
Charged to income statement
113 (206) 217 162 (32) (140) 54 167
Charged to OCI
(1) (359) - - 100 - (1) (261)
Net exchange differences
1 167 (86) 112 (15) (56) (20) 103
Transfer (to)/from current
income tax
- - - - - 2 - 2
Transfer (to) /from other
headings
- (29) - - - (1) 30 -
At December 31, 2021
776 1,986 (1,402) 1,706 (154) (1,018) (303) 1,591
At January 1, 2020
644 1,641 (1,470) 1,774 (256) (734) (397)
1,203
Acquisitions / Additions
- - - 2 - - - 2
Charged to income statement
20 379 (102) (213) 169 (13) (67)
171
Charged to OCI
2 597 - - (140) - 4 464
Net exchange differences
(3) (204) 105 (130) 21 56 27 (128)
Transfer (to)/from current
income tax
- - - - - (132) - (132)
Transfer (to)/from other
headings
- - (66) - - - 66 -
At December 31, 2020
663 2,413 (1,533) 1,433 (206) (823) (366) 1,580
Transfer to/from current income tax relates to the deferred tax asset for the loss carry forward position of the Dutch fiscal unit.
Deferred tax assets are recognized for tax losses and credits carried forward to the extent that the realization of the related tax benefit
through future taxable profits is probable. For an amount of gross EUR1,247million; an amount of tax EUR301million related to tax
losses carried forward (2020: gross EUR1,346million; tax EUR230million) and an amount of tax EUR491million related to tax
credits carried forward (2020; tax EUR405million) the realization of the deferred tax asset is dependent on the projection of future
taxable profits.
For the following amounts, arranged by loss carry forward periods, the deferred tax asset is not recognized:
Gross amounts
1)
Not recognized deferred tax assets
2021
2020
20212020
< 5 years
62 71 15 18
≥ 5 – 10 years
24 12 4 4
≥ 10 – 15 years
- 18 55 57
≥ 15 – 20 years
- 4 - -
Indefinitely
598 514 151 114
At December 31
684 619 224 192
1
with various applicable tax rates and apportionment rules
Aegon Integrated Annual Report
2021
240
About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 40
Deferred tax assets in respect of deductible temporary differences are recognized to the extent that the realization of the related
tax benefit through future taxable profits is probable. For an amount of gross EUR32million; tax EUR8million (2020: gross
EUR31million; tax EUR5million) the realization of the deferred tax asset is dependent on future taxable profits in excess
of the profits arising from the reversal of existing taxable temporary differences.
Aegon did not recognize deferred tax assets in respect of deductible temporary differences relating to Financial assets and Other items
for the amount of gross EUR30million; tax EUR6million (2020: gross EUR20million; tax EUR4million).
Deferred tax liabilities have not been recognized for withholding tax and other taxes that would be payable on the unremitted earnings
of certain subsidiaries. The unremitted earnings totaled gross EUR1,770million; tax EUR455million (2020: gross EUR1,769million;
tax EUR441million calculated at the enacted rates).
Deferred taxes are non-current by nature and the majority of the deferred tax assets and liabilities will therefore reverse after more
than one year after the balance sheet date.
41 Other liabilities
2021
2020
Payables due to policyholders
1,229 1,135
Payables due to brokers and agents
467 399
Payables out of reinsurance
1,384 1,218
Social security and taxes payable
145 110
Income tax payable
4 2
Investment creditors
1,103 1,068
Cash collateral on derivative transactions
2,708 6,118
Cash collateral on securities lended
2,171 2,053
Cash collateral - other
76 74
Repurchase agreements
821 962
Short term deposits
-
105
Commercial paper
- 72
Lease liabilities
252
266
Other creditors
2,556 3,100
At December 31
12,916 16,685
Current
12,233 16,111
Non-current
683 575
The carrying amounts disclosed reasonably approximate the fair values at year-end, given the predominantly current nature
of the
otherliabilities.
42 Accruals
2021
2020
Accrued interest
251 241
Accrued expenses
285 210
At December 31
537 451
The carrying amounts disclosed reasonably approximate the fair values as at the year-end.
43 Capital management and solvency
Strategic importance
Aegon’s approach towards capital management plays avital role in supporting the execution of its strategy. The key capital
management priority is to ensure adequate capitalization to cover Aegon’s obligations towards its policyholders and debtholders while
providing sustainable dividends to shareholders. This priority is accomplished by allocating capital to products that offer high growth
and return prospects.
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Notes to the consolidated financial statements
Note 41
Management of capital
Disciplined risk and capital management support Aegon’s decisions in deploying the capital that is generated
in the Company's businesses and that is provided for by investors. Aegon balances the funding of new business growth with
the funding required to ensure that its obligations towards policyholders and debtholders are always adequately met, and providing for
asustainable dividend to shareholders.
Aegon’s goal for both its operating units and for the Aegon group as awhole is to maintain astrong financial position and to be able
to sustain losses from extreme business and market conditions. Aegon’s Enterprise Risk Management (ERM) framework ensures
that the Aegon Group and its operating companies are adequately capitalized and that obligations towards policyholders are always
adequately met. Embedded in this larger framework is Aegon’s capital management policy, which is based on adequate capitalization
of the operating units, Cash Capital at Holding and leverage.
Aegon manages capital in the operating units to their respective operating levels, sufficient to absorb moderate shocks and pay
sustainable remittances to the Group, and above their minimum dividend payment levels. Cash Capital at Holding is maintained within
an operating range of EUR0.5 – 1.5billion and covers holding expenses, near-term dividends, and contingencies, such as potential
recapitalization of units. Furthermore, Aegon aims to reduce its gross financial leverage from the current level of EUR5.9billion
to the range of EUR5.0 – 5.5billion by 2023. This reduction of leverage will strengthen the balance sheet, reduce Aegon’s risk profile
and therefore make Aegon more resilient.
The frequent monitoring of actual and forecasted capitalization levels of its underlying businesses is an important element
in Aegon's capital framework in order to actively steer and manage towards maintaining adequate capitalization levels. Group operating
capital generation contributed favorably and more than offset dividend payments.
Capital ratios of Aegon's main operating units
December 31, 2021
1)
December 31, 2020
US RBC ratio
426%
432%
NL Life Solvency II ratio
186% 159%
Scottish Equitable Plc (UK) Solvency II ratio
167% 156%
1
The estimated RBC ratioin the United States decreased from 432% on December 31, 2020, to 426% on December 31, 2021, and
remained above the operating level of 400%. The RBC ratio was positively impacted by higher equity markets and by private equity
revaluations. One-time impacts were negative overall, driven by updates to regulatory factors that determine required capital, and
in part by the impact of actions taken to reduce mortality risk. There was a partial offset from capital release from the lump-sum
buy-out program for variable annuities. Operating capital generation contributed favorably, despite being impacted by adverse mortality
as a result of the COVID-19 pandemic, but was more than offset by dividend payments to the intermediate holding company.
The estimated Solvency II ratio of NL Life increased from 159% on December 31, 2020, to 186% on December 31, 2021, which
is above the operating level of 150%. The increase includes benefits from management actions and model updates. The main
management action was the longevity transaction as announced on December 15, 2021, which significantly reduced required capital.
Market impacts had aslight negative impact, mainly due to higher interest rates. This is areflection of the fact that Aegon hedges
on an economic basis. Operating capital generation had apositive impact, which more than offset remittances to Group.
The estimatedSolvency II ratio for Scottish Equitable Plc increased from 156% on December 31, 2020, to 167% on December 31,
2021, and remained above the operating level of 150%. The increase was primarily driven by management actions to reduce the equity
risk in the own pension plan. Furthermore, aforthcoming change in the corporate income tax rate led to areduction in required capital,
contributing favorably. In addition, strong operating capital generation had apositive impact. These positive impacts more than offset
the impact of dividend payments to the intermediate holding company.
The abilityof Aegon's operating units, principally insurance companies, to pay remittances to the holding company is constrained
by the requirement for these operating units to remain adequately capitalized to the levels set by local insurance regulations and
governed by local insurance supervisory authorities. Based on the capitalization level of the operating units, local insurance supervisors
are able to restrict and/or prohibit the transfer of remittances to the holding company. In addition, the ability of operating units to pay
remittances to the holding company can be constrained by the requirement for these operating units to hold sufficient shareholders'
equity as determined by law. The capitalization level and shareholders' equity of the operating units can be impacted by various
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Financial information
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Note 43
factors (e.g. general economic conditions, capital market risks, underwriting risk factors, changes in government regulations, and
legal and arbitrational proceedings). To mitigate the impact of such factors on the ability of operating units to transfer funds, Aegon
establishes an operating level of capital in each of the units, 150% SCR for Solvency II units and 400% RBC CAL in the US, which
includes additional capital in excess of regulatory capital requirements. Aegon manages capital in the units to this operating level
over-the-cycle.
Cash Capital at Holding
Cash Capital at Holding increased from EUR 1.1 billion on December 31, 2020 to EUR 1.3 billion on December 31, 2021, driven by free
cash flows from the operating units. These free cash flows were used to reduce leverage and pay dividends to Aegon’s shareholders
and to support operating units through capital injections. Proceeds from divestments also contributed to Cash Capital at Holding,
notably Transamerica’s portfolio of fintech and insurtech companies and Stonebridge in the United Kingdom.
Aegon Group Solvency Ratio
To calculate its Group Solvency Ratio, Aegon applies acombination of the Group consolidation methods available under Solvency II:
the Accounting Consolidation (AC) and Deduction & Aggregation (D&A) based methods. Solvency II capital requirements are mainly used
for the European Economic Area (EEA)-based insurance and reinsurance entities, applying the AC method. Local requirements are used
for insurance and reinsurance entities in (provisionally) equivalent third-country jurisdictions. Aegon's UK insurance subsidiaries have
been included in the Group Solvency II calculation in accordance with Solvency II standards, including Aegon's approved Partial Internal
Model.For more details, reference is made to the section “Regulation and Supervision”.
The Group Solvency II ratio is calculated as the ratio between the Eligible Own Funds and the Solvency Capital Requirement (SCR).
The Eligible Own Funds equal to the Available Own Funds after applying any Own Funds eligibility restrictions.
The Group SCR is calculated based on Solvency II Partial Internal Model (PIM), which includes the SCR of AC entities, the D&A entities
and the Other Financial Sector entities (including Aegon Bank). The SCR amount (or 100% Solvency II ratio) reflects alevel of Eligible
Own Funds that enables insurance and reinsurance entities to absorb significant losses (1-in-200 year events) and gives reasonable
assurance to policyholders and beneficiaries that payments will be made as they fall due. On December 31, 2021, Aegon's estimated
capital position was:
December 31, 2021
1)
December 31, 2020
Group Own Funds
19,431 18,582
Group SCR
9,226 9,473
Group Solvency II ratio
211% 196%
1
Aegon Group Eligible Own Funds amounted to EUR19,431million on December 31, 2021 (2020: EUR18,582million). The increase
of EUR849million in Own Funds since December 31, 2020, was mostly driven by the positive impact from expected return on in-
force business and market impacts. The positive impact was partly offset by claims experience in the Americasdue to COVID-19,and
the negative impact on Own Funds resulting from management actions.
Aegon's Group PIM SCR amounted to EUR9,226million on December 31, 2021 (2020: EUR9,473million). The SCR decreased
by EUR247million since December 31, 2020. This decrease was mainly the result from the release of required capital of in force
business, partially offset by the need to setup SCR for new business, the impact from management actions - notably the reinsurance
of longevity risk announced in December 2021 for NL Life - and model and assumption changes including the increased
L AC-
DT factor for NL Life from 45% to 65%. There were partial offsets from market impacts and alower benefit of group diversification. As aresult
of the above changes in Eligible Own Funds and PIM SCR, the Group Solvency II ratio increased by 15%-points to 211% in 2021.
Minimum regulatory requirements
Insurance laws and regulations in local regulatory jurisdictions often contain minimum regulatory capital requirements. For insurance
companies in the European Union, Solvency II formally defines alower capital requirement, being the Minimum Capital Requirement
(MCR). An irreparable breach of the MCR would lead to awithdrawal of the Company's insurance license. Similarly, for the US insurance
entities the withdrawal of the insurance license is triggered by abreach of the 100% Authorized Control Level (ACL), which is set
at 50% of the Company Action Level (CAL).
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Notes to the consolidated financial statements
Note 43
With the introduction of Solvency II for EEA countries, Aegon views the higher capital requirement, 100% of the SCR, as the level
around which EU supervisors will formally require management to provide regulatory recovery plans. For the US insurance entities this
is viewed at 100% CAL.
During 2021, the Aegon Group and the regulated entities within the Aegon Group that are subject to regulatory capital requirements
on asolo-level continued to comply with the solvency requirements.
Capital quality
Aegon’s capital consists of 3 Tiers as an indication of its quality, with Tier 1 capital ranking the highest. The Available Own Funds is an
estimate, has not been filed with the regulator and is subject to supervisory review. It is to be noted that the Group Own Funds do not
include any contingent liability potentially arising from unit-linked products sold, issued or advised on by Aegon in the Netherlands
in the past as the potential liability cannot be reliably quantified at this point.
The below table provides the composition of Aegon's Available Own Funds across Tiers:
Available Own Funds
2021
2020
Available Own
Funds
Percentage
total
Available Own
Funds
Percentage
total
Tier 1 (Unrestricted Tier 1 + Restricted Tier 1)
16,409 84% 15,542 84%
Unrestricted Tier 1
14,044 72% 12,972 70%
Restricted Tier 1
2,364 12% 2,571 14%
Junior Perpetual Capital Securities
1,391 7%
1,563 8%
Perpetual Cumulative Securities
459 2%
475 3%
Perpetual Contingent Convertible Securities
515 3%
532 3%
Tier 2
2,348 12% 2,340 13%
Subordinated notes issued by AFC
832 4%
818 4%
Subordinated liabilities Aegon NV
767 4%
754 4%
Grandfathered subordinated notes
750 4%
768 4%
Tier 3
675 3% 700 4%
Total Available Own Funds
19,431 18,582
On December 31, 2021, Tier 1 capital amounted to EUR16,409million (2020: EUR15,542), which includes EUR2,364million
(2020: EUR2,571million ) restricted Tier 1 capital. Restricted Tier 1 capital consists of Aegon's junior perpetual capital securities
(2021: EUR1,391million, 2020: EUR1,563million), perpetual cumulative subordinated bonds (2021: EUR459million; 2020:
EUR475million), and perpetual contingent convertible security (2021: EUR515million;2020: EUR532million). Both junior
perpetual capital securities and perpetual cumulative subordinated bonds are grandfathered. The reduction in junior perpetual capital
securities is driven by the redemption in September 2021 of USD 250million floating rate perpetual capital securities with aminimum
coupon of 4% issued in 2005. Perpetual contingent convertible securities are Solvency II compliant liabilities which were issued
in 2019.Restricted Tier 1 capital is subject to eligibility restrictions to qualify as Eligible Own Funds.
On December 31, 2021, Tier 2 capital amounted to EUR2,348million (2020: 2,340million). This consists of the subordinated notes
issued by Aegon Funding Company LLC (AFC) in 2019 (2021: EUR832million; 2020: EUR818million), the Solvency II compliant
subordinated liabilities that were issued during 2018 (2021: EUR767million;2020: EUR754million), and grandfathered
subordinated notes (2021: EUR750million;2020: EUR768million). Tier 2 capital is subject to eligibility restrictions to qualify
as Eligible Own Funds.
The grandfathered restricted Tier 1 and Tier 2 capital instruments are grandfathered such that they are considered as capital under
the Solvency II framework until December 31, 2025. For the terms and conditions of these grandfathered instruments refer to note
31 Other equity instruments and note 32 Subordinated borrowings.
It is to be noted that the difference between the amounts mentioned above for junior perpetual capital securities and perpetual
cumulative subordinated bonds, and those in note 31 Other equity instruments and note 32 Subordinated borrowings, stem from
valuation differences between Solvency II (market value) and EU-IFRS rules (refer to related accounting policies in note 2, paragraphs
2.17 and 2.18).
Tier 3 capital as of December 31, 2021 is comprised of deferred tax assets balances related to Solvency II entities.
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Note 43
EU-IFRS equity compares to Solvency II Own Funds as follows:
2021
2020
IFRS Shareholders' Equity
24,282 22,815
IFRS adjustments for Other Equity instruments and non controlling interests
2,559 2,644
IFRS Group Equity
26,841 25,459
Solvency II revaluations & reclassifications
(9,564) (9,418)
Transferability restrictions
1)
(1,772) (1,766)
Excess of Assets over Liabilities
15,504 14,274
Availability adjustments
4,020 4,416
Fungibility adjustments
(93) (108)
Available Own Funds
19,431 18,582
1
The Solvency II revaluations and reclassification of EUR 9,564million negative (2020: EUR 9,418million negative) mainly stem from
the difference in valuation and presentation between EU-IFRS and Solvency II frameworks. The Solvency II revaluations and
reclassification can be grouped into four categories:
•
Items that are not recognized under Solvency II. The most relevant examples of this category for Aegon include Goodwill, deferred
policy acquisition costs (DPAC)and other intangible assets (EUR 2,263million negative, 2020: EUR 1,989million negative);
•
Items that have adifferent valuation treatment between EU-IFRS and Solvency II. Solvency II is amarket consistent framework
hence all assets and liabilities are to be presented at fair value while EU-IFRS also includes other valuation treatments in addition
to fair value. The most relevant examples of this category for Aegon Group include loans and mortgages, reinsurance recoverables,
and technical provisions. The revaluation difference stemming from this category amounted to EUR 3,197million positive (2020:
EUR 2,878million positive) compared to the EU-IFRS Statement of Financial Position;
•
The Net Asset Value of subsidiaries that are included under the D&A method (on provisional equivalence or Standard Formula basis)
in the Group Solvency II results. The revaluation difference stemming from this category amounted to EUR 7,331million negative
(2020: EUR 6,942million negative) compared to the EU-IFRS Statement of Financial Position;
•
Reclassification of subordinated liabilities of EUR 3,168million negative (2020: EUR 3,366 negative).
The transferability restrictions reflect the restrictions on Tier 1 unrestricted Own Funds as aconsequence of the RBC CAL conversion
methodology as described above.
The availability adjustments are changes to the availability of Own Funds of Aegon Group in accordance with Solvency II requirements.
Examples include the adjustments for subordinated liabilities, ring-fenced fund, treasury shares and foreseeable dividend.
Finally, the fungibility restrictions limit the availability of Own Funds on Aegon Group level as prescribed by Supervisory Authorities.
These limitations refer to charitable trusts in the Americas for which the local Supervisory Authority could limit the upstream of capital
to the Group and therefore are excluded for Solvency II purposes.
Capital leverage
Aegon’s total capitalization reflects the capital employed in the business units and consists of shareholders’ capital and total gross
financial leverage. Aegon assesses its gross financial leverage position based on various leverage metrics, including the gross financial
leverage ratio, which is calculated by dividing total financial leverage by total capitalization. Aegon defines total financial leverage
as debt or debt-like funding issued for general corporate purposes and for capitalizing Aegon’s business units. Total financial leverage
includes hybrid instruments, in addition to both subordinated and senior debt. Aegon’s total capitalization comprises the following
components:
•
Shareholders’ equity excluding revaluation reservesbased on IFRS as adopted by the EU;
•
Non-controlling interests and Long Term Incentive Plans not yet vested; and
•
Total financial leverage.
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The following table shows the composition of Aegon's total capitalization, the calculation of the gross financial leverage ratio and its
fixed charge coverage:
Note
2021
2020
Total shareholders’ equity - based on IFRS as adopted by the EU
30
24,282
22,815
Non-controlling interests and Long Term Incentive Plans not yet vested
31, SOFP
2)
253 126
Revaluation reserves
30
(6,442)
(7,480)
Adjusted shareholders' equity
18,093 15,461
Perpetual contingent convertible securities
31
500
500
Junior perpetual capital securities
31
1,352 1,564
Perpetual cumulative subordinated bonds
31
454
454
Fixed floating subordinated notes
32
1,396 1,345
Fixed subordinated notes
32
798 740
Trust pass-through securities
33
126 126
Currency revaluation other equity instruments
1)
16
(1)
Hybrid leverage
4,642 4,728
Senior debt
3)
37
1,290 1,241
Senior leverage
1,290 1,241
Total gross financial leverage
5,932 5,969
Total capitalization
24,008 21,430
Gross financial leverage ratio
24.7% 27.9%
Fixed Charge Coverage
9.3 x 8.3 x
1
2
3
AegonN.V. is subject to legal restrictions with regard to the amount of dividends it can pay to its shareholders. Under Dutch law,
the amount that is available to pay dividends consists of total shareholders' equity less the issued and outstanding capital and
the reserves required by law. The legal reserves in respect of the foreign currency translation reserve (FCTR), group companies and
the revaluation reserves, cannot be freely distributed. In case of negative balances for individual reserves legally to be retained,
no distributions can be made out of retained earnings to the level of these negative amounts. Total distributable items under Dutch law
amounted to EUR14,093million as at December 31, 2021 (2020: EUR12,797million). The following table shows the composition
of the total distributable items:
Distributable items
2021
2020
Equity attributable to shareholders
24,282 22,815
Non-distributable items:
Share capital
(321) (320)
Legal reserves
1)
(9,868)
(9,697)
At December 31
14,093 12,797
1
cannot be freely distributed.
Besides the distributable items under Dutch law, asecond restriction on the possibility to distribute dividends stems from Solvency II
(Dutch Supervision act).
Distributable reserves
2021
2020
Reserves available for financial surpervision purposes
19,431 18,582
Solvency requirement under the Financial Supervision Act
9,226 9,473
Total distributable reserves on the basis of solvency requirements
10,205 9,109
The freely distributable reserves is the minimum of distributable items under Dutch law and the freely distributable capital on the basis
of solvency requirements and amounted to EUR10,205million as at December 31, 2021 (2020: EUR9,109million).
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Note 43
44 Fair value
The estimated fair values of Aegon’s assets and liabilities correspond with the amounts that would be received to sell an asset or paid
to transfer aliability in an orderly transaction between market participants at the measurement date. When available, Aegon uses
quoted market prices in active markets to determine the fair value of investments and derivatives. In the absence of an active market,
the fair value of investments in financial assets is estimated by using other market observable data, such as corroborated external
quotes and present value or other valuation techniques. An active market is one in which transactions are taking place regularly on an
arm’s length basis. Fair value is not determined based upon aforced liquidation or distressed sale.
Valuation techniques are used when Aegon determines the market is inactive or quoted market prices are not available for the asset
or liability at the measurement date. However, the fair value measurement objective remains the same, that is, to estimate
the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants
at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of amarket
participant that holds the asset or owes the liability). Therefore, unobservable inputs reflect Aegon’s own assumptions about
the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are
developed based on the best information available.
Aegon employs an oversight structure over valuation of financial instruments that includes appropriate segregation of duties. Senior
management, independent of control and valuation policies and for reporting
of the
investing functions, is responsible for the oversightthe results of these policies. For fair values determined by reference to external quotation or evidenced pricing parameters, independent
price determination or validation is utilized to corroborate those inputs. Further details
of the
validation processes are set out below.Valuation of assets and liabilities is based on apricing hierarchy, in order to maintain acontrolled process that will systematically
promote the use of prices from sources in which Aegon has the most confidence, where the least amount of manual intervention exists
and to embed consistency in the selection of price sources. Depending on asset type the pricing hierarchy consists of awaterfall that
starts with making use of market prices from indices and follows with making use of third-party pricing services or brokers.
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Notes to the consolidated financial statements
Note 44
Fair value hierarchy
The table below provides an analysis of assets and liabilities recorded at fair value on arecurring basis by level of the fair
value hierarchy:
Level I Level II Level III
Total 2021
Assets carried at fair value
Available-for-sale
Shares
84 75 191 350
Debt securities
25,166 68,131 603 93,899
Money market and other short-term instruments
1,204 3,586 - 4,790
Other investments at fair value
- 246 599 844
26,453 72,038 1,393 99,884
Fair value through profit or loss
Shares
85 237 1,343 1,665
Debt securities
130 3,161 5 3,296
Money market and other short-term instruments
18 102 - 120
Other investments at fair value
2 389 3,010 3,401
Investments for account of policyholders
1)
129,794 119,653 943 250,390
Derivatives
150 8,676 1 8,827
Investments in real estate
- - 2,643 2,643
Investments in real estate for policyholders
- - 563 563
130,178 132,219 8,507 270,904
Revalued amounts
Real estate held for own use
- - 185 185
- - 185 185
Total assets at fair value
156,631 204,256 10,086 370,974
Liabilities carried at fair value
Investment contracts for account of policyholders
2)
- 71,249 (6) 71,242
- - - -
Derivatives
39 7,162 3,437 10,639
Total liabilities at fair value
39 78,411 3,431 81,881
1
2
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Level I Level II Level III
Total 2020
Assets carried at fair value
Available-for-sale
Shares
90 82 173
345
Debt securities
28,300 64,914 467 93,681
Money market and other short-term instruments
832 3,726 -
4,558
Other investments at fair value
- 415 581 996
29,222 69,136 1,221 99,580
Fair value through profit or loss
Shares
80 226 1,329 1,634
Debt securities
168 5,260 242 5,669
Money market and other short-term instruments
17 93 - 109
Other investments at fair value
1 470 2,174
2,645
Investments for account of policyholders
1)
118,057 104,635 1,012 223,705
Derivatives
34 13,930 22 13,986
Investments in real estate
- - 2,385 2,385
Investments in real estate for policyholders
- - 467 467
118,356 124,613 7,631 250,600
Revalued amounts
Real estate held for own use
- - 209 209
- - 209 209
Total assets at fair value
147,578 193,750 9,061 350,389
Liabilities carried at fair value
Investment contracts for account of policyholders
2)
- 59,637 (12) 59,625
Derivatives
61 9,654 4,902 14,617
Total liabilities at fair value
61 69,291 4,890 74,242
1
2
3
Significant transfers between Level I, Level II and Level III
Aegon’s policy is to record transfers of assets and liabilities between Level I, Level II and Level III at their fair values as of the beginning
of each reporting period.
The table below shows transfers between Level I and Level II for financial assets and financial liabilities recorded at fair value
on arecurring basis.
Total 2021
Total 2020
Transfers Level I
to Level II
Transfers Level II
to Level I
Transfers Level I
to Level II
Transfers Level II
to Level I
Assets carried at fair value
Available-for-sale
Debt securities
44 32 - 46
44 32 - 46
Total assets at fair value
44 32 - 46
Total Liabilities carried at fair value
- - - -
Transfers are identified based on transaction volume and frequency, which are indicative of an active market.
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Notes to the consolidated financial statements
Note 44
Movements in Level III financial instruments measured at fair value
The following table summarizes the change of all assets and liabilities measured at estimated fair value on arecurring basis using
significant unobservable inputs (Level III), including realized and unrealized gains (losses) of all assets and liabilities and unrealized
gains (losses) of all assets and liabilities still held at the end of the respective period.
Assets carried at
fair value
At January 1, 2021
Acquisitions through business
combinations
Disposal of abusiness
Total gains / losses in income
statement
1)
Total gains / losses in OCI
2)
Purchases
Sales
Settlements
Net exchange difference
Reclassification
Transfers from levels I and II
Transfers to levels I and II
Transfers to disposal groups
At December 31, 2021
Total unrealized gains and
(losses) for the period recorded
in the P&L for instruments held
at December 31, 2021
3)
Available-for-sale
Shares
173 - - 1 3 30 (26) (0) 11 - - - - 191 -
Debt securities
467 - - (1) 6 228 (29) (46) 22 - 203 (246) - 603 -
Money markets and
other short-term
instruments
- - - - - - - - - - - - - - -
Other investments at
fair value
581 - - (113) 7 111 (24) (6) 43 - - - - 599 -
1,221 - - (114) 16 368 (80) (52) 77 - 203 (246) - 1,393 -
Fair value through
profit or loss
Shares
1,329 - - 150 - 179 (316) 1 1 - - - - 1,343 147
Debt securities
242 - - (1) - 124 (361) - - - - - - 5 1
Other investments at
fair value
2,173 - - 796 - 492 (638) - 186 - - - - 3,010 (1)
Investments for
account of
policyholders
1,012 - - 206 (0) (198) (93) - 22 - - (7) - 943 162
Derivatives
22 - - (17) - - (4) - - - - - - 1 (10)
Investments in real
estate
2,385 - - 253 - 48 (60) - 3 14 - - - 2,643 253
Investments in real
estate for
policyholders
467 - - 46 - 60 (43) - 32 - - - - 563 66
7,631 - - 1,433 (0) 705 (1,514) - 245 14 - (7) - 8,507 618
Revalued amounts
Real estate held for
own use
209 - - (16) (4) 6 - (0) 5 (14) - - - 185 1
209 - - (16) (4) 6 - (0) 5 (14) - - - 185 1
Total assets at fair
value
9,061 - - 1,303 12 1,079 (1,594) (52) 326 - 203 (253) - 10,086 619
Liabilities carried
at fair value
Investment contracts
for account of
policyholders
(12) - - (1) - (361) 366 - 2 - - - - (6) 3
Derivatives
4,902 - - (1,627) - - (14) - 176 - - - - 3,437 607
4,890 - - (1,628) - (361) 352 - 178 - - - - 3,431 610
1
statement.
2
statement on disposal and impairment of available-for-sale investments and Changes in revaluation reserve real estate held for own use of the statement of other
comprehensive income.
3
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Assets carried at
fair value
At January 1, 2020
Acquisitions through
business combinations
Disposal of abusiness
Total gains / losses in
income statement
1)
Total gains / losses in OCI
2)
Purchases
Sales
Settlements
Net exchange difference
Reclassification
Transfers from levels I and II
Transfers to levels I and II
Transfers to disposal groups
At December 31, 2020
Total unrealized gains and
(losses) for the period
recorded in the P&L for
instruments held at
December 31, 2020
3)
Available-for-sale
Shares
157 - - (27) 24 49 (15) (1) (12) - - (2) - 173 -
Debt securities
1,074 - - 3 (19) 155 (11) (34) (32) - 26 (695) - 467 -
Money markets and
other short-term
instruments
- - - - - - - - - - - - - - -
Other investments at
fair value
482 - - (140) 28 302 (19) (22) (50) - - - - 581 -
1,712 - - (163) 34 505 (45) (56) (94) - 26 (697) - 1,221 -
Fair value through
profit or loss
Shares
1,401 - - (132) - 160 (97) - (3) - - - - 1,329 (98)
Debt securities
4 - - - - 276 (37) - - - - - - 242 -
Other investments at
fair value
2,049 - - 122 - 432 (250) - (184) - 16 (13) - 2,173 (1)
Investments for
account of
policyholders
1,805 - - 3 - (168) (607) - (20) - - - - 1,012 37
Derivatives
56 - - (33) - - - - - - - - - 22 (32)
Investments in real
estate
2,901 - - 65 - 150 (717) - (14) - - - - 2,385 196
Investments in real
estate for
policyholders
586 - - (36) - 4 (56) - (31) - - - - 467 (52)
8,802 - - (11) - 854 (1,765) - (251) - 16 (13) - 7,631 51
Revalued amounts
Real estate held for
own use
208 - - (9) 18 5 (5) - (8) - - - - 209 -
208 - - (9) 18 5 (5) - (8) - - - - 209 -
Total assets at fair
value
10,722 - - (183) 51 1,364 (1,815) (57) (354) - 42 (710) - 9,061 51
Liabilities carried
at fair value
Investment contracts
for account of
policyholders
197 - - 9 - (200) (16) - (3) - - - - (12) 7
Derivatives
3,081 - - 2,073 (9) - (15) - (228) - - - - 4,902 314
3,278 - - 2,082 (9) (200) (31) - (231) - - - - 4,890 321
1
statement.
2
statement on disposal and impairment of available-for-sale investments and Changes in revaluation reserve real estate held for own use of the statement of other
comprehensive income.
3
During 2021, Aegon transferred certain financial instruments from Level I and II to Level III of the fair value hierarchy. The reason for
the change in level was that the market liquidity for these securities decreased, which led to achange in market observability of prices.
Prior to transfer, the fair value for the Level II securities was determined using observable market transactions or corroborated broker
quotes respectively for the same or similar instruments. Since the transfer, all such assets have been valued using valuation models
incorporating significant non market-observable inputs or uncorroborated broker quotes.
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Similarly, during 2021, Aegon transferred certain financial instruments from Level III to Level I and II of the fair value hierarchy.
The change in level was mainly the result of areturn of activity in the market for these securities and that for these securities the fair
value could be determined using observable market transactions or corroborated broker quotes for the same or similar instruments.
Valuation techniques and significant unobservable inputs
The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain
Level III financial instruments.
Valuation technique
1)
Significant unobservable
input
2)
December
31, 2021
Range
(weighted
average)
December
31, 2020
Range
(weighted
average)
Assets carried at fair value
Available-for-sale
Shares
Net asset value n.a. 166 n.a. 136 n.a.
Other n.a. 25 n.a. 37 n.a.
191 173
Debt securities
Broker quote n.a. 493 n.a. 374 n.a.
Discounted cash flow Credit spread - n.a. 29 2.38%
Discounted cash flow Constant Prepayment Rate 5 21.43% 6 n.a.
Discounted cash flow Constant Prepayment Rate 22 9.95% 24 8.57%
Other n.a. 82 n.a. 34 n.a.
603 467
Other investments at fair value
Tax credit investments
Discounted cash flow Discount rate 541 7.09% 517 6.55%
Investment funds
Net asset value n.a. 3 n.a. 12 n.a.
Other
Other n.a. 56 n.a. 52 n.a.
599 581
At December 31
1,393 1,221
Fair value through profit or
loss
Shares
Other n.a. 1,343 n.a. 1,329 n.a.
Debt securities
Other n.a. 5 n.a. 3 n.a.
Debt securities
Broker quote n.a. - n.a. 239 n.a.
1,348 1,571
Other investments at fair value
Investment funds
Net asset value n.a. 2,944 n.a. 2,095 n.a.
Other
Other n.a. 66 n.a. 79 n.a.
3,010 2,174
Derivatives
Longevity swap
Discounted cash flow Mortality - n.a. 22 n.a.
- 22
Total assets at fair value
3)
5,750 7,582
Liabilities carried at fair value
Derivatives
Embedded derivatives in insurance
contracts
Discounted cash flow Own credit spread 3,437 0.23% 4,902 0.25%
Total liabilities at fair value
3,437 4,902
1
2
value measurement in this note for adetailed description of Aegon’s methods of determining fair value and the valuation techniques.
3
Policyholder assets, and their returns, belong to policyholders and do not impact Aegon’s net result or equity. The effect on total assets is offset by the effect on
total liabilities. Derivatives exclude derivatives for account of policyholders amounting to 1 (2020: 0)
For reference purposes, the valuation techniques included in the table above are described in more detail on the following pages.
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Note 44
Effect of changes in significant unobservable assumptions to reasonably possible alternatives
Own credit spread, as included in the discount rate for embedded derivatives in insurance contracts, is considered as asignificant
unobservable input. It is estimated that changing the other significant unobservable inputs to reflect reasonable possible alternatives
in valuation would have no significant impact for the Group.
An increase in own credit spread results in lower valuation, while adecrease results in ahigher valuation of the embedded derivatives.
The table below presents the impact on afair value measurement of achange in the own credit spread by 5 basis points included
in the discount rate.
December 31,
2021
Effect of reasonably
possible alternative
assumptions (+/-)
December 31,
2020
Effect of reasonably
possible alternative
assumptions (+/-)
Increase Decrease
Increase Decrease
Financial liabilities carried at fair value
Embedded derivatives in insurance contracts
3,437 39 (39) 4,902 48 (48)
Fair value information about assets and liabilities not measured at fair value
The following table presents the carrying values and estimated fair values of assets and liabilities, excluding assets and liabilities which
are carried at fair value on arecurring basis.
2021
Carrying amount
December 31, 2021
Estimated fair value hierarchy
Total estimated
fair value
December 31, 2021Level I Level II Level III
Assets
Mortgage loans - held at amortized cost
40,624 - 1 44,366 44,366
Private loans - held at amortized cost
4,883 - 34 5,457 5,491
Other loans - held at amortized cost
1,949 21 1,923 5 1,949
Liabilities
Subordinated borrowings - held at amortized cost
2,194 1,567 872 - 2,438
Trust pass-through securities - held at amortized cost
126 - 139 - 139
Borrowings – held at amortized cost
9,661 1,735 2,662 5,773 10,171
Investment contracts - held at amortized cost
21,573 - - 20,861 20,861
2020
Carrying amount
December 31, 2020
Estimated fair value hierarchy
Total estimated
fair value
December 31, 2020Level I Level II Level III
Assets
Mortgage loans - held at amortized cost
39,298 - 1 43,257 43,258
Private loans - held at amortized cost
4,358 - 38 5,242 5,280
Other loans - held at amortized cost
1,917 41 1,850 26 1,917
Liabilities
Subordinated borrowings - held at amortized cost
2,085 1,517 834 - 2,351
Trust pass-through securities - held at amortized cost
126 - 51 91 142
Borrowings – held at amortized cost
8,524 1,766 2,083 5,315 9,165
Investment contracts - held at amortized cost
20,889 - - 20,382 20,382
Certain financial instruments that are not carried at fair value are carried at amounts that approximate fair value, due to their short-
term nature and generally negligible credit risk. These instruments include cash and cash equivalents, short-term receivables and
accrued interest receivable, short-term liabilities, and accrued liabilities. These instruments are not included in the table above.
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Fair value measurement
The description of Aegon's methods of determining fair value and the valuation techniques are described on the following pages.
Shares
When available, Aegon uses quoted market prices in active markets to determine the fair value of its investments in shares. For Level
III unquoted shares,the net asset value can be considered the best approximation to the fair value. Net asset value is the value of an
entity's assets minus the value of its liabilities and may be the same as the book value or the equity value of the entity.
Also for unquoted shares, the fair value may be estimated using other methods, such as observations of the price/earnings or price/
cash flow ratios of quoted companies considered comparable to the companies being valued. Valuations are adjusted to account for
company-specific issues and the lack of liquidity inherent in an unquoted investment. Adjustments for lack of liquidity are generally
based on available market evidence. In addition, avariety of other factors are reviewed by management, including, but not limited to,
current operating performance, changes in market outlook and the third-party financing environment.
Available-for-sale shares include shares in aFederal Home Loan Bank (FHLB) for an amount of EUR112million (2020: EUR93million),
which are reported as part of the line-item Net asset value. A FHLB has implicit financial support from the United States government.
The redemption value of the shares is fixed at par and they can only be redeemed by the FHLB.
Debt securities
The fair values of debt securities are determined by management after taking into consideration several sources of data. When
available, Aegon uses quoted market prices in active markets to determine the fair value of its debt securities. As stated previously,
Aegon’s valuation policy utilizes apricing hierarchy which dictates that publicly available prices are initially sought from indices and
third-party pricing services. In the event that pricing is not available from these sources, those securities are submitted to brokers
to obtain quotes, the majority of which are non-binding. As part of the pricing process, Aegon assesses the appropriateness of each
quote (i.e. as to whether the quote is based on observable market transactions or not) to determine the most appropriate estimate
of fair value.
When broker quotes are not available, securities are priced using internal cash flow modeling techniques. These valuation
methodologies commonly use the following inputs: reported trades, bids, offers, issuer spreads, benchmark yields, estimated
prepayment speeds, issue specific credit adjustments, indicative quotes from market makers and/or estimated cash flows.
To understand the valuation methodologies used by third-party pricing services Aegon reviews and monitors the applicable
methodology documents of the third-party pricing services. Any changes to their methodologies are noted and reviewed for
reasonableness. In addition, Aegon performs in-depth reviews of prices received from third-party pricing services on asample basis.
The objective for such reviews is to demonstrate that Aegon can corroborate detailed information such as assumptions, inputs and
methodologies used in pricing individual securities against documented pricing methodologies. Only third-party pricing services and
brokers with asubstantial presence in the market and with appropriate experience and expertise are used.
Third-party pricing services will often determine prices using recently reported trades for identical or similar securities. The third-party
pricing service makes adjustments for the elapsed time from the trade date to the reporting date to take into account available market
information. Lacking recently reported trades, third-party pricing services and brokers will use modeling techniques to determine
asecurity price where expected future cash flows are developed based on the performance of the underlying collateral and discounted
using an estimated market rate.
Periodically, Aegon performs an analysis of the inputs obtained from third-party pricing services and brokers to ensure that the inputs
are reasonable and produce areasonable estimate of fair value. Aegon’s asset specialists and investment valuation specialists consider
both qualitative and quantitative factors as part of this analysis. Several examples of analytical procedures performed include, but are
not limited to, recent transactional activity for similar debt securities, review of pricing statistics and trends and consideration of recent
relevant market events. Other controls and procedures over pricing received from indices, third-party pricing services, or brokers include
validation checks such as exception reports which highlight significant price changes, stale prices or unpriced securities. Additionally,
Aegon performs back testing on asample basis. Back testing involves selecting asample of securities trades and comparing the prices
in those transactions to prices used for financial reporting. Significant variances between the price used for financial reporting and
the transaction price are investigated to explain the cause of the difference.
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Credit ratings are also an important consideration in the valuation of securities and are included in the internal process for determining
Aegon’s view of the risk associated with each security. However, Aegon does not rely solely on external credit ratings and there is an
internal process, based on market observable inputs, for determining Aegon’s view of the risks associated with each security.
Aegon’s portfolio of private placement securities (held at fair value under the classification of available-for-sale or fair value through
profit or loss) is valued using amatrix pricing methodology. The pricing matrix is obtained from athird-party service provider and
indicates current spreads for securities based on weighted average life, credit rating, and industry sector. Each month, Aegon’s asset
specialists review the matrix to ensure the spreads are reasonable by comparing them to observed spreads for similar bonds traded
in the market. Other inputs to the valuation include coupon rate, the current interest rate curve used for discounting and aliquidity
premium to account for the illiquid nature of these securities. The liquidity premiums are determined based upon the pricing of recent
transactions in the private placements market; comparing the value of the privately offered security to asimilar public security.
The impact of the liquidity premium for private placement securities to the overall valuation is insignificant.
Aegon's portfolio of debt securities can be subdivided into Residential mortgage-backed securities (RMBS), Commercial mortgage-
backed securities (CMBS), Asset-backed securities (ABS), Corporate bonds and Government debt. Below relevant details of the valuation
methodologies for these specific types of debt securities are described.
Residential mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities
Valuations of RMBS, CMBS and ABS are monitored and reviewed on amonthly basis. Valuations per asset type are based on apricing
hierarchy which uses awaterfall approach that starts with market prices from indices and follows with third-party pricing services
or brokers of corroboration
.
The pricing hierarchy is dependent on the
possibilities of the
market prices. If no market prices are available, Aegon uses internal models to determine fair value. Significant inputs included in the internal models are generally determined based
on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles. Market standard
models may be used to model the specific collateral composition and cash flow structure of each transaction. The most significant
unobservable input is the liquidity premium which is embedded in the discount rate.
Aegon the Netherlands has mandated Aegon Asset Management to invest in RMBS transactions. Aegon Asset Management uses its
own proprietary cash flow tools to analyze and stress test RMBS transactions. The key input parameters are default rates and loss
given default assumptions, which are established based on historical pool characteristics and current loan level data.
Corporate bonds
Valuations of corporate bonds are monitored and reviewed on amonthly basis. The pricing hierarchy is dependent on the possibility
of corroboration of market prices when available. If no market prices are available, valuations are determined by adiscounted cash
flow methodology using an internally calculated yield. The yield is comprised of acredit spread over agiven benchmark. In all cases
the benchmark is an observable input. The credit spread contains both observable and unobservable inputs. Aegon starts by taking
an observable credit spread from asimilar bond of the given issuer, and then adjust this spread based on unobservable inputs. These
unobservable inputs may include subordination, liquidity and maturity differences. During 2021, there were no corporate bonds that
met the policy threshold to be internally modeled.
Government debt
When available, Aegon uses quoted market prices in active markets to determine the fair value of its government debt investments.
When Aegon cannot make use of quoted market prices, market prices from indices or quotes from third-party pricing services
or brokers are used.
Money market and other short-term investments and deposits with financial institutions
The fair value of assets maturing within ayear is assumed to be approximated by their carrying amount adjusted for credit risk where
appropriate. Credit risk adjustments are based on market observable credit spreads if available, or management’s estimate if not
market observable.
Tax credit investments
The Level III fair value of tax credit investments is determined by using adiscounted cash flow valuation technique. This valuation
technique takes into consideration projections of future capital contributions and distributions, as well as future tax credits and
the tax benefits of future operating losses. The present value of these cash flows is calculated by applying adiscount rate. In general,
the discount rate is determined based on the cash outflows for the investments and the cash inflows from the tax credits and/or tax
benefits (and the timing of these cash flows). These inputs are unobservable in the market place. The discount rate used in valuation
of tax credit investments has increased to 7.1% (December 31, 2020: 6.6%).
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Investment funds: Real estate funds, private equity funds and hedge funds
The fair values of investments held in non-quoted investment funds are determined by management after taking into consideration
information provided by the fund managers. Aegon reviews the valuations each month and performs analytical procedures and trending
analyses to ensure the fair values are appropriate. The net asset value is considered the best valuation method that approximates
the fair value of the funds.
Mortgage loans, policy loans and private loans
(held at amortized cost)
For private loans, fixed interest mortgage loans and other loans originated by the Group, the fair value used for disclosure purposes
is estimated by discounting expected future cash flows using acurrent market rate applicable to financial instruments with similar
yield and maturity characteristics. For fixed interest mortgage loans, the market rate is adjusted for expenses, prepayment rates, lapse
assumptions (unobservable inputs), liquidity and credit risk (market observable inputs). An increase in expense spread, prepayment
rates and/or prepayment assumptions, would decrease the fair value of the mortgage loan portfolio.
The fair value of floating interest rate mortgage loans, policy loans and private placements used for disclosure purposes is assumed
to be approximated by their carrying amount, adjusted for changes in credit risk. Credit risk adjustments are based on market
observable credit spreads if available, or management’s estimate if not market observable.
Derivatives
Where quoted market prices are not available, other valuation techniques, such as option pricing or stochastic modeling, are applied.
The valuation techniques incorporate all factors that atypical market participant would consider and are based on observable market
data when available. Models are validated before they are used and calibrated to ensure that outputs reflect actual experience and
comparable market prices.
Fair values for exchange-traded derivatives, principally futures and certain options, are based on quoted market prices in active
markets. Fair values for over-the-counter (OTC) derivative financial instruments represent amounts estimated to be received from
or paid to athird party in settlement of these instruments. These derivatives are valued using pricing models based on the net present
value of estimated future cash flows, directly observed prices from exchange-traded derivatives, other OTC trades, or external pricing
services. Most valuations are derived from swap and volatility matrices, which are constructed for applicable indices and currencies
using current market data from many industry standard sources. Option pricing is based on industry standard valuation models and
current market levels, where applicable. The pricing of complex or illiquid instruments is based on internal models or an independent
third party. For long-dated illiquid contracts, extrapolation methods are applied to observed market data in order to estimate inputs
and assumptions that are not directly observable. To value OTC derivatives, management uses observed market information, other
trades in the market and dealer prices.
Some OTC derivatives are so-called longevity derivatives. The payout of longevity derivatives is linked to publicly available mortality
tables. The derivatives are measured using the present value of the best estimate of expected payouts of the derivative plus arisk
margin. The best estimate of expected payouts is determined using best estimate of mortality developments. Aegon determined
the risk margin by stressing the best estimate mortality developments to quantify the risk and applying acost-of-capital methodology.
Depending on the duration of the longevity swaps either the projected mortality development or discount rate are the most significant
unobservable inputs.
Aegon normally mitigates counterparty credit risk in derivative contracts by entering into collateral agreements where practical and
in ISDA master netting agreements for each of the Group’s legal entities to facilitate Aegon’s right to offset credit risk exposure.
Changes in the fair value of derivatives attributable to changes in counterparty credit risk were not significant.
Embedded derivatives in insurance contracts including guarantees
Bifurcated guarantees for minimum benefits in insurance and investment contracts are carried at fair value. These guarantees include
Guaranteed minimum withdrawal benefits (GMWB) in the United States and United Kingdom which are offered on some variable
annuity products and are also assumed from aceding company; minimum investment return guarantees on insurance products offered
in the Netherlands, including group pension and traditional products; variable annuities sold in Europe.
Since the price of these guarantees is not quoted in any market, the fair values of these guarantees are based on discounted cash flows
calculated as the present value of future expected payments to policyholders less the present value of assessed rider fees attributable
to the guarantees. Given the complexity and long-term nature of these guarantees which are unlike instruments available in financial
markets, their fair values are determined by using stochastic models under avariety of market return scenarios. A variety of factors
are considered, including own credit spread, expected market rates of return, equity and interest rate volatility, correlations of market
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Note 44
returns, discount rates and actuarial assumptions. The most significant unobservable factor is own credit spread. The weighted average
own credit spread used in the valuations of embedded derivatives in insurance contracts decreased to 0.23% (2020: 0.25%).
The expected returns are based on risk-free rates. Aegon added apremium to reflect the credit spread as required. The credit spread
is set by using the Credit default swap (CDS) spreads of areference portfolio of life insurance companies (including Aegon), adjusted
to reflect the subordination of senior debt holders at the holding company level to the position of policyholders at the operating
company level (who have priority in payments over other creditors). Aegon’s assumptions are set by region to reflect differences
in the valuation of the guarantee embedded in the insurance contracts.
Aegon extrapolates yield curves beyond market observable maturities. The discount rates converge linearly in 10 years to an Ultimate
Forward Rate. In the Netherlands, the ultimate forward rate is 3.65% from the last liquid point. The US ultimate forward rate
extrapolates linearly beyond 30 years using an average of forward interest rates implied by the market between 20 years and 30 years.
In the US, the ultimate forward rate is 3.55% from the last liquid point. The uniform last liquid point for all Aegon’s major currencies
(EUR, USD and GBP) is set at 30 years.
Since many of the assumptions are unobservable and are considered to be significant inputs to the liability valuation, the liability
included in future policy benefits has been reflected within Level III of the fair value hierarchy. Refer to note 36 Guarantees in insurance
contracts for more details about Aegon’s guarantees.
Real estate
Valuations of Level III investments in real estate and real estate held for own use are conducted in full by independent external
appraisers at least every three to five years and reviewed at least once ayear by qualified internal appraisers to ensure the value
correctly reflects the fair value at the reporting date. Appraisals are different for each specific local market, but are based on market
guidelines such as International Valuation Standards, Uniform Standards of Professional Appraisal Practice or guidelines issued
by the Investment Property Databank. Valuations are mostly based on active market prices, adjusted for any difference in the nature,
location or condition of the specific property. If such information is not available, other valuation methods are applied, considering
the value that the property’s net earning power will support, the value indicated by recent sales of comparable properties and
the current cost of reproducing or replacing the property. Discount rates used in the valuation of real estate reflect the risk embedded
in the projected cash flows for the asset being valued. Capitalization rates represent the income rate for areal estate property that
reflects the relationship between asingle year’s net operating income expectancy and the total property price or value. For property
held for own use, appraisers consider the present value of the future rental income cash flows that could be achieved had the real
estate been rented to athird party.
Trust pass-through securities and subordinated borrowings
Trust pass-through securities and subordinated borrowings are either carried at fair value (if they are designated as financial liabilities
at fair value through profit or loss) or amortized cost (with fair value being disclosed in the notes to the consolidated financial
statements). For the determination of the fair value of these instruments, the level hierarchy as described by EU-IFRS is used.
The preferred method of obtaining the fair value of the fair value option bonds is the quoted price (Level I). In case markets are less
liquid or the quoted prices are not available, Aegon’s valuation policy utilizes apricing hierarchy which dictates that publicly available
prices are initially sought from indices and third-party pricing services. During 2021, the US method of obtaining fair value for trust
pass-through securities and subordinated borrowings changed from using internal models to obtaining independent third-party vendor
prices. The updated approach reflects consistency in pricing source for the investment grade corporate debt interests and moves
the pricing from an internally generated approach to one or more independent third parties. The US trust pass-through securities and
subordinated borrowings are classified as Level II of the fair value hierarchy.
Investment contracts
Investment contracts issued
by Aegon
are either carried at
fair they financial
value (
if are designated
as liabilities
atfair
value through
profit or
loss) or amortized the
cost (with fair value being disclosed
innotes to the
consolidated
financial statements). These contracts
are not quoted
in active
markets and their fair values are determined by
using discounted
valuation techniques, such
as cash flow
methods and stochastic modeling
or in
relation to
the unit
price
ofthe underlying
assets. All models are validated and calibrated.
A
variety
of factors
are considered, including time value, volatility, policyholder behavior, servicing costs and fair values
of similar
instruments.
Similar to embedded derivatives in insurance contracts, certain investment products are not quoted in active markets and their fair
values are determined by using valuation techniques. Because of the dynamic and complex nature of these cash flows, stochastic
or similar techniques under avariety of market return scenarios are often used. A variety of factors are considered, including expected
market rates of return, market volatility, correlations of market returns, discount rates and actuarial assumptions.
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Note 44
The expected returns are based on risk-free rates, such as the current London Interbank Offered Rate (LIBOR) swap ratesand
associated forward rates, theOvernight Index Swap (OIS) curve or the current rates on local government bonds. Market volatility
assumptions for each underlying index are based on observed market implied volatility data and/or observed market performance.
Correlations of market returns for various underlying indices are based on observed market returns and their inter-relationships over
anumber of years preceding the valuation date. Current risk-free spot rates are used to determine the present value of expected future
cash flows produced in the stochastic projection process.
Assumptions on customer behavior, such as lapses, included in the models are derived in the same way as the assumptions used
to measure insurance liabilities.
Summary of total financial assets and financial liabilities at fair value through profit or loss
The table that follows summarizes the carrying amounts of financial assets and financial liabilities that are classified as at fair value
through profit or loss, with appropriate distinction between those financial assets and financial liabilities held for trading and those
that, upon initial recognition, were designated as at fair value through profit or loss.
2021
2020
Trading Designated
Trading Designated
Investments for general account
41 8,440 114 9,943
Investments for account of policyholders
- 250,390 - 223,705
Derivatives with positive values not designated as hedges
8,184 - 13,269 -
Total financial assets at fair value through profit or loss
8,225 258,830 13,383 233,647
Investment contracts for account of policyholders
- 71,242 - 59,625
Derivatives with negative values not designated as hedges
8,959 - 12,766 -
Total financial liabilities at fair value through profit or loss
8,959 71,242 12,766 59,625
Investments for general account
The Group manages certain portfolios on atotal return basis which have been designated at fair value through profit or loss. This
includes portfolios of investments in limited partnerships and limited liability companies (primarily hedge funds and private equity
funds) for which the performance is assessed internally on atotal return basis. In addition, some investments for general account that
include an embedded derivative that would otherwise have required bifurcation, such as convertible instruments, preferred shares and
credit linked notes, have been designated at fair value through profit or loss.
Aegon has certain insurance and investment liabilities that are carried at fair value with changes in the fair value recognized
in the income statement. The Group has elected to designate the investments backing those liabilities at fair value through profit
or loss, as aclassification of available-for-sale would result in accumulation of unrealized gains and losses in arevaluation reserve
within equity whilst changes to the liability would be reflected in net result (accounting mismatch).
Investments for account of policyholders
Investments held for account of policyholders comprise assets that are linked to various insurance and investment contracts for
which the financial risks are borne by the customer. Under the Group’s accounting policies these insurance and investment liabilities
are measured at the fair value of the linked assets with changes in the fair value recognized in the income statement. To avoid
an accounting mismatch the linked assets have been designated as at fair value through profit or loss.
In addition, the investment for account of policyholders include with profit assets, where Aegon manages these assets together with
related liabilities on afair value basis in accordance with adocumented policy of asset and liability management. In accordance with
the Group’s accounting policies, these assets have been designated as at fair value through profit or loss.
Investment contracts for account of policyholders
With the exception of the financial liabilities with discretionary participating features that are not subject to the classification and
measurement requirements for financial instruments, all investment contracts for account of policyholders that are carried at fair value
or at the fair value of the linked assets are included in the table above.
Derivatives
With the exception of derivatives designated as ahedging instrument, all derivatives held for general account and held for account
of policyholders are included in the table above.
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Non-financial informationNotes to the consolidated financial statements
Note 44
Borrowings
Borrowings designated as at fair value through profit or loss includes financial instruments that are managed on afair value basis
together with related financial assets and financial derivatives (refer to note 37 Borrowings).
Gains and losses on financial assets and financial liabilities classified at fair value through profit or loss
Gains and losses recognized in the income statement on financial assets and financial liabilities classified as at fair value through profit
or loss can be summarized as follows:
2021
2020
1)
Trading Designated
Trading Designated
Net gains and (losses)
(2,930) 25,591 1,150 20,411
1
No loans and receivables were designated at fair value through profit or loss.
Changes in the fair value of investment contracts for account of policyholders designated at fair value through profit or loss were
not attributable to changes in Aegon’s credit spread. There are also no differences between the carrying amounts of these financial
liabilities and the contractual amounts payable at maturity (net of surrender penalties).
Refer to note 37 Borrowings for the impact of Aegon’s own credit spread on the fair value of the borrowings designated at fair value
through profit or loss.
45 Commitments and contingencies
Investments contracted
In the normal course of business, the Group has committed itself through purchase and sale transactions of investments, mostly to be
executed in the course of 2022. The amounts represent the future outflow and inflow, respectively, of cash related to these investment
transactions that are not reflected in the consolidated statement of financial position.
2021
2020
Purchase Sale
Purchase Sale
Real estate
129 6 180 14
Mortgage loans
1,163 67 1,469 122
Private loans
311 - 172 -
Other
1,358 - 1,310 -
Aegon has committed itself, through certain subsidiaries, to invest in real estate, private loans, mortgage loans and receivables and
investment funds.
Real estate commitments represent the committed pipeline of investments in real estate projects. The sale of real estate relates
to properties that are under contract to be sold as per December 31. Mortgage loan commitments represent undrawn mortgage
loan facilities provided and outstanding proposals on mortgages. The sale of mortgage loans relates to pre-announced redemptions
on mortgage loans. Private loans represent deals on Aegon's portfolio of private placement securities that Aegon has committed
to,but which have not yet settled and funded.Other commitments include future purchases of interests in investment funds and
limited partnerships.
In the Netherlands, mortgage customers can take on top of their mortgage a construction deposit for home improvements. Undrawn
amounts of construction deposits are netted against the outstanding total mortgage loans. Per December 31, 2021 an amount
of EUR 319 million (2020: EUR 326 million) of construction deposits is undrawn.
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Notes to the consolidated financial statements
Note 45
Future lease payments
< 1 year
amounts
1 < 2 years
amounts
2 < 3 years
amounts
3 < 4 years
amounts
4 < 5 years
amounts
> 5 years
amounts
2021
Operating lease rights
8 8 6 5 5 21
2020
Operating lease rights
8 6 5 4 4 22
The operating lease rights relate to non-cancellable commercial property leases.
Other commitments and contingencies
2021
2020
Guarantees
506
364
Standby letters of credit
12 11
Share of contingent liabilities incurred in relation to interests in joint ventures
7
7
Other guarantees
11 11
Other commitments and contingent liabilities
- 7
Guarantees include those guarantees associated with the sale of investments in low-income housing tax credit partnerships
in the United States, which can be called upon if there is adeficiency in the tax benefits delivered to the investor or if Aegon is in
default under amaterial provision of the contract.Standby letters of credit amounts reflected above are the liquidity commitment
notional amounts. In addition to the guarantees shown in the table, guarantees have been given for fulfillment of contractual
obligations such as investment mandates related to investment funds.
Contractual obligations
In March 2019, affiliates of Transamerica Corporation and Long Term Care Group (LTCG), entered into aseries of agreements
to which Transamerica transferred to LTCG the administration and claims management of its long term care insurance business line,
enabling Transamerica to accelerate the enhancement of its digital capabilities and modernize its long term care insurance platform.
Over the course of the multi-year contract, Transamerica will pay approximately USD 390million to LTCG. These fees represent
compensation for administering Transamerica’s long term care product line including policyholder service, claims processing and
care management. The agreement also contains atermination clause in which Transamerica – subject to certain limitations – agrees
to compensate LTCG, on aspecified schedule, for early termination.
In April 2018, affiliates of Transamerica Corporation entered into aseries of agreements with affiliates of Tata Consultancy Services
Limited (TCS) to administer the Company’s US life insurance, voluntary benefits, and annuity business lines. The collaboration
enables Transamerica to accelerate the enhancement of its digital capabilities and the modernization of its platforms to service its
customers in all lines of business. Over the course of the multi-year contract, Transamerica could pay more than USD 2billion to TCS.
These fees represent compensation for administering Transamerica’s over 10million policies and are driven by both new business
and policies already in force. In addition, this commitment includes remaining transition and conversion charges of approximately
USD 9million in 2022 as well as administrative, IT and finance service fees which are contingent on TCS meeting specified milestones
in the underlying agreement with Transamerica. The agreement also contains termination clauses which in certain conditions and
subject to certain limitations, could require Transamerica to compensate TCS, on aspecified schedule, for early termination.
In November 2018, Aegon UK announced an extended partnership with Atos BPS Ltd (Atos) to service and administer its Traditional
Products Business (non-Platform customers). The agreement is a15-year contract under which Aegon UK pays Atos to administer
around 1.4million customers, which took effect on June 1, 2019 as planned. At year-end 2021, outstanding transition and conversion
charges are estimated to amount to approximately GBP 8million, which are expected to be recorded over the next year, with fixed
payments to Atos defined in the agreement and subject to completion of milestones which have been agreed with Aegon UK.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 45
On October 31, 2017, Aegon the Netherlands sold its shares in Unirobe Meeùs Groep (UMG) for EUR295million to Aon Groep
Nederland. Under the share purchase agreement between Aegon Nederland and the buyer, Aegon the Netherlands indemnifies
and holds the buyer and its group (including UMG) harmless for and against any damage suffered or incurred which is the result
of the Unit Linked Insurances Claims until 2027 with respect to Unit Linked Policies in the portfolio of UMG prior to January 1, 2017.
The aggregate liability for Aegon the Netherlands is maximized at an amount equal to the purchase price.
An AegonN.V. indirect US life subsidiary has anet worth maintenance agreement with its subsidiary Transamerica Life (Bermuda) Ltd,
pursuant to which Transamerica Life Insurance Company, aUS life insurance subsidiary, will provide capital sufficient to maintain aS&P
'AA' financial strength rating and capital sufficient to comply with the requirements of the countries in which its branches are located.
AegonN.V. has guaranteed and is severally liable for the following:
•
Due and punctual payment of payables under letter of credit agreements applied for by AegonN.V. as co-applicant with its captive
insurance companies that are subsidiaries of Transamerica Corporation and Commonwealth General Corporation. At December 31,
2021, the letter of credit arrangements utilized by captives to provide collateral to affiliates amounted to EUR 1,157million (2020:
EUR 1,618million); as of that date no amounts had been drawn, or were due under these facilities;
•
Due and punctual payment of payables by the consolidated group companies Transamerica Corporation, Aegon Funding Company
LLC and Commonwealth General Corporation with respect to fixed subordinated notes, bonds, capital trust pass-through securities
and notes issued under commercial paper programs amounting to EUR 987million (2020: EUR 993million); and
•
Due and punctual payment of any amounts owed to third parties by the consolidated group company Aegon Derivatives N.V.
in connection with derivative transactions. Aegon Derivatives N.V. enters into derivative transactions with counterparties with which
ISDA master netting agreements, including collateral support annex agreements, have been agreed. Net (credit) exposure
on derivative transactions with these counterparties was therefore limited as of December 31, 2021.
Legal and arbitration proceedings, regulatory investigations and actions
Aegon faces significant risks of litigation as well as regulatory exams and investigations and actions relating to its and its subsidiaries’
businesses. Aegon is also subject to compliance with regulations applicable to it as acorporate entity.
Due to the geographic spread of its business, Aegon Group may be subject to tax audits or litigation in various jurisdictions. Although
uncertainties are provided for adequately in the tax position, the ultimate outcome of tax audits or litigation may result in an outcome
that differs from the amounts provided for.
Insurance companies and their affiliated regulated entities are routinely subject to litigation, investigation and regulatory activity
by various governmental and enforcement authorities, individual claimants and policyholder advocate groups in the jurisdictions
in which Aegon does business, including the United States, the Netherlands, Poland and the United Kingdom. These actions may
involve issues including, but not limited to, employment or distribution relationships; operational and internal controls and processes;
investment returns; sales practices; transparency and adequacy of product disclosures including regarding initial costs, ongoing
costs, and costs due on policy surrender as well as changes to costs over time; environmental and climate change related matters;
competition and antitrust matters; data privacy; information security; intellectual property; and anti-money laundering, anti-bribery and
economic sanctions compliance.
Government and regulatory investigations may result in the institution of administrative, injunctive or other proceedings and/
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 Aegon 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. 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.
The existence
of potential
claims may remain unknown for long periods
oftime events
after
the giving rise
tosuch
claims. Determining
the likelihood
of exposure
to Aegon extent
and
theof
any possible
such exposure may not
be for long periods
oftime
after Aegon becomes
aware of
such time
potential claims. Litigation exposure may develop over long periods
of; once litigation
isinitiated, it
may be
protracted
and subject
to multiple
levels of
appeal significant
, which can lead
to costs
ofdefense
, adverse publicity and other
constraints.Aegon Integrated Annual Report
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Financial information
Non-financial information261
Notes to the consolidated financial statements
Note 45
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 aresult, Aegon cannot predict the effect of litigation, investigations or other actions
on its business.
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 amaterial adverse impact on Aegon’s businesses, results of operations, cash flows and
financial position.
Proceedings in which Aegon is involved
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. Aegon's subsidiary in the US has settled two
such class actions that had been venued in the US District Court for the Central District of California. The settlement in the first
of these cases, approved in January 2019, arose from increases implemented in 2015-2016. Over 99% of affected policyholders
participated in that settlement. While less than 1% of policyholders opted out of the settlement, they represented approximately 43%
of the value of the settlement fund. In asecond case, Aegon’s subsidiary agreed to settle aclass action lawsuit arising out of MDR
increases in 2017 and 2018. The court approved that settlement in September 2020. Opt-outs in this case represented less than 7%
of the value of the settlement fund. The settlement fund was reduced proportionally for opt outs. In 2021, settlements were reached
with some of the opt-out parties from both settled class actions. The remaining opt-out cases and disputes are ongoing, and Aegon
continues to hold aprovision for the remaining opt-outs from the settlements that were approved by the court in 2019 and 2020.
If this provision for these cases proves to be insufficient, then these matters could have an adverse effect on Aegon's business, results
of operations, and financial position.
Transamerica subsidiaries may face employment-related lawsuits from time to time. For example, several Transamerica subsidiaries are
defendants in aclass action alleging that the business model at issue improperly characterizes distributors as independent contractors
instead of employees. Depending on the outcome, these lawsuits, along with similar claims against Transamerica subsidiaries and other
companies and regulatory action could result in significant settlements or judgments, and could necessitate achange in the distribution
model, which would be costly and could have amaterial impact on the financial results for that part of the Transamerica business.
A former subsidiary of Transamerica Corporation was involved in acontractual dispute with aNigerian travel broker that arose in 1976.
That dispute was resolved in Delaware court for USD 235 thousand plus interest in 2010. The plaintiff took the Delaware judgment
relating to the 1976 dispute to aNigerian court and alleged that it was entitled to approximately the same damages for 1977 through
1984 despite the absence of any contract relating to those years. The Nigerian trial court issued ajudgment in favor of the plaintiff
of the
alleged actual damages as well
as pre-judgment interest of approximately
USD 120m
illion. On appeal this decision was reversed
on procedural grounds and remanded back to the trial court which ruled to dismiss the case; however, the Plaintiff appealed the trial
court’s ruling. The appeal is still pending. Aegon has no material assets located in Nigeria.
In Poland, owners of unit-linked policies continue to file claims in civil court against Aegon over fees payable upon purchase
or surrender of the product. Plaintiffs claim that these fees are not contractually supported. Aegon faces asignificant number of these
cases. For reasons of commercial necessity as well as at the instigation of the regulatory authorities, Aegon decided to modify the fee
structure. As of 2021, aprovision of EUR8million remains, which represents management's best estimate of the exposure. The final
amount may vary based on regulatory developments and the outcome of litigation.
In the Netherlands, unit linked products (beleggingsverzekeringen) have been controversial and the target of litigation since at least
2005. Allegations include excessive cost, unfair terms, inadequate disclosure, and failure to perform as illustrated. Consumer groups
have formed to address these issues and initiate mass claims against insurers. Regulators as well as the Dutch Parliament have been
involved ever since, with the principal goal of achieving an equitable resolution. Aegon has made improvements across its product
lines, including after settlements reached in 2009 with Stichting Woekerpolis and Stichting Verliespolis. Aegon also decided to reduce
future policy costs for the large majority of its unit-linked portfolio. Some of the unit linked products are still involved in ongoing
litigation. In September 2014, consumer interest group Vereniging Woekerpolis.nl filed aclaim against Aegon in court. The claim
related to arange of unit linked products that Aegon sold in the past, including Aegon products involved in the earlier litigation.
The claim challenges avariety of elements of these products, on multiple legal grounds, including allegations made previously. In June
2017 (and revised in December 2017), the court issued averdict 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 alimited
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 45
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. This court decision has been appealed by both parties. The Court of Appeal has
stayed the proceedings during the preliminary proceedings at the Supreme Court in another class action of Vereniging Woekerpolis.
nl against another insurance company. On February 11, 2022 the Supreme Court ruled in these preliminary proceedings. The answers
to the preliminary questions of the court regarding transparency and consent about costs and cost levels are a(re)confirmation
of the EU Court ruling in aprevious case against another insurance company. The legal debate will now continue at the level
of the Court of Appeal. Aegon expects the uncertainty about the possible impact to continue for the foreseeable future. Developments
in similar cases against other Dutch insurers currently before regulators and courts may also affect Aegon. At this time, Aegon
is unable to estimate the range or potential maximum liability. There can be no assurances that these matters, in the aggregate, will
not ultimately result in amaterial adverse effect on Aegon's business, results of operations and financial position.
Securities leasing products (aandelenlease producten) have also been the subject of litigation in the Netherlands. Although sales
of securities leasing products ended more than adecade ago, litigation relating to these products has resurfaced. In December 2020
Aegon Bank N.V. reached an agreement in principle on asettlement with Leaseproces B.V. for claims regarding Vliegwiel and Sprintplan
customers represented by Leaseproces. On June 4, 2021 Aegon and Leaseproces B.V. announced it had finalized its agreement to settle
these claims. In September 2021, the parties announced that more than 90% of customers had agreed to the settlement, by which
the last remaining threshold was met. Subsequently, most claims have been paid during the fourth quarter 2021, with asmall amount
remaining at year-end. Full performance of the agreement is expected in the first half of 2022. There are still some individual claims
pending. There can be no assurances that Aegon is able to resolve these cases in the way it expects and that this matter will not
ultimately result in amaterial adverse effect on Aegon's business, results of operations and financial position.
46 Transfers of financial assets
Transfers of financial assets occur when Aegon transfers contractual rights to receive cash flows of financial assets or when Aegon
retains the contractual rights to receive the cash flows of the transferred financial asset, but assumes acontractual obligation to pay
the cash flows to one or more recipients in that arrangement.
In the normal course of business Aegon is involved in the following transactions:
•
Transferred financial assets that are not derecognized in their entirety:
Securities lending; whereby Aegon legally (but not economically) transfers assets and receives cash and non-cash collateral.
Thetransferred assets are not derecognized. The obligation to repay the cash collateral is recognized as aliability. The non-cash
collateral is not recognized in the statement of financial position; and
Repurchase activities; whereby Aegon receives cash for the transferred assets. The financial assets are legally (but not
economically) transferred, but are not derecognized. The obligation to repay the cash received is recognized as aliability.
•
Transferred financial assets that are derecognized in their entirety and Aegon does not have acontinuing involvement (normal sale);
•
Transferred financial assets that are derecognized in their entirety, but where Aegon has acontinuing involvement;
•
Collateral accepted in the case of securities lending, reverse repurchase agreement and derivative transactions; and
•
Collateral pledged in the case of (contingent) liabilities, repurchase agreements, securities borrowing and derivative transactions.
The following disclosures provide details for transferred financial assets that are not derecognized in their entirety, transferred
financial asset that are derecognized in their entirety, but where Aegon has acontinuing involvement and assets accepted and pledged
as collateral.
46.1 Transferred financial assets that have not been derecognized in their entirety
The following table reflects the carrying amount of financial assets that have been transferred to another party in such away
that part or all of the transferred financial assets do not qualify for derecognition. Furthermore, it reflects the carrying amounts
of the associated liabilities.
2021
Available-for-sale financial assets
Financial assets at fair value
through profit or loss
Shares Debt securities Debt securities
Investments for
account of
policyholders
Carrying amount of transferred assets
34 3,705 12 96
Carrying amount of associated liabilities
37 3,941 18 -
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Notes to the consolidated financial statements
Note 46
2020
Available-for-sale financial assets
Financial assets at fair value
through profit or loss
Shares Debt securities Debt securities
Investments for
account of
policyholders
Carrying amount of transferred assets
64 3,068 11 153
Carrying amount of associated liabilities
71 3,166 14 -
Securities lending and repurchase activities
The table above includes financial assets that have been transferred to another party under securities lending and repurchase activities.
Aegon retains substantially all risks and rewards of those transferred assets, this includes credit risk, settlement risk, country risk and
market risk. The assets are transferred in return for cash collateral or other financial assets. Non-cash collateral is not recognized
in the statement of financial position. Cash collateral is recorded on the statement of financial position as an asset and an offsetting
liability is established for the same amount as Aegon is obligated to return this amount upon termination of the lending arrangement.
Cash collateral is usually invested in pre-designated high quality investments. The sum of cash and non-cash collateral is typically
greater than the market value of the related securities loaned. Refer to note 46.3 Assets accepted and note 46.4 Assets pledged for
an analysis of collateral accepted and pledged in relation to securities lending and repurchase agreements.
46.2 Transferred financial assets that are derecognized in their entirety, but where Aegon has continuing involvement
Aegon has no transferred financial assets with continuing involvement that are derecognized in their entirety as per year-end 2021 and
as per year-end2020.
46.3 Assets accepted
Aegon receives collateral related to securities lending, reverse repurchase activities and derivative transactions. Non-cash collateral
is not recognized in the statement of financial position.
To
the extent that cash is paid for reverse repurchase agreements, areceivable is recognized for the corresponding amount.
The following tables present the fair value of the assets received in relation to securities lending and reverse repurchase activities:
Securities lending
2021
2020
Carrying amount of transferred financial assets
3,083 2,320
Fair value of cash collateral received
2,171 2,053
Fair value of non-cash collateral received
1,102 393
Net exposure
(190) (126)
Non-cash collateral that can be sold or repledged in the absence of default
1,004 236
Non-cash collateral that has been sold or transferred
- -
Reverse repurchase agreements
2021
2020
Cash paid for reverse repurchase agreements
1,004 1,180
Fair value of non-cash collateral received
1,025 1,199
Net exposure
(21) (19)
Non-cash collateral that can be sold or repledged in the absence of default
695 869
Non-cash collateral that has been sold or transferred
- -
The above items are conducted under terms that are usual and customary to standard securities lending activities, as well
as requirements determined by exchanges where the bank acts as intermediary.
In addition, Aegon can receive collateral related to derivative transactions that it enters into. The credit support agreement will
normally dictate the threshold over which collateral needs to be pledged by Aegon or its counterparty. Transactions requiring Aegon
or its counterparty to post collateral are typically the result of over-the-counter derivative trades, comprised mostly of interest rate
swaps, currency swaps and credit swaps. Refer to the credit risk section in note 4 Financial risks for details on collateral received for
derivative transactions.
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Financial information
Non-financial informationNotes to the consolidated financial statements
Note 46
46.4 Assets pledged
Aegon pledges assets that are on its statement of financial position in securities borrowing transactions, in repurchase transactions,
in derivative transactions and against long-term borrowings. In addition, in order to trade derivatives on the various exchanges, Aegon
posts margin as collateral.
These transactions are conducted under terms that are usual and customary to standard long-term borrowing, derivative and securities
borrowing activities, as well as requirements determined by exchanges where the bank acts as intermediary.
Non-cash financial assets that are borrowed or purchased under agreement to resell are not recognized in the statement
of financial position.
To
the extent that cash collateral is paid, areceivable is recognized for the corresponding amount. If other non-cash financial assets are
given as collateral, these are not derecognized.
The following tables present the carrying amount of collateral pledged and the corresponding amounts.
Assets pledged for general account and contingent liabilities
2021
2020
General account (contingent) liabilities
3,410
2,832
Collateral pledged
4,594 4,090
Net exposure
(1,183) (1,258)
Non-cash collateral that can be sold or repledged by the counterparty
- -
Assets pledged for repurchase agreements
2021
2020
Cash received on repurchase agreements
821 962
Collateral pledged (transferred financial assets)
764 975
Net exposure
57 (13)
As part of Aegon
’
s mortgage loan funding program in the
Netherlands, EUR5.1billion
(2020: EUR4.4billion
) has been pledged as security for notes issued (refer to note 37 Borrowings of SAECURE 17 and SAECURE 19 are held intercompany
).
In addition,
the notesand are eliminated against the notes issued
by the
special purpose entity (SPE) in the
consolidation process.Per December 31, 2021,
as part of SAECURE 17,
EUR600million has been posted as collateral with respect
to the longevity reinsurance contract with
Canada Life Reinsurance (2020:
EUR575million).
The notes from SAECURE 19 are European Central Bank eligible retained notes and therefore generated increased liquidity capacity. Additionally, in order to trade derivatives
on the
various exchanges, Aegon posts margin as collateral of collateral pledged for derivative transactions was
.
The amountEUR2.3billion
(2020: EUR2
.
3billion).
47 Offsetting, enforceable master netting arrangements and similar agreements
The following table only includes financial positions for which there is arecognized corresponding position that could be offset
under alegally enforceable master netting arrangement or similar agreement. Aegon also enters into collateralized (reverse) repo
or security lending and borrowing transaction, for which the collateral is not recognized on the balance sheet. For further information
on the financial positions resulting from such transactions please refer to note 46. The table provides details relating to the effect,
or potential effect, of netting arrangements, including rights to set-off, associated with the entity's recognized financial assets and
recognized financial liabilities.
Financial assets
subject to offsetting,
enforceable master
netting arrangements
and similar agreements
Gross amounts of
recognized financial
assets
Gross amounts of
recognized financial
liabilities set off in
the statement of
financial position
Net amounts of
financial assets
presented in the
statement of
financial position
Related amounts not set off in the
statements of financial position
Net
amount
Financial
instruments
Cash collateral
received (excluding
surplus collateral)
2021
Derivatives
8,811 - 8,811 6,045 2,519 247
At December 31
8,811 - 8,811 6,045 2,519 247
2020
Derivatives
14,030 - 14,030 8,778 5,224 27
At December 31
14,030 - 14,030 8,778 5,224 27
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Financial information
Non-financial informationAbout Aegon Governance and risk management
Financial information
Non-financial information265
Notes to the consolidated financial statements
Note 47
Financial liabilities
subject to offsetting,
enforceable master
netting arrangements
and similar agreements
Gross amounts of
recognized financial
liabilities
Gross amounts of
recognized financial
assets set off in the
statement of
financial position
Net amounts of
financial liabilities
presented in the
statement of
financial position
Related amounts not set off in the
statements of financial position
Net
amount
Financial
instruments
Cash collateral
pledged (excluding
surplus collateral)
2021
Derivatives
7,043 - 7,043 6,768 224 52
At December 31
7,043 - 7,043 6,768 224 52
2020
Derivatives
9,633 - 9,633 9,436 170 28
At December 31
9,633 - 9,633 9,436 170 28
Financial assets and liabilities are offset in the statement of financial position when the Group has alegally enforceable right to offset
and has the intention to settle the asset and liability on anet basis, or to realize the asset and settle the liability simultaneously.
As shown in the second column there are no financial assets and liabilities offset in 2021 and 2020.
The line Derivatives includes derivatives for general account and for account of policyholder.
Aegon mitigates credit risk in derivative contracts by entering into collateral agreements, where practical, and in ISDA master
netting agreements for each of the Aegon’s legal entities to facilitate Aegon’s right to offset credit risk exposure. The credit support
agreement will normally dictate the threshold over which collateral needs to be pledged by Aegon or its counterparty. Transactions
requiring Aegon or its counterparty to post collateral are typically the result of over-the-counter derivative trades, comprised mostly
of interest rate swaps, currency swaps and credit swaps. These transactions are conducted under terms that are usual and customary
to standard long-term borrowing, derivative, securities lending and securities borrowing activities, as well as requirements determined
by exchanges where the bank acts as intermediary.
48 Companies and businesses acquired and divested
Companies and businesses acquired
2021
There were no significant acquisitions in 2021.
2020
On July 30, 2020, Aegon announced the completion of the expansion of its partnership with Santander in Spain. This follows
the agreement signed on July 3, 2018 between Aegon and Banco Santander to expand their life and non-life insurance partnership,
following Banco Santander’s acquisition of Banco Popular.Aegon’s insurance joint ventures with Banco Santander in Spain completed
the acquisition of the in force term life policies previously sold through Banco Popular branches as well as the right to write new term
life and selected lines of non-life policies through the former Banco Popular branches now owned by Banco Santander.The transaction
was closed following satisfaction of all closing conditions, including the termination of existing alliances of Banco Popular. For its
51% stake in the expansion of the joint venture with Banco Santander, Aegon paid an upfront amount of EUR187million – lower
than the EUR215million communicated in July 2018 mainly due to the results of the in-force portfolio which accrued to Santander
till closing. Furthermore, the previously agreed contingent payment of up to EUR75million is due in 2024, subject to the performance
of the partnership.
2019
There were no significant acquisitions in 2019.
Companies and businesses divested
2021
On November 29, 2020, Aegon agreed to sell its insurance, pension, and asset management businesses in Hungary, Poland, Romania,
and Turkey to Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG) for EUR 830 million, of which EUR 35 million was
received by Aegon in the form of net remittances in 2021.As a result of the transaction, the Group Solvency II ratio is estimated
to improve by approximately 8 percentage points. Based on the balance sheet position at December 31, 2021, a book gain amounting
to EUR 266 million is expected, which includes a loss of EUR 204 million related to the foreign currency translation reserve, which will
be reclassified from Other Comprehensive Income into the income statement. As a result of this transaction, IFRS equity is expected
to increase by EUR 470 million.The closing of the transaction is subject to local regulatory and competition approvals customary for
transactions of this nature. Aegon will continue to work with VIG to close this transaction.
Aegon Integrated Annual Report
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 48
On February 28, 2021, Aegon successfully completed the divestment of Stonebridge, a UK-based provider of accident insurance
products to Global Premium Holdings group, part of Embignell group.Under the terms of the agreement, Aegon sold Stonebridge
for a consideration of approximately GBP 60 million (EUR 65 million), consisting of the purchase price and dividends related
to the transaction. This excludes a contingent consideration of up to GBP 10 million. The transaction had no material impact
on Aegon’s capital position and results.
2020
On January 29, 2020, Aegon completed the sale of its 50% stake
in the
variable annuity joint ventures in Japan
. The sale was announced
on May 17, 2019. The total cash proceeds are EUR 153 million (JPY 18.75 billion
).
The divestment had no material impact on Aegon’
s capital
position and led to an IFRS gain
of EUR
53 m
illion
. This divestment had no material impact on operating result before tax going forward. 2019
On January 8, 2019, Aegon completed the sale of its businesses in Czech Republic and Slovakia. The businesses consisted mainly
of unit linked life insurance coverage, term life products and pension reserves. The proceeds of the sale amount to EUR 155 million and
the book gain amounts to approximately EUR 70 million, which were reflected in other income. As a consequence of the transaction,
annual result before tax and operating result before tax decreased. In 2018, the operating result before tax of the combined operations
amounted to EUR 17 million.
49 Group companies
Subsidiaries
The principal subsidiaries of the parent company Aegon N.V. are listed by geographical segment. All are wholly owned, directly
or indirectly, unless stated otherwise, and are involved in insurance or reinsurance business, pensions, asset management or services
related to these activities. The voting power in these subsidiaries held by Aegon is equal to the shareholdings.
Americas
•
Transamerica Corporation, Wilmington, Delaware (United States);
•
Transamerica Casualty Insurance Company, Cedar Rapids, Iowa (United States);
•
Transamerica Financial Life Insurance Company, Harrison, New York (United States);
•
Transamerica Life Insurance Company, Cedar Rapids, Iowa (United States).
The Netherlands
•
Aegon Bank N.V., The Hague;
•
Aegon Cappital B.V., Groningen;
•
Aegon Hypotheken B.V., The Hague;
•
Aegon Levensverzekering N.V., The Hague;
•
Aegon Schadeverzekering N.V., The Hague;
•
Aegon Spaarkas N.V., The Hague;
•
Nedasco B.V., Amersfoort;
•
Robidus Groep B.V., Zaandam;
•
TKP Pensioen B.V., Groningen.
United Kingdom
•
Aegon Investment Solutions Ltd., Edinburgh;
•
Aegon Investments Ltd., London;
•
Scottish Equitable plc, Edinburgh;
•
Cofunds Limited, London.
International
•
Aegon Magyarország Általános Biztosító Zártkörűen Működő Részvénytársaság, Budapest (Aegon Hungary Composite
Insurance Co.);
•
Aegon Towarzystwo Ubezpieczeń na Życie Spółka Akcyjna, Warsaw (Aegon Poland Life);
•
Aegon Powszechne Towarzystwo Emerytaine Spólka Akcyjna, Warsaw (Aegon Poland Pension Fund Management Co.);
•
Aegon Emeklilik ve Hayat A.Ş., Istanbul (Aegon Turkey);
•
Aegon Pensii Societate de Administrare aFondurilor de Pensii Private S.A.,Cluj (Aegon Romania Pension Administrator Co.);
•
Aegon España S.A.U. de Seguros y Reaseguros, Madrid (Spain);
•
Transamerica Life (Bermuda) Ltd., Hamilton (Bermuda).
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2021
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Financial information
Non-financial information267
Notes to the consolidated financial statements
Note 49
Asset Management
•
Aegon USA Investment Management, LLC, Cedar Rapids (United States);
•
Aegon USA Realty Advisors, LLC, Des Moines (United States);
•
Aegon Asset Management Holding B.V., The Hague (The Netherlands);
•
Aegon Investment Management B.V, The Hague (The Netherlands);
•
Aegon Asset Management UK plc, Edinburgh (United Kingdom).
The legally required list of participations as set forth in articles 379 and 414 of Book 2 of the Dutch Civil Code has been registered
with the Trade Register in The Hague. AegonN.V. has issued astatement of liability as meant in article 403 of Book 2 of the Dutch Civil
Code for its subsidiary company Aegon Derivatives N.V.
Joint ventures
The principal joint ventures are listed by geographical segment. The voting powers in these joint ventures is equal to the shareholdings,
unless stated otherwise.
Americas
Mongeral Aegon, Seguros e Previdencia S.A., Rio de Janeiro (Brazil)(55%, voting rights 50%).
The Netherlands
•
AMVEST Vastgoed, Utrecht (50%);
•
AMVEST Living & Care Fund, Utrecht (50%);
•
AMVEST Development Fund, Amsterdam (50%).
International
•
Santander Generales Seguros y Reaseguros, S.A., Madrid (Spain)(51%);
•
Santander Vida Seguros y Reaseguros, S.A., Madrid (Spain)(51%);
•
Liberbank Vida y Pensiones, Seguros y Reaseguros, S.A., Oviedo (Spain)(50%);
•
Aegon Santander Portugal Não Vida – Companhia de Seguros S.A., Lisbon (Portugal)(51%);
•
Aegon Santander Portugal Vida – Companhia de Seguros de Vida S.A., Lisbon (Portugal)(51%);
•
Aegon THTF Life Insurance Co., Ltd., Shanghai (China) (50%);
•
Aegon Life Insurance Co. ltd (India) (49%).
Asset Management
•
Aegon Industrial Fund Management Co., Ltd, Shanghai (China)(49%).
Refer to note 25 Investments in joint ventures and associates for further details on these investments.
Investments in associates
The principal investments in associates are listed by geographical segment.The voting powers in these associates is equal
to the shareholdings, unless stated otherwise.
The Netherlands
•
AMVEST Residential Core Fund, Amsterdam (29%);
•
N.V. Levensverzekeringmaatschappij ‘De Hoop’, The Hague (33%);
•
OB Capital Cooperatief U.A., Schiphol (95%; Aegon does not have control to direct the daily activities of the company).
Asset Management
•
La Banque Postale Asset Management, Paris (France)(25%).
Refer to note 25 Investments in joint ventures and associates for further details on these investments.
50 Related party transactions
In the normal course of business, Aegon enters into various transactions with related parties. Parties are considered to be related if one
party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related
parties of Aegon include, amongst others, its associates, joint ventures, key management personnel and the defined benefit and
Aegon Integrated Annual Report
2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 50
contribution plans. Transactions between related parties have taken place on an arm’s length basis. Transactions between Aegon and
its subsidiaries that are deemed related parties have been eliminated in the consolidation and are not disclosed in the notes.
Related party transactions include, among others, transactions between AegonN.V. and Vereniging Aegon.
None of the transactions listed hereunder qualifies as aMaterial Transaction, i.e. atransaction entered into by the Company where
the information regarding the transaction on its own or taken together with other transactions entered into in the course of the same
financial year with the same party, constitutes inside information as defined in article 7 of the Market Abuse Regulation (MAR).
On December 15, 2021, Aegon repurchased 22,643,360 common shares B from Vereniging Aegon for the amount of EUR2,285,621
based on 1/40
th
of the Value Weight Average Price of the common shares of the five trading days preceding this transaction.
The repurchase of common shares B was executed to align the aggregate holding of voting shares by Vereniging Aegon in Aegon with
its special cause voting rights of 32.6%.
On June 3, 2021, Vereniging Aegon exercised its options rights to purchase in aggregate 1,983,360 common shares B at fair value
of acommon share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance)
to mitigate dilution caused by the issuance of shares on June 3, 2021, in connection with the Long Term Incentive Plans for
senior management.
On December 11, 2020 AegonN.V. repurchased 2,955,600 common shares B from Vereniging Aegon for the amount of
EUR228,911.22 based on 1/40th of the Value Weighted Average Price of the common shares of the five trading days preceding this
transaction. The repurchase of common shares B was executed to align the aggregate shareholding of Vereniging Aegon in AegonN.V.
with its special cause voting rights of 32.6%.
On May 15, 2020, Vereniging Aegon exercised its options rights to purchase in aggregate 2,154,000 common shares B at fair value
of acommon share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance)
to mitigate dilution caused the issuance of shares on May 15, 2020, in connection with the Long Term Incentive Plans for
senior management.
On December 23, 2019 AegonN.V. repurchased 13,227,120 common shares B from Vereniging Aegon for the amount
of EUR1,384,046 based on 1/40
th
of the Value Weighted Average Price of the common shares on the five trading days preceding this
transaction. The repurchase of common shares B was executed to align the shareholding of Vereniging Aegon in AegonN.V. with its
special cause voting rights of 32.6%.
On May 17, 2019, Vereniging Aegon exercised its options rights to purchase 1,773,680 common shares B at fair value of acommon
share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance) to mitigate dilution
caused by the issuance of shares on May 17, 2019, in connection with the Long Term Incentive Plans for senior management.
Remuneration of members of the Supervisory Board, Executive Board and Key Management
The following table includes the expenses for remuneration, with amounts reflective of time spent on the Board.
Remuneration expenses
2021
2020
2)
2019
Supervisory Board
1)
0.9 0.8 1.0
Executive Board
4.9 5.9 5.8
Key Management
27.5 24.8 26.3
In fixed compensation
16.8 14.2 14.3
In cash based variable compensation
3.6 3.3 3.6
In share based variable compensation
3.2 2.9 3.2
In pension contributions
2.8 3.2 3.9
In other benefits
1.1 1.2 1.3
1
VAT anymore, retroactively as from June 13, 2019. Therefore, Aegon has not paid Dutch VAT anymore on the fees of the Supervisory Board Members as from
Q2 2021. Additionally, Aegon reclaimed VAT for the period Q3 2019 - Q1 2021, except for its Supervisory Board members based in the Netherlands for
practical reasons. The 2019 and 2020 amounts were restated in this table for this VAT reclaim.
2
Management members that were not included in this table last year.
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Financial information
Non-financial information269
Notes to the consolidated financial statements
Note 50
Fixed compensation of Key Management included severance payments in 2021 (EUR2.2million) and 2019 (EUR0.7million). Key
Management consisted of all members of the Supervisory Board, Executive Board and Management Board (see the chapter Composition
of the Boards for more details).
Additional information on the remuneration and share-based compensation of members of the Executive Board and the remuneration
of the Supervisory Board is disclosed in the Remuneration report.
Interests in AegonN.V. held by active members of the Executive Board
Shares held in Aegon at December 31, 2021 by Mr.Friese amount to 56,554 (2020: 36,001) and by Mr.Rider to 103,699 (2020:
78,164). The shares held in Aegon mentioned above do not exceed 1% of total outstanding share capital at the reporting date.
At the reporting date no loans with Aegon or outstanding balances such as guarantees or advanced payments exist for either Mr.Friese
or Mr.Rider.
Common shares held by Supervisory Board members
Shares held in Aegon at December 31
2021
2020
Ben J. Noteboom
23,500 23,500
Dona D. Young
13,260 13,260
Total
36,760 36,760
Shares held by Supervisory Board members are only disclosed for the period for which they have been part of the Supervisory
Board.At the reporting date no loans with Aegon or outstanding balances such as guarantees or advanced payments exist for
the members of the Supervisory Board.
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the consolidated financial statements
Note 50
51 Events after the reporting period
On February 24, 2022, Russia invaded Ukraine, which caused a humanitarian crisis and is also impacting global financial markets and
causing economic turbulence. At the date of this report the depth and length of this invasion is unknown, and the situation is changing
rapidly from day to day.
Aegon is closely monitoring the financial markets and economic turbulence that has arisen as a consequence of the situation and
the related international sanctions, and its impact on Aegon. The most significant risks Aegon faces are related to financial markets,
particularly from volatility in credit, equity and interest rates. The notes to Aegon’s financial statements include elaborate descriptions
and related financial market sensitivities. Aegon is actively managing its risks and capital position to maintain a robust balance sheet,
as the Company navigates through the uncertainty created by the current geopolitical situation. The Company is on high alert status
to help ensure the safety and well-being of its staff, as well as its capability to support its customers, while maintaining our financial
and operational resilience.
Aegon has no direct operations in Russia and Ukraine. Aegon’s direct investment exposure in the company’s general account portfolio
to Russia and Ukraine is to mainly corporates and amounts to approximately EUR 27 million and EUR 42 million respectively, based
on the book value as per March 3, 2022. Thecombined exposure to Russia and Ukraine on investments for account of policyholders
with guarantees amounts to approximately EUR 38 million.
The Hague, the Netherlands, March 16, 2022
Supervisory Board Executive Board
William L. Connelly Lard Friese
Mark A. Ellman Matthew J. Rider
Jack McGarry
Ben J. Noteboom
Caroline Ramsay
Thomas Wellauer
Corien M.Wortmann-Kool
Dona D. Young
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Financial information
Non-financial information271
Notes to the consolidated financial statements
Note 51
TOC-4
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About Aegon Governance and risk management
Financial information
Non-financial informationFinancial statements of AegonN.V.
TOC 4
Financial statements of AegonN.V.
Financial statements of AegonN.V.
Financial statements of AegonN.V.
Table of contents
Financial statements of AegonN.V.
273 Income statement of AegonN.V.
274 Statement of financial position of AegonN.V.
Notes to the financial statements
ofAegonN.V.
275 1 General information
275 2 Significant accounting policies
275 3 Investment income
275 4 Results from financial transactions
276 5 Commissions and expenses
276 6 Interest charges and related fees
276 7 Income tax
276 8 Shares in group companies
277 9 Loans to group companies
277 10 Non-current assets
277
11 Receivables
277 12 Other current assets
277 13 Share capital
279 14 Shareholders’ equity
282 15 Other equity instruments
283 16 Subordinated borrowings
283 17 Long-term borrowings
283 18 Current liabilities
284 19 Commitments and contingencies
284 20 Number of employees
284 21 Auditor's remuneration
284 22 Events after the reporting period
285 23 Proposal for profit appropriation
286 Independent auditor’s report
Other information
297 Profit appropriation
298 Major shareholders
Income statement of AegonN.V.
For the year ended December 31
Amounts in EURmillion
Note
2021
2020
Result
Investment Income
3
13 10
Total revenues
13 10
Results from financial transactions
4
3 2
Total result
16 12
Charges
Commissions and expenses
5
80 71
Interest charges and related fees
6
129
126
Total charges 210 197
Result before tax (193) (185)
Income Tax
7
54 39
Result after tax (139) (146)
Net result group companies
8
1,791 190
Net result
1,651 45
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Financial information
Non-financial information273
Financial statements of AegonN.V.
Income statement of AegonN.V.
Income statement of AegonN.V.
Statement of financial position of AegonN.V.
As at December 31
Before profit appropriation, amounts in EURmillion
Note
2021
2020
Non-current assets
Financial fixed assets
Shares in group companies
8
26,511
25,643
Loans to group companies
9
1,829 1,392
Other non-current assets
10
138
148
28,478 27,183
Current assets
Receivables
Receivables from group companies
11
35 56
Other receivables
11
181 100
Other current assets
12
90 198
Accrued interest and rent
6
9
312 363
Cash and cash equivalents
Cash and cash equivalents
1,204 887
Total assets
29,993 28,433
Shareholders’ equity
Share capital
13
321 320
Paid-in surplus
14
7,033 7,160
Revaluation account
14
6,453 7,491
Legal reserves – foreign currency translation reserve
14
258 (601)
Legal reserves in respect of group companies
14
2,316 1,710
Retained earnings, including treasury shares
14
8,450 9,224
Remeasurement of defined benefit plans of group companies
14
(2,199) (2,534)
Net result
14
1,651 45
24,282 22,815
Other equity instruments
15
2,363 2,569
Total equity
26,645 25,384
Non-current liabilities
Subordinated borrowings
16
1,396 1,345
Long-term borrowings
17
1,266 1,218
2,662 2,563
Current liabilities
18
Loans from group companies
7 6
Payables to group companies
422 44
Other current liabilities
227 406
Accruals and deferred income
31 30
686 486
Total liabilities
3,349 3,049
Total equity and liabilities
29,993 28,433
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationFinancial statements of AegonN.V.
Statement of financial position of AegonN.V.
Statement of financial position of AegonN.V.
Notes to the financial statements
1 General information
AegonN.V., incorporated and domiciled in the Netherlands, is apublic limited liability company organized under Dutch law and recorded
in the Commercial Register of The Hague registered under number 27076669 and with its registered address at Aegonplein 50, 2591
TV,
The Hague, the Netherlands. AegonN.V. serves as the holding company for the Aegon Group and has listings of its common shares
in Amsterdam and New York.
AegonN.V. (or 'the Company') and its subsidiaries ('Aegon' or 'the Group') have life insurance and pensions operations and are also
active in savings and asset management operations, accident and health insurance, general insurance and to alimited extent banking
operations. Aegon focuses on three core markets (the United States, the Netherlands, and the United Kingdom), three growth markets
(Spain & Portugal, China, and Brazil) and one global asset manager. Furthermore, Aegon has activities in Asia and Southern and
Eastern Europe. Headquarters are located in The Hague, the Netherlands. The Group employs over 22,000 people worldwide (2020:
over 22,000).
2 Significant accounting policies
The financial statements have been prepared in accordance with accounting principles in the Netherlands as embodied in Part 9 of
Book 2 of the Netherlands Civil Code. In accordance with 2:362.8 of the Dutch Civil Code, the Company’s financial statements are
prepared based on the accounting principles of recognition, measurement and determination of profit, as applied in the consolidated
financial statements. These principles also include the classification and presentation of financial instruments, being equity
instruments or financial liabilities.
The group companies are stated at their net asset value, determined on the basis of the consolidated accounting policies as applied
in the consolidated financial statements of the Group. For details on the accounting policies applied for the group companies refer
to the consolidated financial statements.
Revaluation account includes unrealized gains and losses on available-for-sales assets and the positive changes in value that have been
recognized in net result relating to investments (including real estate) and which do not have afrequent market listing.
Legal reserves in respect of group companies include net increases in net asset value of subsidiaries and associates since their first
inclusion, less any amounts that can be distributed without legal restrictions.
A reference is made to Note 2 Significant accounting policies of the consolidated financial statements for the description
of the accounting policies applied.
3 Investment income
2021
2020
Interest income from intercompany loans
12 16
Interest income from derivatives
1 (6)
Total
13 10
4 Results from financial transactions
2021
2020
Net fair value change of derivatives
5 (2)
Net foreign currency gains and (losses)
(1) 4
Total
3 2
Net fair value change of derivatives mostly comprises of fair value changes on derivatives that are designated as economic hedges for
which no hedge accounting is applied.
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Financial information
Non-financial information275
Notes to the financial statements of AegonN.V.
Note 1
Notes to the financial statements ofAegonN.V.
Notes to the financial statements ofAegonN.V.
Notes to the financial statements of AegonN.V.
5 Commissions and expenses
2021
2020
Employee expenses
84
86
Administration expenses
71 58
Cost sharing to group companies
(75)
(72)
Total
80 71
6 Interest charges and related fees
2021
2020
Subordinated borrowings
68
67
Borrowings
54 50
Other
8
8
Total
129 126
7 Income tax
2021
2020
Current Tax
Current Tax
54 39
Income tax for the period (result) / charge
54 39
Reconciliation between standard and effective tax
Result before tax
(193) (185)
Tax on result on Dutch corporate result tax rate
48 46
Differences due to the effect of:
Tax rate changes
4 -
Change in uncertain tax positions
8 -
Non deductible expenses
(7) (7)
Total
54 39
8 Shares in group companies
2021
2020
At January 1
25,643
25,644
Capital contributions and acquisitions
65 96
Dividend received
(1,196) (735)
Net result for the financial year
1,791 190
Revaluations
209 448
At December 31
26,511 25,643
For alist of names and locations of the most important group companies, refer to note 49 Group companies of the consolidated
financial statements of the Group. The legally required list of participations as set forth in article 379 of Book 2 of the Netherlands
Civil Code has been registered with the Commercial Register of The Hague.
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the financial statements of AegonN.V.
Note 5
9 Loans to group companies
2021
2020
At January 1
1,392
1,337
Additions / (repayments)
308 110
Other changes
128
(56)
At December 31
1,829 1,392
Current
639 788
Non-current
1,190 604
The other changes in Loans to group companies mainly relate to currency exchange rate fluctuations.
10 Non-current assets
Other non-current assets included deferred tax assets of EUR138million (2020: EUR148million).
11 Receivables
Receivables from group companies and other receivables have amaturity of less than one year.
AegonN.V., together with certain of its subsidiaries, is part of atax grouping for Dutch corporate income tax purposes. The members
of the fiscal unit are jointly and severally liable for any taxes receivable or payable by the Dutch tax grouping.
Other receivables included an income tax receivable of EUR157million.
12 Other current assets
Other current assets include derivatives with positive fair values of EUR77million (2020: EUR196million).
13 Share capital
Issued and outstanding capital
2021
2020
Common shares
253 252
Common shares B
68 69
Total share capital
321 320
Common shares
2021
2020
Authorized share capital
720 720
Number of authorized shares (inmillion)
6,000 6,000
Par value in cents per share
12 12
Common shares B
2021
2020
Authorized share capital
360 360
Number of authorized shares (inmillion)
3,000 3,000
Par value in cents per share
12 12
All issued common shares and common shares B each have anominal value of EUR0.12 and are fully paid up. Repayment of capital
can only be initiated by the Executive Board, is subject to approval of the Supervisory Board and must be resolved by the General
Meeting of Shareholders. Moreover, repayment on common shares B needs approval of the related shareholders. Refer to Other
information for further information on dividend rights.
Vereniging Aegon, based in The Hague, the Netherlands, holds all of the issued and outstanding common shares B.
For detailed information on the transactions between AegonN.V. and Vereniging Aegon refer to note 50 Related party transactions
in the consolidated financial statements of the Group.
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Financial information
Non-financial information277
Notes to the financial statements of AegonN.V.
Note 9
The following table shows the movement during the year in the number of common shares and common shares B:
Common shares Common shares B
Number of shares
(thousands)
Total amount
Number of shares
(thousands)
Total amount
At January 1, 2020
2,105,139 253 585,022 70
Shares withdrawn
(9,491) (1) (13,227) (2)
Dividend
2,466 - - -
At December 31, 2020
2,098,114 252 571,795 69
Shares withdrawn
(2,466) (0) (2,956) (0)
Dividend
10,665 1 - -
At December 31, 2021
2,106,313 253 568,839 68
The following table shows the weighted average number of common shares and common shares B:
Weighted average number of
common shares (thousands)
Weighted average number of
common shares B (thousands)
2020
2,101,749 579,312
2021
2,101,231 570,629
The shares repurchased by AegonN.V. during the share-buy-back programs to undo the dilution caused by the distribution of dividend
in stock, although included in the issued and outstanding number of shares, are excluded from the calculation of the weighted average
number of shares.
Long-term incentive plans
For detailed information on the Long Term Incentive Plans refer to note 14 Commissions and expenses to the consolidated financial
statements of the Group.
Board remuneration
Detailed information on remuneration of active and retired members of the Executive Board including their share plans, remuneration
of active and retired members of the Supervisory Board along with information about shares held in Aegon by the members of the
Boards is included in note 50 Related party transactions to the consolidated financial statements of the Group and in the remuneration
report on page 55.
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the financial statements of AegonN.V.
Note 13
14 Shareholders’ equity
Share
capital
Paid- in
surplus
Revaluation
account
Legal
reserves
FCTR
Legal
reserves
group
compa-
nies
Retained
earnings
Remeasure-
ment of
defined benefit
plans of group
companies
Treasury
shares
Net
result
Total
At January 1, 2021
320 7,160 7,491 (601) 1,710 9,405 (2,534) (181) 45
22,815
Net result 2020 retained
- - - - - 45 - - (45) -
Net result 2021
- - - - - - - - 1,651 1,651
Total net result - - - - - 45 - - 1,606 1,651
Foreign currency
translation differences
and movement in
foreign investment
hedging reserves
- - 859 - - (65) - - 795
Changes in revaluation in
subsidiaries
- - (1,035) - - - - - - (1,035)
Changes in revaluation
reserve real estate held
for own use
- - (3) - - (3)
Remeasurement of
defined benefit plans of
group companies
- - - - - - 399 - - 399
Changes and transfer to
legal reserve
- - - - 606 (587) - - - 19
Other
- - - - - 14 - - - 14
Other comprehensive
income / (loss) - - (1,038) 859 606 (573) 335 - - 189
Shares issued
1 - - - - - - - - 1
Shares withdrawn
(1) - - - - - - - - (1)
Dividends paid on
common shares
- (127) - - - (120) - - - (247)
Issuance and purchase of
treasury shares
- - - - - 4 - (92) - (88)
Coupons on perpetual
securities
- - - - - (39) - - - (39)
At December 31, 2021
321 7,033 6,453 258 2,316 8,722 (2,199) (273) 1,651 24,282
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Financial information
Non-financial information279
Notes to the financial statements of AegonN.V.
Note 14
Share
capital
Paid- in
surplus
Revalua-
tion
account
Legal
reserves
FCTR
Legal
reserves
group
compa-
nies
Retained
earnings
Remeasurement
of defined
benefit plans of
group companies
Treasury
shares
Net
result Total
At January 1, 2020
323 7,213 6,120 426 1,703 7,817 (2,397) (281) 1,524 22,449
Net result 2019 retained
- - - - - 1,524 - - (1,524) -
Net result 2020
- - - - - - - - 45 45
Total net result - - - - - 1,524 - - (1,480) 45
Foreign currency
translation differences
and movement in
foreign investment
hedging reserves
- - (1,027) - - 83 - - (945)
Changes in revaluation in
subsidiaries
- - 1,589 - - - - - - 1,589
Changes in revaluation
reserve real estate held
for own use
- - 18 - - 18
Remeasurement of
defined benefit plans of
group companies
- - - - - - (220) - - (220)
Changes and transfer to
legal reserve
- - (235) - 6 245 - - - 17
Other
- - - - - 2 - - - 2
Other comprehensive
income / (loss) - - 1,371 (1,027) 6 247 (137) - - 460
Shares withdrawn
(3) - - - - (42) - 45 - -
Dividends paid on
common shares
- (54) - - - (64) - - - (118)
Dividend withholding tax
reduction
- - - - - 1 - - - 1
Issuance and purchase of
treasury shares
- - - - - (52) - 55 - 3
Coupons on perpetual
securities
- - - - - (38) - - - (38)
Incentive plans
- - - - - 10 - - - 10
At December 31, 2020
320 7,160 7,491 (601) 1,710 9,405 (2,534) (181) 45 22,815
The balance of the revaluation account, which includes revaluation reserves for real estate, cash flow hedging and investments that
do not have a frequent market listing, consisted of EUR 7,294 million (2020: EUR 7,988million) of items with positive revaluation
and of EUR 840 million (2020: EUR 496 million) of items with negative revaluation (on cash flow hedging and AFS investments).
The revaluation linked to cash flow hedging hedging is identified on individual cash flow hedge positions.
The legal reserves in respect of the foreign currency translation reserve (FCTR), group companies and the revaluation reserves, cannot
be freely distributed. In case of negative balances for individual reserves legally to be retained, no distributions can be made out
of retained earnings to the level of these negative amounts.
Certain of Aegon’s subsidiaries, principally insurance companies, are subject to restrictions on the amounts of funds they may transfer
in the form of cash dividends or otherwise to their parent companies. There can be no assurance that these restrictions will not limit
or restrict Aegon in its ability to pay dividends in the future.
For more details on distributable reserves, refer to note 43 Capital management and solvency of the consolidated financial statements.
On the reporting date, AegonN.V. and its subsidiaries held 71,780,196 (2020: 53,747,701) of its own common shares and30,588,800
(2020: 12,884,400)own common shares
B with
apar value of EUR0.12 each.Aegon Integrated Annual Report
2021
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About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the financial statements of AegonN.V.
Note 14
Movements in the number of treasury common shares held by AegonN.V. were as follows:
2021
2020
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
At January 1
52,686 171 65,540 269
Transactions in 2021:
Sale: transactions, average price 3.90
(4,139) (16)
Shares witdrawn: 1 transaction, average price EUR 3.89
(2,466) (10)
Sale: 1 transaction, average price 3.89
(15,274) (59)
Purchase: 1 transaction average price 3.70
35,933 133
Sale: 1 transaction, average price 3.02
(17,314) (52)
Purchase: 1 transaction average price 4.46
21,532 96
Transactions in 2020:
Sale: transactions, average price EUR 4.52
(4,445) (20)
Shares witdrawn: 1 transaction, average price EUR 4.52
(9,491) (43)
Sale: 1 transaction, average price EUR 4.13
(22,947) (95)
Purchase: 1 transaction, average price EUR 2.46
24,029 59
At December 31
70,958 262 52,686 171
Movements in the number of treasury common shares B held by AegonN.V. were as follows:
2021
2020
Number of shares
(thousands) Amount
Number of shares
(thousands) Amount
At January 1
12,884 1 25,310 3
Transactions in 2021:
Sale: 1 transaction, average price EUR 0.10
(1,983) -
Shares withdrawn: 1 transaction, average price EUR 0.10
(2,956) -
Purchase: 1 transaction, average price EUR 0.10
22,643 2
Transactions in 2020:
Sale: 1 transaction, average price EUR 0.13
(2,154) -
Shares withdrawn: 1 transaction, average price EUR 0.13
(13,227) (2)
Purchase: 1 transaction, average price EUR 0.08
2,956 -
At December 31
30,589 3 12,884 1
As part of their insurance and investment operations, subsidiaries within the Group also hold AegonN.V. common shares, both for
their own account and for account of policyholders. These shares have been treated as treasury shares and are included at their
consideration paid or received.
2021
2020
Number of shares
(thousands) Total amount
Number of shares
(thousands) Total amount
Common shares
Held by AegonN.V.
70,958 262 52,686 171
Held by subsidiaries
822 8 1,062 9
Common shares B
Held by AegonN.V.
30,589 3 12,884 1
At December 31
102,369 273 66,632 181
The consideration for the related shares is deducted from or added to the retained earnings.
Aegon Integrated Annual Report
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Financial information
Non-financial information281
Notes to the financial statements of AegonN.V.
Note 14
15 Other equity instruments
Perpetual
contingent
convertible
securities
Junior perpetual
capital securities
Perpetual
cumulative
subordinated
bonds
Long Term
Incentive Plans
1)
Total
At January 1, 2021
500 1,564 454 50 2,569
Shares granted
- - - 27 27
Shares vested
- - - (21) (21)
Securities redeemed
- (212) - - (212)
At December 31, 2021
500 1,352 454 57 2,363
At January 1, 2020
500 1,564 454 53 2,571
Shares granted
- - - 22 22
Shares vested
- - - (25) (25)
At December 31, 2020
500 1,564 454 50 2,569
1
Perpetual contingent convertible
securities
Coupon rate Coupon date Year of next call
2021
2020
EUR 500million
5.625%
1)
Semi-annually, April 15 2029 500 500
At December 31
500 500
1
The securities have been issued at par and have subordination provisions, rank junior to all other liabilities and senior to shareholders'
equity only. The conditions of the securities contain certain provisions for optional and required coupon payment cancelation. Although
the securities have no stated maturity, Aegon has the right to call the securities for redemption at par for the first time between April
15, 2029 and October 15, 2029 and every reset date (October 15, with five year intervals) thereafter. Upon breach of certain regulatory
capital requirement levels, the securities convert into common shares.
Junior perpetual capital securities
Coupon rate Coupon date Year of next call
2021
2020
USD 250million
floating LIBOR rate
1)
Quarterly, December 15 Called in 2021 - 212
USD 500million
floating CMS rate
2)
Quarterly, July 15 2022 402 402
EUR 950million
floating DSL rate
3)
Quarterly, July 15 2022 950 950
At December 31
1,352 1,564
1
aspread of 87.5 basis points, with aminimum of 4%.
2
yield plus aspread of ten basis points, with amaximum of 8.5%.
3
plus aspread of ten basis points, with amaximum of 8%.
The interest rate exposure on some of these securities has been swapped to athree-month LIBOR and/or EURIBOR based yield.
With effect on September 15, 2021, Aegon hasexercised its right to redeem USD 250million floating rate perpetual capital securities
with aminimum coupon of 4% issued in 2005. The securities had no stated maturity, however Aegon had the right to call the securities
for redemption and exercised this right with effect on September 15, 2021.
The securities have been issued at par. The securities have subordination provisions, rank junior to all other liabilities and senior
to shareholders' equity only. The conditions of the securities contain certain provisions for optional and required coupon payment
deferral and, in situations under Aegon's control, mandatory coupon payment events. Although the securities have no stated maturity,
Aegon has the right to call the securities for redemption at par for the first time on the coupon date in the years as specified, or on any
coupon payment date thereafter.
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2021
282
About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the financial statements of AegonN.V.
Note 15
Perpetual cumulative
subordinated bonds
Coupon rate Coupon date Year of next call
2021
2020
EUR 114million
1.506%
1),
4)
Annually, June 8 2025 114 114
EUR 136million
1.425%
2),
4)
Annually, October 14 2028 136 136
EUR 203million
0.496%
3),
4)
Annually, March 4 2031 203 203
At December 31
454 454
1
and 1.506% until June 8, 2025.
2
October 14, 2018 and 1.425% until October 14, 2028.
3
2021 and 0.496% until March 4, 2031.
4
of ten-year Dutch government securities plus aspread of 85 basis points.
These bonds have the same subordination provisions as dated subordinated debt. In addition, the conditions of the bonds contain
provisions for interest deferral.
Although the bonds have no stated maturity, Aegon has the right to call the bonds for redemption at par for the first time
on the coupon date in the year of next call.
16 Subordinated borrowings
Coupon rate Coupon date
Issue /
Maturity
Year of next
call
2021
2020
Fixed to floating subordinated notes
EUR 700million
4%
1)
Annually, April 25 2014/44 2024 698 698
USD 800million
5.5%
2)
Semi-annually, April 11 2018/48 2028 697
648
At December 31
1,396 1,345
Fair value of subordinated borrowings
1,567 1,517
1
2
These securities are subordinated and rank senior to the junior perpetual capital securities, equally with the perpetual cumulative
subordinated bonds and junior to all other liabilities. The conditions of the securities contain certain provisions for optional and required
deferral of interest payments. There have been no defaults or breaches of conditions during the period.
17 Long-term borrowings
2021
2020
Remaining terms less than 1 year
- -
Remaining terms 1 - 5 years
499 498
Remaining terms 5 - 10 years
296 -
Remaining terms over 10 years
472 720
At December 31
1,266 1,218
Fair value of long-term borrowings
1,735 1,766
The repayment periods of borrowings vary from 2 years up to 18 years. The interest rates vary from 1.000% to 6.625% per annum.
18 Current liabilities
Loans from and payables to group companies have amaturity of less than one year. Other current liabilities includes derivatives with
negative fair values of EUR116million (2020: EUR250million).
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Notes to the financial statements of AegonN.V.
Note 16
19 Commitments and contingencies
AegonN.V. has guaranteed and is severally liable for the following:
•
Due and punctual payment of payables due under letter of credit agreements applied for by AegonN.V. as co-applicant with its
captive insurance companies that are subsidiaries of Transamerica Corporation and Commonwealth General Corporation.
At December 31, 2021, the letter of credit arrangements utilized by captives to provide collateral to affiliates amounted
to EUR 1,157million (2020: EUR 1,618million); as of that date no amounts had been drawn, or were due under these facilities;
•
Due and punctual payment of payables by the consolidated group companies Transamerica Corporation, Aegon Funding Company
LLC and Commonwealth General Corporation with respect to fixed subordinated notes, bonds, capital trust pass-through securities
and notes issued under commercial paper programs amounted to EUR 987million (2020: EUR 993million); and
•
Due and punctual payment of any amounts owed to third parties by the consolidated group company Aegon Derivatives N.V.
in connection with derivative transactions. Aegon Derivatives N.V.enters into derivative transactions with counterparties with which
ISDA master netting agreements including collateral support annex agreements have been agreed; net (credit) exposure
on derivative transactions with these counterparties was therefore limited as of December 31, 2021.
20 Number of employees
There were no employees employed by AegonN.V. in 2021 (2020: nil).
21 Auditor's remuneration
Total remuneration of the group
Of which PricewaterhouseCoopers
Accountants N.V. (NL)
2021
2020
20212020
Audit fees
31 34 9 9
Audit-related service fees
3
5
1
2
Total
35 40 10 11
Audit fees consist of fees billed for the annual financial statements audit (including quarterly reviews), subsidiary audits, equity
investment audits and other procedures required to be performed by the independent auditor to be able to form an opinion
on Aegon’s consolidated financial statements. These other procedures include information systems and procedural reviews and
testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit
or quarterly review. They also include fees billed for other audit services, which are those services that only the external auditor
reasonably can provide, and include statutory audits or financial audits for subsidiaries or affiliates of the Company and services
associated with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued
in connection with securities offerings.
Audit-related services include, among others, assurance services to report on internal controls for third parties, due diligence services
pertaining to potential business acquisitions/dispositions; discussions, review and testing of certain information related to the adoption
of new accounting standards impacting future periods, financial reporting or disclosure matters not classified as 'Audit services';
financial audits of employee benefit plans; and agreed-upon or expanded audit procedures related to accounting and/or billing records
required to respond to or comply with financial, accounting or regulatory reporting matters.
22 Events after the reporting period
On February 24, 2022, Russia invaded Ukraine, which caused a humanitarian crisis and is also impacting global financial markets and
causing economic turbulence. At the date of this report the depth and length of this invasion is unknown, and the situation is changing
rapidly from day to day.
Aegon is closely monitoring the financial markets and economic turbulence that has arisen as a consequence of the situation and
the related international sanctions, and its impact on Aegon. The most significant risks Aegon faces are related to financial markets,
particularly from volatility in credit, equity and interest rates. The notes to Aegon’s financial statements include elaborate descriptions
and related financial market sensitivities. Aegon is actively managing its risks and capital position to maintain a robust balance sheet,
as the Company navigates through the uncertainty created by the current geopolitical situation. The Company is on high alert status
to help ensure the safety and well-being of its staff, as well as its capability to support its customers, while maintaining our financial
and operational resilience.
Aegon Integrated Annual Report
2021
284
About Aegon Governance and risk management
Financial information
Non-financial informationNotes to the financial statements of AegonN.V.
Note 19
Aegon has no direct operations in Russia and Ukraine. Aegon’s direct investment exposure in the company’s general account portfolio
to Russia and Ukraine is to mainly corporates and amounts to approximately EUR 27 million and EUR 42 million respectively, based
on the book value as per March 3, 2022. The combined exposure to Russia and Ukraine on investments for account of policyholders
with guarantees amounts to approximately EUR 38 million.
23 Proposal for profit appropriation
At the Annual General Meeting of Shareholders currently scheduled for May 31, 2022, the Executive Board will, in line with its
earlier announcement and barring unforeseen circumstances, propose afinal dividend for 2021 of EUR0.09 per common share
and EUR0.00225 per common share B. The final dividend will be paid in cash or stock at the election of the shareholder. The value
of the stock dividend will be approximately equal to the cash dividend.
If the proposed dividend is approved by shareholders, Aegon shares will be quoted ex-dividend on June 2, 2022. The record date for
the dividend will be June 3, 2022. Shareholders can elect to receive adividend in cash or in shares during the dividend election period,
which will run from June 6, 2022 up to and including June 29, 2022. The dividend will be payable as of July 6, 2022.
In order to reflect the prevailing market price of AegonN.V. common shares fully within the indication provided, the number of dividend
coupons that give entitlement to anew common share of EUR0.12 (nominal value) will be determined on June 29, 2022 after
5.30 p.m. (CET), based on the average share price on Euronext Amsterdam in the five trading days from June 23, 2022 up to and
including June 29, 2022.
2021
2020
Final dividend on common shares
184 124
Earnings to be retained
1,467 -
To be deducted from retained earnings
- (79)
Net result attributable to owners of AegonN.V.
1,651 45
The Hague, the Netherlands, March 16, 2022
Supervisory Board Executive Board
William L. Connelly Lard Friese
Mark A. Ellman Matthew J. Rider
Jack McGarry
Ben J. Noteboom
Caroline Ramsay
Thomas Wellauer
Corien M.Wortmann-Kool
Dona D. Young
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Financial information
Non-financial information285
Notes to the financial statements of AegonN.V.
Note 23
Independent auditor’s report
To: the Annual General Meeting of Shareholders and the Supervisory Board of AegonN.V.
Report on the financial statements 2021
Our opinion
In our opinion:
•
The consolidated financial statements of AegonN.V. together with its subsidiaries (‘the Group’) give atrue and fair view of the
financial position of the Group as at December 31, 2021, and of its result and its cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted by the European Union (‘EU-IFRS’) and with Part 9 of Book 2 of the
Dutch Civil Code;
•
The company financial statements of AegonN.V. (‘the Company’) give atrue and fair view of the financial position of the Company
as at December 31, 2021, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2021 of AegonN.V., The Hague. The financial statements include
the consolidated financial statements and the company financial statements.
The consolidated financial statements comprise:
•
the consolidated statement of financial position as at December31, 2021;
•
the following statements for 2021: the consolidated income statement, the consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the consolidated cash flow statement; and
•
the notes to the consolidated financial statements, comprising the significant accounting policies and other explanatory
information.
The company financial statements comprise:
•
the company statement of financial position as at December31, 2021;
•
the company income statement for the year then ended; and
•
the notes to the financial statements, comprising the significant accounting policies and other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions
of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of the Dutch Civil Code for
the company financial statements.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our
responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Independence
We are independent of AegonN.V. in accordance with the European Union Regulation on specific requirements regarding statutory
audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake
de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, aregulation with
respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the
‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
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2021
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About Aegon Governance and risk management
Financial information
Non-financial informationIndependent auditor’s report
Independent auditor’s report
Independent auditor’s report
Independent auditor’s report
Our audit approach
We designed our audit procedures with respect to the key audit matters, fraud and going concern, and the matters resulting from
that, in the context of our audit of the financial statements as awhole and in forming our opinion thereon. The information in support
of our opinion, like our findings and observations related to individual key audit matters, the audit approach on fraud risk and the audit
approach on going concern was addressed in this context, and we do not provide aseparate opinion or conclusion on these matters.
Overview and context
AegonN.V. is aprovider of mainly life insurance, pension and asset management services. The Group consists of several components.
AegonN.V.’s main operating units are separate legal entities and operate under the laws of their respective countries. Aegon has
the following reportable segments: Americas (which covers the business unit in United States), the Netherlands, United Kingdom,
International (which covers business units in Southern and Eastern Europe as well as Asia), Asset Management, and Holding and other
activities. Aegon has significant operations in the Americas, the Netherlands and the United Kingdom. To be able to obtain sufficient
and appropriate audit evidence over the consolidated financial statements, we considered our group audit scope and approach as set
out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group,
as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
We determined our group materiality based on Adjusted Shareholders’ Equity since we believe that this metric is the most relevant
and suitable benchmark to determine our overall materiality, as we have set out in the section ‘Materiality’. In particular, we considered
where management made important judgments, for example, in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain.
In Note 3, ‘Critical accounting estimates and judgment in applying accounting policies’, to the consolidated financial statements,
the Group describes the areas of judgment in applying accounting policies and the key sources of estimation uncertainty. Given
the significant estimation uncertainty and the related higher inherent risks of material misstatement in the valuation of certain assets
and liabilities arising from insurance contracts and the valuation of certain Level 3 investments, we considered these matters as key
audit matters as set out in the section ‘Key audit matters’ of this report. Furthermore, we identified uncertainties in policyholder claims
and litigation as akey audit matter.
We discussed with management their assessment on how the risk of climate change impacts the strategy, operations, and financial
position of the Group. The Group committed to anet zero impact objective in respect to its general account investment portfolio and
an operational greenhouse gas emission reduction. We discussed with management the planned actions which in their view should
lead to realization of the commitments. The impact on the 2021 financial statements resulting from the risk of climate change
on the insurance activities is considered limited, due to among others, the size and nature of the property and casualty portfolio
of the group. As the investment portfolio is largely valued at market value, based on market observable inputs, the risk of climate
change on this portfolio does also not lead to amaterial risk from a2021 financial statements perspective. Hence, the risk of climate
change on the Group does not warrant akey audit matter.
Based on our risk assessment, including cyber security risks and given the importance of information technology (IT) for
the Group and hence for our audit of the financial statements, we have, to the extent relevant to our audit, paid specific attention
to the IT dependencies and IT general controls, which comprise the policies and procedures to ensure reliable automated processing
of information used for financial reporting purposes, and relevant application controls.
We ensured that the group audit team and the component audit teams included the appropriate skills and competences which are
needed for the audit of acomplex financial conglomerate, such as Aegon. This includes industry expertise in life and non-life insurance,
banking, and asset management. We included experts and specialists in the areas of risk assurance (IT), tax services, actuarial services,
global human resource services, valuation services for certain types of assets (e.g., complex financial instruments and real estate)
and forensics in our team. For the assessment of the other information included in the annual report in respect of the required
EU Taxonomy disclosures we added ESG specialists to our team.
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The outline of our audit approach was as follows:
Materiality
•
Overall materiality: EUR 130 million.
Audit scope
•
We conducted audit work in the segments Americas, the Netherlands, United Kingdom,
International, Asset Management and Holding and other activities.
•
Virtual site visits were conducted to the United States, the Netherlands,
UnitedKingdom, Spain, Hong Kong and global Asset Management. For the segment
Holdings and other activities, we performed the audit work ourselves.
•
Audit coverage: 96% of consolidated revenue, 99% of consolidated total assets
and97% of consolidated result before tax.
Key audit matters
•
Valuation of certain assets and liabilities arising from insurance contracts.
•
Valuation of certain Level 3 investments.
•
Uncertainties in policyholder claims and litigation.
Materiality
Audit scope
Key audit
matters
Materiality
The scope of our audit is influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for
the audit of the financial statements’.
Based on our professional judgment we determined certain quantitative thresholds for materiality, including the overall materiality
for the financial statements as awhole, as set out in the table below. These, together with qualitative considerations, helped us to
determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as awhole and
on our opinion.
Overall group
materiality
EUR 130 million (2020: EUR 115 million).
Basis for determining
materiality
We used our professional judgment to determine overall materiality. As a basis for our judgment, we used 0.75%
of the Adjusted Shareholders’ Equity.
Rationale for benchmark
applied
We used the Adjusted Shareholders’ Equity, as disclosed in Note 43, ‘Capital management and solvency’, to the
consolidated financial statements, as the primary benchmark, based on our analysis of the common information
needs of users of the financial statements. Adjusted Shareholders’ Equity is defined as EU-IFRS Shareholders’
Equity minus revaluation reserves (i.e., the volatile effect of unrealized gains/losses on available-for-sale
investments) plus non-controlling interests and long-term incentive plan not yet vested (which are immaterial
to the calculation). We believe that Adjusted Shareholders’ Equity is the most relevant and suitable benchmark
to determine our overall materiality due to the focus of stakeholders (e.g., regulators, rating agencies and
shareholders) on capital generation in combination with the nature of the Group’s business and the volatility of
earnings. Adjusted Shareholders’ Equity is a key metric to evaluate Aegon’s equity position, which is important
for the dividend paying potential of Aegon and gives a relevant indication of the ability of the Group to cover
itsliabilities.
We applied professional judgment to determine the percentage to be applied to this metric. In this respect we
considered the activities of the Group, the balance sheet total, revenue, the underlying result, and the result
before tax. Based on this assessment, during our planning procedures we considered a percentage of 0.75%
adequate considering the anticipated level of Adjusted Shareholders’ equity. We have set our final materiality
based on the Adjusted Shareholders’ Equity position at year end.
Component materiality
To each component in our audit scope, we, based on our judgment, allocate materiality that is less than our
overall group materiality. The range of materiality allocated across components was between EUR 15 million and
EUR 100 million.
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We also take misstatements and/or possible misstatements into account that, in our judgment, are material for qualitative reasons.
We agreed with the Supervisory Board that we would report to them misstatements identified during our audit above EUR6million
(2020: EUR6million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The scope of our group audit
AegonN.V. is the parent company of agroup of entities. The Group is structured predominantly along geographical lines as described
in Note 5, ‘Segment information’, to the consolidated financial statements. The financial information of this group is included
in the consolidated financial statements of AegonN.V.
We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for us to
be able to give an opinion on the financial statements as awhole, taking into account the management structure of the Group,
the nature of operations of its components, the accounting processes and controls, and the markets in which the components
of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be
performed at the component level by the Group engagement team and by each component auditor.
The group audit primarily focused on the significant components: Americas, the Netherlands and United Kingdom.
We subjected these components to audits of their complete financial information, as these components are individually financially
significant to the Group. Additionally, we selected Spain, two operating entities in Asia, and Holdings and other activities for audit
of specified balances to achieve appropriate coverage on financial line items in the consolidated financial statements.
In total, in performing these procedures and excluding our consolidated analytical procedures, we achieved the following coverage
on the financial line items:
Revenue
96%
Total assets
99%
Resul
t before tax
97%
None of the remaining components represented more than 2% of total consolidated revenue or total consolidated assets. For those
remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were
no significant risks of material misstatements within those components.
Where component auditors performed the work, we determined the level of involvement we needed to have in their audit work to be
able to conclude whether we had obtained sufficient and appropriate audit evidence as abasis for our opinion on the consolidated
financial statements as awhole.
We issued instructions to the component audit teams in our audit scope. These instructions included amongst others our risk analysis,
materiality and scope of the work. We explained to the component audit teams the structure of the Group, the main developments
that are relevant for the component auditors, the risks identified (including the risk of fraud), the materiality levels to be applied and
our global audit approach. We discussed the risk assessment and audit approach with each of the component teams. This particularly
concerned the risk of fraud, revenue recognition, significant estimates and the impact of the COVID-19 pandemic on the risk
assessment, for instance the risk of working in aremote and/or hybrid environment. We developed an oversight strategy for each
component based on its significance and/or risk characteristics to the Group.This strategy included procedures such as regular
virtual meetings and discussions with component auditors to challenge and review significant audit matters and judgments including
the review of selected working papers via remote access to our component teams’ audit files which is fully supported by the use
of the global PwC electronic audit file program.
Furthermore, we had individual calls with each of the in-scope component audit teams during the year and upon conclusion of their
work. During these calls, we discussed the significant accounting and audit issues identified by the component auditors and the audit
procedures in this respect, their reports, the findings of their procedures, updates on risk assessments and other matters, which could
be of relevance for the audit of the consolidated financial statements of the Group. Furthermore, we analyzed the reports received
from the component auditors and attended the virtual closing meetings.
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Next to the meetings with the component teams, we also had (virtual) meetings with various members of the local Aegon management
team of the main components. During these meetings, we discussed the business development, strategy, financial performance
of the local businesses, and fraud and climate related risks. We also discussed the impact of change on the organization and people
from transformation programs (e.g., performance improvement initiatives), the IFRS 17 implementation, and the COVID-19 pandemic,
including the impact on controls and the control environment. The impact of change also affects considerations of controls in respect
of outsourcing.
The group engagement team performed the audit work on the group consolidation and financial statement disclosures.
By performing the procedures above at the component level, combined with additional procedures at group level, we have been able
to obtain sufficient and appropriate audit evidence on the Group’s financial information, as awhole, to provide abasis for our opinion
on the financial statements.
Audit approach on fraud risks
We identified and assessed the risk of material misstatement of the financial statements due to fraud. During our audit we obtained
an understanding of the Group and its environment and the components of the system of internal control, including the risk
assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal control
and how the Supervisory Board exercises oversight, as well as the outcomes. We considered available information and made enquiries
of relevant executives, directors, including internal audit, risk management, legal, compliance, human resources, local management, and
the Supervisory Board.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud,
misappropriation of assets and bribery and corruption. Together with our forensic specialists, we evaluated these fraud risk factors
to consider whether those factors indicated arisk of material misstatement due to fraud. In all our audits, we pay attention to the risk
of management override of controls, as this risk is always considered to present asignificant risk of fraud.
We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment and
management, as well as among others, the code of conduct, whistle blower procedures and incident registration and follow-up. Where
considered appropriate, we tested the operating effectiveness of internal controls designed to mitigate fraud risks. We incorporated
elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether
any findings were indicative of fraud or non-compliance. If so, we reevaluated our assessment of fraud risk and its resulting impact
on our audit procedures. Further, we performed an assessment of matters reported on the (Group’s) whistleblowing and complaints
procedures and results of management’s investigation of such matters.
Based on our considerations of various factors, such as the high volume of individually small transactions, and our assessment
of the inherent risk at the assertion level, the engagement team concluded that the risk of fraud in revenue recognition does not rise
to the level of a significant risk for any of the revenue streams for the Aegon N.V. consolidated audit.
Taking into account all factors, we identified ‘management override of controls’, including the risk of management bias when setting
assumptions, as afraud risk and performed the following specific procedures:
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Identified fraud risk
Audit work and observations
Management override of controls
In accordance with Standard 240.32, the risk of management override
of controls is always considered to present a significant risk of fraud
that cannot be rebutted.
Methods by which management could override controls include, but
are not limited to, the following:
Manipulation of the financial reporting process by recording
inappropriate or unauthorized journal entries.
Intentional misstatement of accounting estimates that involve
subjective inputs and assumptions.
Entering into significant transactions that are outside the normal
course of business for the entity or that otherwise appear to be
unusual, that have been entered into to engage in fraudulent
financial reporting or to conceal misappropriation of assets.
To the extent relevant to our audit, we have reviewed the design of
internal controls to mitigate the risk of override of internal control
and tested the effectiveness of the controls in the processes for
generating and processing journal entries and making estimates. We
also paid specific attention to the restricted access in IT systems and
the possibility that segregation of duties is not enforced.
We identified significant assumptions and tested these against the
Group’s and market experience information. For details we refer to
the key audit matters in respect of Valuation of certain assets and
liabilities arising from insurance contracts and Valuation of certain
level 3 investments.
We tested the appropriateness of journal entries recorded in the
general ledger and other adjustments made in the preparation of the
financial statements. We selected journal entries based on risk criteria
and performed specific audit procedures on these. We identified no
significant transactions outside normal business operations.
Our work did not lead to specific indications of fraud or suspicions of
fraud with regard to the override of internal control by management.
Audit approach on going concern
As disclosed in Note 3, ‘Critical accounting estimates and judgment in applying accounting policies’, to the consolidated financial
statements management performed their assessment of the entity’s ability to continue as agoing concern for the foreseeable future
and has not identified events or conditions that may cast significant doubt on the entity’s ability to continue as agoing concern
(hereafter: going concern risks). Our procedures to evaluate management’s going concern assessment include, amongst others:
•
Considering whether management’s going concern assessment includes all relevant information of which we are aware as aresult
of our audit, inquire with management regarding management's most important assumptions underlying their going concern
assessment;
•
Evaluating management’s assessment of the adequacy of the solvency positions, and the sufficiency of free cash flows to cover the
projected dividends and other cash outflows;
•
Understanding and evaluating the Group’s stress testing of liquidity and regulatory capital requirements, including severity of the
stress scenarios that were applied;
•
Performing inquiries of management as to their knowledge of going concern risks beyond the period of management’s assessment.
Our procedures did not result in outcomes contrary to management’s assumptions and judgments used in the application of the going
concern assumption.
Our focus on the risk of non-compliance with laws and regulations
We obtained ageneral understanding of the legal and regulatory framework applicable to the Group and how the Group is complying
with that framework. There is an industry risk that emerging compliance or litigation areas have not been identified and/or addressed
by management for financial statement purposes. This includes the consideration whether there is aneed for the recognition
of aprovision or acontingent liability disclosure on the future outcome of legal or regulatory processes.
In our audit, adistinction is made between those laws and regulations which have adirect effect on the determination of material
amounts and disclosures in the financial statements and those that do not have adirect effect but where compliance may
be fundamental to the operating aspect of the business, to the Group’s ability to continue its business or to avoid material penalties.
We identified that the risk of non-compliance with laws and regulations mainly relates to the laws and regulations which have
an indirect impact on the financial statements, such as anti-money laundering and anti-terrorist financing regulations, regulations
linked to the operating licenses for the Group’s activities (insurance, asset management, banking) including Solvency II in Europe and
Risk-Based Capital (RBC) in the US. For this category, we performed specific procedures to identify non-compliance with those laws
and regulations that may have amaterial effect on the financial statements. These procedures comprise inquiring of management,
evaluating compliance reporting and inspecting correspondence with relevant authorities.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not acomprehensive
reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included
asummary of the audit procedures we performed on those matters.
The key audit matters described below are mostly related to the nature of the Group and are therefore expected to occur year over
year. In prior year, given the economic impacts resulting from the ongoing COVID-19 pandemic, but also the new strategy presented
by the Group in December 2020, we gave significant additional attention to the risk of impairment of assets. Compared to last year,
we do not consider the risk of impairment of assets as akey audit matter anymore. Based on our assessment, the economic impact
of the pandemic and the impact of the late 2020 announced new strategy on the future earnings capacity do not to lead to such
an increased risk for impairment of assets at the 2021 year-end that it warrants akey audit matter.
Key audit matter Our audit work and observations
Valuation of certain assets and liabilities arising from
insurance contracts.
Note 3 ‘Critical accounting estimates and judgment in applying
accounting policies’, Note 27 ‘Deferred expenses’, Note 29
‘Intangible assets’, Note 34 ‘Insurance contracts’ and Note 44
‘Fairvalue’.
The Group has the following assets and liabilities as at
December31, 2021 arising from insurance contracts:
•
Deferred policy acquisition costs (DPAC) of EUR 9.3billion
included in the deferred expenses line item;
•
Value of business acquired (VOBA) of EUR 0.8billion included in
the intangible assets line item;
•
Insurance contracts of EUR 124.4billion; and
•
Embedded derivatives in insurance contracts of EUR 3.4billion
included in the derivatives liability line item.
These areas involve the use of valuation models that use
significant inputs that are not market observable and significant
judgment over uncertain future outcomes, including the timing and
ultimate full settlement of long-term policyholder liabilities and as
aresult, are more likely to be subject to amaterial misstatement
either due to error or fraud. Therefore, we considered these areas
akey matter for our audit.
To assess the recoverability of DPAC and VOBA and the adequacy
of the liabilities for insurance contracts, at each reporting date,
Aegon performs liability adequacy testing. This testing is done to
verify that the valuation of these assets and liabilities are adequate
as compared to the expected future contractual cash flows.
The main assumptions used in measuring the DPAC and VOBA and
the liabilities for insurance contracts relate to mortality, morbidity,
future expenses, surrender, lapse, utilization rates and, for
embedded derivatives, own credit spread. In addition, Aegon the
Netherlands adjusts the outcome of the liability adequacy test for
the difference between the fair value and the book value of
mortgage loans and private loans. The fair value of mortgage loans
and private loans is determined using significant assumptions that
require judgment, including prepayment rate and lapse
assumptions. Given the magnitude of the insurance contract
liabilities and the sensitivities as explained in Note 34, ‘Insurance
contracts’, a change in non-market observable inputs (especially
mortality and morbidity) could have a significant effect on net
income and shareholders’ equity.
During 2021, Aegon continued a multi-year review of its actuarial
models with focus on those considered medium and high risk.
Model updates in combination with the Group’s actuarial and
economic assumptions update resulted in a EUR 298 million
pre-tax charge for the year as explained in Note5, ‘Segment
information’.
We performed audit procedures over the valuation and liability
adequacy testing models and the model updates to determine the
appropriateness of those and assessed the compliance with the
applicable accounting standards. We tested the impact of model
updates against supporting evidence. For the models used, we tested
the completeness and accuracy of key data underlying the
development of the significant assumptions, as well as judgments
applied, which may vary depending on the product and/or the
specifications of the product. We evaluated the reasonableness of
management’s significant assumptions, taking also into account the
impact of the COVID-19 pandemic, especially on mortality and
morbidity, assumed future expenses, surrender and utilization rates
and investment return. In our assessment, we considered the risk of
management bias in setting these significant assumptions. Based on
our procedures, we found these assumptions to be reasonable and
appropriate.
The quality of previous years’ assumptions is assessed by the
analyses of the actual versus expected developments. We also
evaluated the different market return scenarios that management
used for measurement purposes by performing audit procedures on
historical experience. Where expert judgment was used, we
challenged management on the judgment applied and the use of
alternative scenarios. Based on our procedures performed, we found
that the assumptions set by management and the different scenarios
used were supported by available audit evidence and are within
arange we consider acceptable based on the Group’s and industry
experience.
In respect of mortgage loans and private loans of Aegon in the
Netherlands, we evaluated the reasonableness of management’s
estimate of the fair value of the portfolio that is included in the
liability adequacy test by independently developing arange of
acceptable outcomes and comparing management’s estimate to the
independently developed ranges.
We also evaluated whether the disclosures in the consolidated
financial statements are adequate and in accordance with EU-IFRS.
We found the disclosures to be appropriate in this context.
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Key audit matter Our audit work and observations
Valuation of certain level 3 investments.
Note 3 ‘Critical accounting estimates and judgment in applying
accounting policies’, Note 22 ‘Investments’ and Note 44
‘Fairvalue’.
The Group has investments of EUR 158.5 billion as at December
31, 2021, of which EUR 3.3 billion were categorized as Level 3
debt securities and investments in real estate in the valuation
hierarchy.
Management’s estimation of the valuation of Level 3 debt
securities and investments in real estate is developed using quotes
from third-party brokers, internal cash flow modelling techniques
and external appraisals that use significant unobservable inputs,
including discount and capitalization rates, default rate and
liquidity assumptions, issue specific credit adjustments and
indicative quotes from market makers. These estimations involve
significant judgment by management and have a higher potential
risk to be affected by error or management bias. Therefore, these
areas are considered a key audit matter. Our focus considered both
the positions that are presented at fair value on the balance sheet
and those positions carried at amortized cost on the balance sheet
but for which fair value is required to be disclosed.
The models that are utilized in the assessment of impairments on
structured securities are dependent on assumptions such as
prepayments, severities, and Constant Default Rate vectors. The
significant inputs used in valuing real estate are monthly rent rolls,
capital expenditure budgets provided by the asset manager, and
discount rates and capitalization rates obtained from outside
parties. In addition, real estate properties are valued using industry
standard models and sales comparison based on the type of
property.
Given the nature of certain inputs/rates utilized and valuation
methodology employed, the valuation of real estate has a high
estimation uncertainty and a change in assumptions could have
asignificant effect on net income and shareholders’ equity.
We performed substantive audit procedures to supplement
procedures over our testing of internal controls in respect of
assumption setting and data and those assessing service organization
reports. These substantive procedures included, among others,
developing an independent estimate of the value for asample of
investments by obtaining independent pricing from third-party
vendors, if available. We performed retrospective testing, where
possible, to assess the quality of previous estimates and assumptions.
Also, on asample basis for certain Level 3 investments, we evaluated
the reasonableness of management’s estimate by developing an
independent range of prices utilizing arange of prices and comparing
management’s estimate to the independently developed ranges.
Developing the independent estimate involved utilizing arange of
available market inputs and assumptions and testing the
completeness and accuracy of data provided by management. We
assessed pricing models and the underlying methodologies against
industry practice and valuation guidelines. We used real estate
valuation experts to assess on asample basis the fair value of
properties as determined by management and as reported by
outsourcing parties based on available market information. Based on
our procedures, we considered that the valuation of these
investments was within the bandwidth that we consider acceptable.
We also evaluated whether the disclosures in the consolidated
financial statements are adequate and in accordance with EU-IFRS.
We found the disclosures to be appropriate in this context.
Uncertainties in policyholder claims and litigation.
Note 38 ‘Provisions’, Note 45 ‘Commitments and contingencies’.
The insurance industry continues to face consumer activism and
regulatory scrutiny over product design and selling practices.
TheGroup has encountered claims and litigations in this respect.
Depending on the actual legal position and expectations from
management, claims, including litigation related, are either
provided for as a liability or reflected as contingent liabilities in the
notes to the financial statements based on the criteria as outlined
in EU-IFRS. The Group uses internal and external legal experts
where applicable to evaluate its legal positions.
Given the uncertainty and judgment in this area in terms of
valuation and presentation and disclosure, this area is subject to
the risk of understatement of recorded liabilities and incomplete
disclosure of contingent liabilities. Therefore, we determined this
as akey audit matter.
We gained an understanding of the policyholders’ claims and
litigations through discussions with management including the
general legal counsel.
Our procedures also included, among others, obtaining and evaluating
lawyers’ letters to the extent considered necessary for our audit. For
all (potential) material claims, we tested the underlying facts and
circumstances considered and assessed the best estimate of outflows
as determined by the Group.
We evaluated that the Group has properly reflected the claims and
litigations in either the provisions or the contingent liabilities by
assessing these against the criteria in IAS 37. In this respect, we
assessed whether the Group has apresent obligation (legal or
constructive) as aresult of apast event, if it is probable (i.e., more
likely than not) that an outflow of resources embodying economic
benefits will be required to settle the obligation and areliable
estimate can be made of the amount of the obligation. Based on our
procedures performed, we noted no exceptions.
We also evaluated whether the disclosures in the consolidated
financial statements are adequate and in accordance with EU-IFRS.
We found the disclosures to be appropriate in this context.
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Report on the other information included in the annual report
In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists
of all information in the annual report besides the financial statements and our auditor’s report thereon.
Based on the procedures performed as set out below, we conclude that the other information:
•
is consistent with the financial statements and does not contain material misstatements;
•
contains the information regarding the directors’ report and the other information that is required by Part 9 of Book 2 and regarding
the remuneration report required by the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements
or otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section 2:135b subsection 7 of the Dutch Civil
Code and the Dutch Auditing Standard 720, ‘The auditor’s responsibilities relating to other information’. The scope of such procedures
was substantially less than the scope of those performed in our audit of the financial statements.
The Executive Board is responsible for the preparation of the other information, including the directors’ report and the other
information in accordance with Part 9 of Book 2 of the Dutch Civil Code. The Executive and Supervisory Board are responsible for
ensuring that the remuneration report is drawn up and published in accordance with sections 2:135b and 2:145 subsection 2 of
the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Our appointment
We were initially appointed as auditors of Aegon by the Supervisory Board following the passing of aresolution by the shareholders
at the annual meeting held on May 15, 2013. We are the independent auditor for atotal period of 8 years.
European Single Electronic Format (ESEF)
AegonN.V. has prepared the annual report, including the financial statements, in ESEF. The requirements for this format are set out
in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of asingle
electronic reporting format (these requirements are hereinafter referred to as: the RTS on ESEF).
In our opinion, the annual report prepared in XHTML format, including the partially marked-up consolidated financial statements,
as included in the reporting package by AegonN.V., complies, in all material respects, with the RTS on ESEF.
The Executive Board is responsible for preparing the annual report, including the financial statements, in accordance with the RTS
on ESEF, whereby the Executive Board combines the various components into asingle reporting package. Our responsibility is to obtain
reasonable assurance for our opinion on whether the annual report in this reporting package, complies with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (Royal Netherlands Institute of Chartered Accountants), included
amongst others:
•
Obtaining an understanding of the entity’s financial reporting process, including the preparation of the reporting package.
•
Obtaining the reporting package and performing validations to determine whether the reporting package, containing the Inline XBRL
instance document and the XBRL extension taxonomy files, has been prepared, in all material respects, in accordance with the
technical specifications as included in the RTS on ESEF.
•
Examining the information related to the consolidated financial statements in the reporting package to determine whether all
required mark-ups have been applied and whether these are in accordance with the RTS on ESEF.
No prohibited non-audit services
To
the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1)
of the European Regulation on specific requirements regarding statutory audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to which our audit
relates, are disclosed in Note 21, 'Auditor's remuneration', to the company financial statements.
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Responsibilities for the financial statements and the audit
Responsibilities of the Executive Board and the Supervisory Board for the financial statements
The Executive Board is responsible for:
•
the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch
Civil Code; and for
•
such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements that are
free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Executive Board is responsible for assessing the Company’s ability
to continue as agoing concern. Based on the financial reporting frameworks mentioned, the Executive Board should prepare
the financial statements using the going concern basis of accounting unless the Executive Board either intends to liquidate
the Company or to cease operations or has no realistic alternative but to do so. The Executive Board should disclose events and
circumstances that may cast significant doubt on the Company’s ability to continue as agoing concern in the financial statements.
The Supervisory Board is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in amanner that allows us to obtain sufficient and appropriate audit
evidence to provide abasis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial statements
as awhole are free from material misstatement, whether due to fraud or error and to issue an auditor
’
s report that includes our opinion. Reasonable assurance is ahigh but not absolute level of assurance, which makes it possible that we may not detect all material
misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements
on our opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
Amsterdam, March 16,2022
PricewaterhouseCoopers Accountants N.V.
Original has been signed byG.J. Heuvelink RA
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Independent auditor’s reportIndependent auditor’s report
Appendix to our auditor’s report on the financial statements 2021 of AegonN.V.
In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit
of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgment and have maintained professional skepticism throughout the audit in accordance with Dutch
Standards on Auditing, ethical requirements and independence requirements. Our audit consisted, among other things of the following:
•
Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing
and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide
abasis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override
of internal control.
•
Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
•
Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the Executive Board.
•
Concluding on the appropriateness of the Executive Board’s use of the going concern basis of accounting, and based on the audit
evidence obtained, concluding whether amaterial uncertainty exists related to events and/or conditions that may cast significant
doubt on the Company’s ability to continue as agoing concern. If we conclude that amaterial uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made
in the context of our opinion on the financial statements as awhole. However, future events or conditions may cause the Company
to cease to continue as agoing concern.
•
Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating
whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction,
supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures
for components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements
as awhole. Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities
or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group
entities for which an audit or review of financial information or specific balances was considered necessary.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit. In this respect, we also issue
an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding
statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this
auditor’s report.
We provide the Supervisory Board with astatement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Supervisory Board, we determine those matters that were of most significance in the audit
of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not
communicating the matter is in the public interest.
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Other information
Profit appropriation
Appropriation of profit will be determined in accordance with the articles 31 and 32 of the Articles of Association of AegonN.V.
Therelevant provisionsare asfollows:
1. The General Meeting of Shareholders will adopt the Annual Accounts;
2. If the adopted profit and loss account shows aprofit, the Supervisory Board may decide, upon the proposal of the Executive Board,
to set aside part of the profit to augment and/or form reserves;
3. The profits remaining after application of 2 above shall be put at the disposal of the General Meeting of Shareholders.
TheExecutive Board, subject to the approval of the Supervisory Board, shall make aproposal for that purpose. A proposal to pay
adividend shall be dealt with as aseparate agenda item at the General Meeting of Shareholders;
4. The Executive Board may, subject to the approval of the Supervisory Board, make one or more interim distributions to the holders of
common shares and common shares B;
5. Distributions are made in accordance with the principle set forth in article 4 of the Articles of Association of AegonN.V. that the
financial rights of acommon share B are one fortieth (1/40th) of the financial rightsof acommon share;
6. The Executive Board may, subject to the approval of the Supervisory Board, decide that adistribution on common shares and
common shares B shall not take place as acash payment but as apayment in common shares. Alternatively, it may decide that
holders of common shares and common shares B shall have the option to receive adistribution as acash payment and/or as
apayment in common shares, out of the profit and/or at the expense of reserves, provided that the Executive Board is designated
by the General Meeting to issue shares. Subject to the approval of the Supervisory Board, the Executive Board shall also determine
the conditions applicable to the aforementioned choices; and
7. The Company’s policy on reserves and dividends shall be determined and can be amended by the Supervisory Board, upon the
proposal of the Executive Board. The adoption and each amendment of the policy on reserves and dividends thereafter, shall be
discussed and accounted for at the General Meeting of Shareholders under aseparate agenda item.
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Profit appropriation
Other information
Other information
Profit appropriation
Profit appropriation
Profit appropriation
Major shareholders
General
As of December 31, 2021, Aegon's total authorized share capital consisted of 6,000,000,000 common shares with apar value
of EUR0.12 per share and 3,000,000,000 common shares B with apar value of EUR0.12 per share. At the same date, there were
2,106,313,195common shares and 568,839,440common shares B issued. Of the issued common shares, 301,774,161common
shares and 538,250,640common shares B were held by Vereniging Aegon and 821,758 common shares were held
by Aegon’s subsidiaries.
All of Aegon’s common shares and common shares B are fully paid and not subject to calls for additional payments of any kind.
All of Aegon’s common shares are registered shares.New York Registry Shares (“NYRS”) are common shares and are traded
at the New York Stock Exchange. Holders of NYRS hold their shares in the registered form issued by Aegon’s New York transfer agent
on Aegon’s behalf. NYRS and shares of listed at Euronext are exchangeable on a one-to-one basis and are entitled to the same rights,
except that cash dividends are paid in US dollars on NYRS.
As of December 31, 2021, 254million common shares were held in the form of NYRS. As of December 31, 2021, there were
approximately 13,232 record holders of Aegon’s NYRS resident in the United States.
Vereniging Aegon
Vereniging Aegon is the continuation of the former mutual insurer AGO. In 1978, AGO demutualized and Vereniging AGO became
the only shareholder of AGO Holding N.V., which was the holding company for its insurance operations. In 1983, AGO Holding N.V. and
Ennia N.V. merged into AegonN.V.. Vereniging AGO initially received approximately 49% of the common shares and all of the preferred
shares in Aegon, giving it voting majority in Aegon. At that time, Vereniging AGO changed its name to Vereniging Aegon.
The purpose of the Association is abalanced representation of the direct and indirect interests of Aegon and of companies with
which Aegon forms agroup, of insured parties, employees, shareholders and other related parties of these companies.Influences
that threaten the continuity, independence or identity of Aegon, in conflict with the aforementioned interests will be resisted as much
as possible.
In accordance with the 1983 Amended Merger Agreement, Vereniging Aegon had certain option rights on preferred shares to prevent
dilution of voting power as aresult of share issuances by Aegon. This enabled Vereniging Aegon to maintain voting control
at the General Meeting of Shareholders of Aegon. In September 2002, Aegon effected acapital restructuring whereby Vereniging
Aegon’s ownership interest in Aegon’s common shares decreased from approximately 37% to approximately 12% and its aggregate
ownership interest in Aegon’s voting shares decreased from approximately 52% to approximately 33%.
In May 2003, Aegon’s shareholders approved certain changes to Aegon’s corporate governance structure, introducing asecond
class of preferred shares. Both classes of preferred shares had anominal value of EUR0.25 each. The voting rights pertaining
to the preferred shares were adjusted accordingly to 25/12 vote per preferred share. However, in May 2003, Aegon and Vereniging
Aegon also entered into aPreferred Shares Voting Agreement, pursuant to which Vereniging Aegon agreed to exercise one vote only
per preferred share, except in the event of a'Special Cause', as defined below. At that time Aegon and Vereniging Aegon amended
the option arrangements under the 1983 Amended Merger Agreement so that, in the event of an issuance of shares by Aegon,
Vereniging Aegon could purchase as many class B preferred shares as would enable Vereniging Aegon to prevent or correct dilution
to below its actual percentage of voting shares, to amaximum of 33%.
On February 15, 2013, Aegon and Vereniging Aegon entered into an agreement to simplify the capital structure of Aegon and to cancel
all of Aegon’s preferred shares, of which Vereniging Aegon was the sole owner. The execution of this agreement was approved
by the Annual General Meeting of Shareholders on May 15, 2013.
The simplified capital structure entailed, but was not limited, to the conversion of all outstanding preferred shares A and B, with
anominal value of EUR0.25 each, into amix of common shares and common shares B, with anominal value of EUR0.12 each.
The financial rights attached to acommon share B were determined at 1/40
th
of the financial rights attached to acommon share.
The simplified capital structure also entailed the amendment of the Voting Rights Agreement between Aegon and Vereniging Aegon,
known as the Preferred Shares Voting Agreement before May 2013. As amatter of Dutch corporate law, the shares of both classes
offer equal full voting rights, as they have equal nominal values (EUR0.12). The amended Voting Rights Agreement ensures that
under normal circumstances, i.e. except in the event of aSpecial Cause, Vereniging Aegon will no longer exercise more votes than
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is proportionate to the financial rights represented by its shares. This means that in the absence of aSpecial Cause Vereniging Aegon
may cast one vote for every common share it holds and one vote only for every 40 common shares B it holds. As Special Cause qualifies
the acquisition of a15% interest in Aegon, atender offer for Aegon shares or aproposed business combination by any person or group
of persons, whether individually or as agroup, other than in atransaction approved by the Executive Board and the Supervisory Board.
If, in its sole discretion, Vereniging Aegon determines that aSpecial 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 alimited period
of six months.
The simplified capital structure also included an amendment to the 1983 Amended Merger Agreement between Aegon and Vereniging
Aegon. Following this 2013 amendment, Vereniging Aegon’s call option relates to common shares B. Vereniging Aegon may exercise
its call option to keep or restore its total stake at 32.6%, irrespective of the circumstances which cause the total shareholding to be
or become lower than 32.6%.
On May 17, 2019, Vereniging Aegon exercised its options rights to purchase in aggregate 1,773,680 common shares B at fair value
of acommon share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance)
to mitigate dilution caused by the issuance of shares on May 17, 2019, in connection with the Long Term Incentive Plans for
senior management.
On December 23, 2019, Aegon repurchased 13,227,120 common shares B from Vereniging Aegon for the amount of EUR1,384,046
based on 1/40
th
of the Value Weight Average Price of the common shares of the five trading days preceding this transaction.
The repurchase of common shares B was executed to align the aggregate holding of voting shares by Vereniging Aegon in Aegon with
its special cause voting rights of 32.6% following the completion of the Share Buy Back Program, initiated by Aegon in October 2019
to neutralize the dilutive effect of the distribution of interim dividend 2019 in stock.
On May 15, 2020, Vereniging Aegon exercised its options rights to purchase in aggregate 2,154,000 common shares B at fair value
of acommon share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance)
to mitigate dilution caused by the issuance of shares on May 15, 2020, in connection with the Long Term Incentive Plans for
senior management.
On December 14, 2020, Aegon repurchased 2,955,600 common shares B from Vereniging Aegon for the amount of EUR
228,911.22 based on 1/40
th
of the Value Weight Average Price of the common shares of the five trading days preceding this
transaction. The repurchase of common shares B was executed to align the aggregate holding of voting shares by Vereniging Aegon
in Aegon with its special cause voting rights of 32.6% following the completion of the Share Buy Back Program, initiated by Aegon
in October 2020 to neutralize the dilutive effect of the distribution of interim dividend 2020 in stock.
On June 3, 2021, Vereniging Aegon exercised its options rights to purchase in aggregate 1,983,360 common shares B at fair value
of acommon share B (being 1/40
th
of the market value of acommon share in the capital of the Company at the time of issuance)
to mitigate dilution caused by the issuance of shares on June 3, 2021, in connection with the Long Term Incentive Plans for
senior management.
On December 15,2021, Aegon repurchased 22,643,360common shares B from Vereniging Aegon for the amount
of EUR2,285,621based on 1/40
th
of the Value Weight Average Price of the common shares of the five trading days preceding this
transaction. The repurchase of common shares B was executed to align the aggregate holding of voting shares by Vereniging Aegon
in Aegon with its special cause voting rights of 32.6% following the completion of the Share Buy Back Programs, initiated by Aegon
in July and October 2021 to neutralize the dilutive effect of the distribution of the final dividend 2020 and the interim dividend
2021 in stock.
Development of shareholding in Aegon
Accordingly, at December 31, 2021, the voting power of Vereniging Aegon under normal circumstances amounted to approximately
15.39%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon).
In the event of aSpecial Cause, Vereniging Aegon’s voting rights will increase, currently to 32.6%, for up to six months.
At December 31, 2021, the General Meeting of Members of Vereniging Aegon consisted of nineteen members. The majority
of the voting rights is with the seventeen members who are not employees or former employees of Aegon or one of the Aegon Group
companies, nor current or former members of the Supervisory Board or the Executive Board of Aegon. The other two members are from
the Executive Board of Aegon.
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Vereniging Aegon has an Executive Committee consisting of six members, four of whom are not, nor have ever been, related to Aegon,
including the Chairman and the Vice-Chairman. The other two members are also member of the Executive Board of Aegon. Resolutions
of the Executive Committee, other than regarding the amendment of the Articles of Association of Vereniging Aegon, are made
with an absolute majority of the votes. When avote in the Executive Committee results in atie, the General Meeting of Members
has the deciding vote. Regarding the amendment of the Articles of Association of Vereniging Aegon, aspecial procedure requires
aunanimous proposal from the Executive Committee, thereby including the consent of the representatives of Aegon at the Executive
Committee. This requirement does not apply in the event of ahostile change of control at the General Meeting of Shareholders
of Aegon, in which event Vereniging Aegon may amend its Articles of Association without the cooperation of Aegon. Furthermore,
the two members of the Executive Board of Aegon, who are also members of the Executive Committee, have no voting rights on several
decisions that relate to Aegon, as set out in the Articles of Association of Vereniging Aegon.
Other major shareholders
In this section where reference is made to any filings with the Dutch Autoriteit Financiële Markten or the SEC, the terms issued capital'
and 'voting rights' are used as defined in the
Wet
op het Financieel Toezicht.To Aegon’s knowledge based on the filings made with the Dutch Autoriteit Financiële Markten, UBS Group AG, Dodge & Cox Stock Fund,
BlackRock, Inc., EuroPacific Growth Fund, Capital Research and Management Company and Dodge & Cox International Stock Fund hold
acapital or voting interest in Aegon of 3% or more.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at February 9, 2022, UBS Group AG stated to hold 95,033,675
common shares, representing 3.6% of the issued capital as at December 31, 2021.
Based on its filing with the Dutch Autoriteit Financiële Markten as at December 2, 2021, BlackRock, Inc. stated to hold 84,608,110
common shares, representing 3.2% of the issued capital as at December 31, 2021, and 99,534,476 voting rights, representing 3.7%
of the issued capital as at December 31, 2021.
On February 7, 2022, BlackRock, Inc.’s filing with the US Securities and Exchange Commission (SEC) shows that BlackRock holds
116,873,102 common shares, representing 4.5% of the issued and outstanding capital as at December 31, 2021, and has voting rights
for 101,297,168 shares, representing 3.9% of the votes as at December 31, 2021.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at November 26, 2021, Dodge & Cox Stock Fund stated to hold
80,432,242 common shares, representing 3.0% of the issued capital as at December 31, 2021.
On February 14, 2022, Dodge & Cox’s filing with the US Securities and Exchange Commission (SEC) shows that Dodge & Cox holds
200,536,310 common shares, representing 7.8% of the issued and outstanding capital as at December 31, 2021, and has voting rights
for 194,907,390 shares, representing 7.6% of the votes as at December 31, 2021.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at August 24, 2021, EuroPacific Growth Fund stated to hold
86,580,061 common shares, representing 3.2% of the issued capital as at December 31, 2021.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at August 24, 2021, Capital Research and Management
Company stated to hold 121,745,561 voting rights, representing 4.6% of the issued capital as at December 31, 2021.
Based on its last filing with the Dutch Autoriteit Financiële Markten as at February 26, 2021, Dodge & Cox International Stock Fund
stated to hold 80,049,394 common shares, representing 3.0% of the issued capital as at December 31, 2021.
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TOC-5
Table of contents
Additional information
302 Overview of Americas
308 Overview of the Netherlands
314 Overview of United Kingdom
318 Overview of International
324 Overview of Asset Management
326 Risk factors Aegon N.V.
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TOC 5
Additional information
Additional information
Overview of Americas
1
SUSEP, http://www2.susep.gov.br/menuestatistica/SES/principal.aspx. Webpage visited October 8, 2021.
2
SICOOB, https://www.bancoob.com.br/sobre-o-sicoob. Webpage visited October 12, 2021.
Aegon Americas operates primarily in the United States and also has operations in Brazil
and Canada.
Aegon in the US and Canada
In the United States, Aegon Americas operates primarily under the Transamerica brand. Aegon Americas is also active in Canada
through World Financial Group Insurance Agency (WFGIA), its affiliated insurance agency operations and WFG Securities Inc.,
asecurities dealer. The use of the term 'Transamerica' throughout this business overview refers to the operating subsidiaries
in the United States and Canada, collectively or individually, through which Aegon conducts business, except those United States
operations further described in the ‘Overview of Aegon Asset Management’.
Transamerica is one of the leading life insurance companies in the United States, and the largest of Aegon's operating units worldwide.
Transamerica employs approximately 7,100 people, and its businesses in the United States serve customers in all fifty states,
the District of Columbia, Puerto Rico, the US Virgin Islands, and Guam. Most Aegon companies in the United States operate under
the Transamerica brand, which stands for the pursuit of financial and physical well-being: Wealth + Health. The primary offices are
in Cedar Rapids, Iowa; Denver, Colorado; and Baltimore, Maryland. There are additional offices located throughout the United States.
Transamerica is organized into two business divisions, Workplace Solutions and Individual Solutions. Workplace Solutions serves
employers and their employees, and Individual Solutions serves retail consumers. The two business divisions operate through one
or more subsidiaries and affiliated companies toprovide awide range of life insurance, voluntary benefits (including supplemental
health insurance), retirement plan recordkeeping and advisory services, annuities, mutual funds and other long-term savings and
investment products.Transamerica employs avariety of distribution models to help customers access its products and services.
Aegon in Brazil
Aegon has a54.9% economic interest, inclusive of 50% of voting common shares reported through the Americas segment, in MAG
Seguros. MAG Seguros is Brazil's third largest independent (i.e. non-bank affiliated) life insurer
1
. To further capture growth prospects
in Brazil, Mongeral Aegon Group and Bancoob (Banco Cooperativo do Brasil) have established Sicoob Seguradora de Vida e Previdência,
acompany dedicated to providing life insurance and pension products within the Sicoob system. Sicoob is Brazil’s largest cooperative
financial system
2
,with over 4.6million associates and over 2,700 points of sale. MAG Seguros has approximately 740 employees.
Effective January 1, 2022, all of MAG Seguros will be reported as part of Aegon International.
Organizational structure
Transamerica Corporation is the holding company for Aegon’s US operations, and all US business is conducted through its various
subsidiaries. Transamerica entities collectively have operating licenses in every US state, in addition to the District of Columbia, Puerto
Rico, the US Virgin Islands, and Guam.
Transamerica is structured to provide relevant customer solutions that are easy to understand and that address the full range
of customers' financial protection and savings needs at every stage of life. Moreover, Transamerica's structure leverages its brand
strength, expertise, and capabilities to fulfill Aegon's purpose of helping people live their best lives.
Transamerica is organized into two business divisions, Workplace Solutions and Individual Solutions. Workplace Solutions offers
retirement plan recordkeeping, advisory services, employee benefits (life insurance and supplemental health insurance), group
annuities, collective investment trusts, health savings and flexible savings accounts, individual retirement accounts and stable
value solutions to employers and their employees. Individual Solutions offers life insurance, annuities, mutual funds, and collective
investment trusts (CITs) to retail customers. Transamerica offers these product lines, described in greater detail below, through
several distribution and sales channels and delivers insurance primarily through one of its key insurance subsidiaries Transamerica Life
Insurance Company and Transamerica Financial Life Insurance Company.
Aegon has designated the US as acore market, with Transamerica's businesses organized into Strategic Assets and Financial Assets.
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Overview of Americas
Overview of Americas
Overview of Americas
Overview of Americas
Business overviews
Strategic Assets are those that are considered to have agreater potential for an attractive return on capital and growth. In Workplace
Solutions, Transamerica is focused on small to mid-sized retirement plan administration, employee benefits, stable value solutions
and the Transamerica Advice Center. It also continues to operate in the retirement plan administration market for large employers.
In addition, Workplace Solutions provides value-added services, such as Managed Advice
®
and its proprietary investment solutions.
In Individual Solutions, Transamerica focuses on select life insurance and investment products, including term life insurance, final
expense whole life insurance, and indexed universal life insurance, as well as mutual funds and individual retirement products, like
accumulation variable annuities (VA) with limited interest rate sensitivity.
Several Transamerica product lines are considered Financial Assets, whichare capital intensive with relatively low returns on capital
employed. These are traditional VAs with interest rate sensitive guaranteed living benefits and death benefits; stand-alone individual
long-term care (LTC) insurance; and fixed annuities. Transamerica ceased new sales of these products in the first half of 2021 and any
future new sales for Financial Assets are limited, if any, and focused on products with higher returns and amoderate risk profile.
Overview of sales and distribution channels
Transamerica offers its products and services through affiliated and non-affiliated distributors to meet customer needs and provide
guidance to its customers. Workplace Solutions supports individuals primarily through their employers as customers, whereas Individual
Solutions supports individual customers.
Workplace Solutions
Transamerica distributes its Workplace Solutions products and services to employers and employees through independent financial
advisors, benefits consultants, and insurance agents as well as through an affiliated team of experienced registered representatives,
investment advisor representatives, and licensed insurance agents.
Individual Solutions
Wholesale distribution
The Individual Solutions business line of Transamerica offers annuities, investments such as mutual funds and exchange traded funds
(ETFs), and life insurance 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 advisors.
Additionally, Transamerica offers protection products through direct marketers, independent marketing organizations, and distribution
outlets known as brokerage general agents. These products are predominantly non-registered life insurance products (term life,
indexed universal life, and whole life insurance) sold through approximately 51,000 independent brokerage distributors and financial
institutions.
Retail distribution
Transamerica’s retail affiliated distribution group, Transamerica Financial Network (TFN), offers products, guidance and advice
to individuals to meet their protection and investment needs. TFN consists of World Financial Group Insurance Agency (WFGIA),
Transamerica Agency Network (TAN), and Transamerica Financial Advisors, Inc. (TFA). TFN, through licensed agents and registered
representatives/investment advisor representatives, offers insurance, annuities, mutual funds, retirement plans and advisory account
solutions. There are approximately:
•
53,200 independent life insurance agents associated with WFGIA in the United States and its affiliated insurance agency operating
in Canada;
•
2,600 insurance agents associated with TAN, comprised of both employees and independent producers; and
•
3,000 WFGIA and TAN agents associated with TFA as registered representatives, of whom approximately 1,300 are registered
as investment advisor representatives.
Overview of product lines
Life
Transamerica offers acomprehensive portfolio of protection solutions to customers in abroad range of market segments. Life products
include term life (TL), universal life (UL), variable universal life (VUL), index universal life (IUL), and whole life insurance (WL).
Term life insurance
TL insurance provides death benefit protection without cash value accumulation. Benefits are paid to policy beneficiaries in the event
of the death of the insured during aspecified period. Living benefit riders that provide accelerated benefits for critical illnesses
or chronic conditions are available on term insurance.
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Overview of Americas
Universal life insurance
UL insurance is flexible permanent life insurance that offers death benefit protection together with the potential for cash value
accumulation. After the first few years, there is usually no set premium. The policyholder can adjust the frequency and amount
of premium payments, as long as sufficient premiums are accumulated in the policy’s account value to cover charges in the month
that follows, which are called 'monthly deductions'. Some versions of this product have 'secondary guarantees.' These maintain life
insurance coverage when the cash value is insufficient, as long as the customer pays aspecified minimum premium.
Variable universal life insurance
VUL insurance is permanent life insurance that offers both adeath 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.
Coverage amounts may change as well. The investment feature usually includes 'sub-accounts,' which provide exposure to investments,
such as stocks and bonds. This exposure increases cash value return potential, but also the risk of additional premium requirements
or lower coverage amounts in comparison with atraditional, non-variable life insurance policy. Transamerica did not actively market VUL
insurance in 2021 but may do so in the future.
Index universal life insurance
IUL insurance provides permanent death benefit protection and cash value accumulation with flexible premium payments. What
distinguishes it from other types of permanent life insurance is the way in which interest earnings are credited. Net premiums may
be allocated to either afixed account or indexed accounts. Indexed accounts credit interest based in part on the performance of one
or more market indices. The credited interest is based on the index, but with afloor and acap. IUL offers both market-paced growth
potential in the indexed accounts and downside protection. It is an alternative to traditional UL - for which interest is credited at afixed
rate - and VUL, in which the cash value is directly exposed to market fluctuations. LTC riders and other living benefit riders are available
on IUL products.
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. Among
the WL insurance products offered is final expense WL insurance, which is intended to cover medical bills and burial expenses.
Accident & Health
Transamerica offers supplemental health insurance and LTC insurance.
Supplemental health insurance
Supplemental health insurance products include accidental death and dismemberment, accidental injury, cancer, critical illness,
disability, hospital indemnity, Medicare supplement, retiree medical, dental, vision, and supplemental medical expense indemnity issued
by affiliated and/or unaffiliated insurance companies.
Long-term care insurance
LTC insurance products are acategory of health insurance and provide benefits to policyholders that require qualified LTC services
when they are unable to perform two or more specified activities of daily living or develop asevere cognitive impairment. LTC insurance
helps protect against the high cost of LTC services, and it may also help families better manage the financial, health and safety issues
associated with LTC. Transamerica offers aLTC rider on certain life insurance productsand ceased offering astandalone product
in the first half of 2021.
Mutual Funds, Exchange Traded Funds (ETF) and Collective Investment Trusts (CITs)
Mutual funds are professionally managed investment vehicles comprised of pooled money invested by numerous individuals
or institutions. Such funds are invested in various underlying security types such as stocks, bonds, money market instruments, and
other securities. Transamerica offers mutual funds that are focused on several different asset classes, including US equity, global/
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 asub-advised platform, using managers both affiliated with and not affiliated with Aegon. These managers are
subject to arigorous selection and monitoring due diligence process conducted by Transamerica Asset Management.
ETFs are apooled investment vehicle for individual and institutional investors that combine some of the features of amutual fund with
the flexibility of allowing investors to trade throughout the day on an exchange. Transamerica offers asuite of managed-risk passive
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ETFs 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.
A CIT is apooled investment fund, held by abank or trust company, and generally available only to certain types of retirement plans
and other institutional investors. Transamerica serves to some it offers, which are focused on several different
as the
advisor of the
CITsasset classes including US equity, international equity, and fixed income. Transamerica also leverages the portfolio management
expertise of asset managers across the industry.
Variable Annuities
VAs allow the policyholder to accumulate assets for retirement on atax-deferred basis and to participate in equity or bond market
performance. Additional insurance guarantees, which are offered through riders, can be added to VAs, including guaranteed minimum
death benefits (GMDBs) and guaranteed living benefits (GLBs). GMDBs provide aguaranteed benefit in the event of death. GLBs are
intended to provide ameasure of protection against market risk while the annuitant is alive. Different forms of GLBs are offered, such
as guaranteeing an income stream for life and/or guaranteeing principal protection. While Transamerica discontinued sales of variable
annuities with significant interest rate sensitive living and death benefits in the first quarter of 2021, it continues to offer variable
annuities, including certain annuities with GLBs and GMDBs.
Fixed Annuities
Fixed annuities allow the policyholder to accumulate assets for retirement on atax-deferred basis through periodic interest
crediting and principal protection. Transamerica no longer allows new contracts of any fixed annuities as it ceased new sales
of fixed indexed annuities in the first quarter of 2021. Premium additions on in force fixed annuities are allowed in some contracts;
however, Transamerica’s fixed indexed annuity rider will no longer receive any premium deposits after the second quarter of 2022,
as the contracts allow for additions only for one year after issue.
Retirement Plans and IRAs
Comprehensive and customized retirement plan services are offered to employers across the entire range of defined benefit, defined
contribution, and non-qualified deferred compensation plans for single employer plans, multiple employer plans (MEPs) and pooled
employer plans (PEPs). Services are also offered to individuals rolling over funds from other qualified retirement funds or IRAs.
Retirement plan services, including administration, recordkeeping and related services are offered to employers of all sizes and to plans
across all market segments with focus on small to mid-sized organizations. Transamerica also works closely with plan advisors and
third-party administrators to serve their customers. Transamerica Retirement Solutions is atop-ten defined contribution record-keeper
in the United States based on number of plan participants
1
.
Plan sponsors have access to awide array of investment options.Tools are provided to help plan participants monitor their retirement
accounts and engage in behavior to stay on track towards afunded retirement. Managed Advice® is amanaged account option that
plan sponsors can make available to participants that provides investment advice to participants using the plan's slate of funds.
For individuals, retirement related services and products include IRAs, advisory services, and annuities as well as access to other
financial insurance products and resources.
Stable Value Solutions
Transamerica’s Stable Value Solutions business offers synthetic guaranteed investment contracts (GICs) primarily to tax-qualified
institutional entities such as 401(k) plans and other retirement plans and college savings plans. A synthetic GIC 'wrapper' is offered
around fixed income invested assets, which are owned by the plan and managed by the plan or athird-party money manager hired
by the plan. A synthetic GIC is typically issued with an evergreen maturity and may be terminated under certain conditions. Such
acontract helps to reduce fluctuations in the value of the wrapped assets and provides book value withdrawals for plan participants.
Stable Value fixed annuity contracts are also available to certain types of qualified retirement plans as aparticipant investment option.
Brazil
Aegon has designated Brazil as agrowth market. The Americas business in Brazil consists of a54.9% economic interest, inclusive
of 50% of voting common shares, in MAG Seguros, aBrazilian independent life insurer. MAG Seguros' activities include alife insurance
and pension company, an asset management company, amulti-sponsored pension fund, aliabilities management company for
1
Based on acompilation of qualitative and quantitative responses received from PLANSPONSOR magazine’s 2021 Recordkeeping Survey. PLANSPONSOR,
June21, 2021, https://www.plansponsor.com/research/2021-recordkeeping-survey. Ranking as of December 2020.
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pension funds, and alongevity institute. MAG Seguros and Bancoob (Banco Cooperativo do Brasil) own Sicoob Seguradora de Vida
e Previdência (Sicoob), alife insurance and pensions company that provides life insurance and pension products via the Sicoob system.
The joint venture distributes products through Sicoob. Bancoob is aprivate commercial bank owned by the credit cooperative entities
affiliated with the Sicoob system. Sicoob represents akey distribution channel for MAG Seguros, which serves over 4million customers
nationwide through over 4,000 brokers.
Competition
The US marketplace is highly competitive. Transamerica's competitors include other large insurance carriers, in addition to certain
banks, securities brokerage firms, investment advisors, and other financial intermediaries marketing insurance products, annuities and
mutual funds.
In individual life insurance, leading competitors include Pacific Life, Lincoln National, Prudential Financial, John Hancock, National Life,
Nationwide, and AIG. Competitors for supplemental health include awide range of companies and company types based on the nature
of the coverage including Aflac, MetLife, Colonial Life, Allstate, Unum, and Guardian Life.
Transamerica's primary competitors in the
VA
market are Jackson National, Lincoln National, AIG, Nationwide, and Equitable.Some of Transamerica’s main competitors in the mutual fund market include John Hancock, Principal, Hartford Funds, American Funds,
PGIM, and Franklin Templeton.
In the defined contribution plan administration market, Transamerica’s largest competitors (based on assets under administration)
are Fidelity, Empower, Principal Financial, TIAA, Voya, Vanguard, Alight, and BofA Securities. Transamerica’s largest competitors
in the defined benefit segment are Alight, Willis Towers Watson, Conduent, Fidelity, Aon, Mercer, and Milliman.
In the market for synthetic GICs, Transamerica’s Stable Value Solutions business, the largest competitors are Prudential Financial,
MetLife, Voya, and Pacific Life.
Regulation and supervision
Transamerica's insurance companies are regulated primarily at the state level. Some activities, products and services are also subject
to federal regulation.
State regulation
The Transamerica insurance companies are licensed as insurers and are regulated in each US state and jurisdiction in which they
conduct insurance business. The insurance regulators in each state carry out their mission by providing oversight in the broad areas
of market conduct and financial solvency.
Transamerica's largest insurance company, Transamerica Life Insurance Company, is domiciled in the State of Iowa, and the Iowa
Insurance Division exercises principal regulatory jurisdiction over it. Iowa is Transamerica’s designated lead state, giving Iowa
acoordinating role in the collective supervision of Transamerica’s insurance entities.
In the areas of licensing and market conduct, states grant or revoke licenses to transact insurance business, regulate trade, advertising
and marketing practices, approve policy forms and certain premium rates, review and approve products and certain rates prior to sale,
address consumer complaints, and perform market conduct examinations on both aregular and targeted basis.
In the area of financial regulation, state regulators implement and supervise statutory reserve and minimum risk-based capital
requirements. Insurance companies are also subject to extensive reporting requirements, investment limitations, and required approval
of significant transactions. State regulators conduct extensive financial examinations every three to five years.
State regulators have the authority to impose avariety of corrective measures, including the revocation of an insurer’s license, for
failure to comply with applicable regulations. All state insurance regulators are members of the National Association of Insurance
Commissioners (NAIC), anon-regulatory industry association that works to achieve uniformity and efficiency of insurance regulation
across the United States and US territories.
Recent state-level regulatory developments that impact Transamerica include changes to the product illustration rules for IUL
insurance. The new rules attempt to make product illustrations more consistent across various product designs and should lead
to amore level playing field for new sales within the industry.
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The NAIC is implementing updated risk-based capital for bonds and real estate, effective at year end 2021. The factors result
in required capital increases for many categories of bonds, whereas real estate capital charges decrease. In combination, the changes
to bond and real estate risk charges have the effect of increasing regulatory capital requirements for Transamerica.
The NAIC has finalized and is gradually implementing aliquidity stress testing framework for large life insurers, including Transamerica.
The requirements are effectuated by changes to the NAIC’s Insurance Holding Company System Regulatory Act, which must be adopted
by each state, but current submissions are occurring under existing authority. It is anticipated that the required liquidity stress testing
exercise will be performed annually.
Recent amendments to the Life and Health Insurance Guaranty Association Model Act adjust guaranty fund assessments for future LTC
insurance-related insolvencies so that 50% of such assessments come from life/annuity accounts, with the other 50% from health/
Health Maintenance Organization accounts. Under the new formula, in the event of an LTC-related insolvency, Transamerica would
be subject to arelatively greater burden for assessments imposed by state guaranty associations. To date, approximately 35 states
have adopted the amended model.
Other emerging state issues that may impact Transamerica include aproject by the NAIC to update the economic scenario generator
that is required to be used to calculate prudential provisions for variable annuities and other products. The NAIC is also investigating
emerging simplified and automated underwriting methodologies in light of nondiscrimination objectives. Finally, the NAIC is also
exploring enhancements to existing climate risk regulation, including solvency assessment and risk disclosure.
Federal regulation
Although the insurance and retirement-related directed trustee and CIT business is primarily regulated at the state level, securities
products, and retirement plans products and services are also subject to federal regulation.
Variable insurance products and mutual funds offered by Transamerica are subject to regulation under the federal securities laws
administered and enforced by the Securities and Exchange Commission (SEC). The distribution and sale of SEC-registered products
by broker-dealers is regulated by the SEC, the Financial Industry Regulatory Authority (FINRA), and state securities regulators.
A number of Transamerica companies are also registered as investment advisors and are subject to the SEC’s Regulation Best Interest
(Regulation BI), which establishes a“best interest” standard of conduct for broker-dealers and investment advisors when making
arecommendation to aretail customer and requires potential conflicts of interest to be disclosed. Several states have adopted an NAIC
model law that imposes similar standards as Regulation BI for the sale of non-variable annuities.
There continues to be avery active US federal legislative and regulatory environment with respect to financial services. While there
is no certainty whether or in what form these proposals might be adopted, emerging federal proposals that may impact the businesses
of Transamerica include aDepartment of Labor fiduciary advice proposal, several legislative proposals considering independent
contractor classification, and new requirements regarding the disclosure of climate risks and potentially other environmental, social,
and governance factors.
Information security and privacy regulation
Transamerica’s businesses are regulated with respect to information security, data breach response, privacy, and data use at both
the federal and state levels. At the federal level, various Transamerica companies are subject to the Gramm-Leach-Bliley Act (GLBA),
the Fair Credit Reporting Act (FCRA), and the Health Insurance Portability and Accountability Act (HIPAA), among other laws.
At the state level, Departments of Insurance and Financial Services typically administer a series of privacy and information security
laws and regulations that impact several Transamerica businesses. In addition, in recent years numerous state legislatures have passed
or have attempted to pass additional, more broad-based general consumer privacy laws, such as the California Consumer Privacy Act
and the California Privacy Rights Act. Those California laws, as amended, will be administered by the newly formed California Privacy
Protection Agency. Additional laws and regulations with respect to these topics are also anticipated to be promulgated and to go
into effect in the coming years, and they may be administered by new or different state agencies or by the offices of state Attorneys
General. The White House, SEC, and other regulators have also increased their focus on companies’ cybersecurity vulnerabilities and
risks, including in relation to third-party service providers.
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Overview of the Netherlands
For over 175 years, Aegon has operated in the Netherlands, where it is aleading
provider of life insurance and pensions. Aegon the Netherlands employs approximately
3,300 people and is headquartered in The Hague, with main other offices in Amsterdam,
Leeuwarden, and Groningen.
Organizational structure
Aegon is one of the most widely recognized brands in the Dutch financial services sector. Aegon the Netherlands also operates through
several other brands, including Knab, TKP Pensioen, Nedasco and Robidus.
Aegon the Netherlands has four lines of business:
•
Life;
•
Mortgages;
•
Banking; and
•
Workplace Solutions.
Aegon the Netherlands' primary subsidiaries are:
•
Aegon Bank N.V.;
•
Aegon Cappital B.V.;
•
Aegon Hypotheken B.V.;
•
Aegon Levensverzekering N.V.;
•
Aegon Schadeverzekering N.V.;
•
Aegon Spaarkas N.V.;
•
Nedasco B.V.;
•
Robidus Groep B.V.;
•
TKP Pensioen B.V.
Within the strategy of Aegon, Aegon the Netherlands is designated acore market, organized into Financial Assets and Strategic Assets.
The Life activities of Aegon the Netherlands are considered Financial Assets.Aegon has established adedicated team to manage
these businesses, which is responsible for maximizing its value through active in-force management, disciplined risk management and
capital management actions. These actions are focused on protecting the capital position, increasing capital generation, and reducing
expenses by outsourcing of the servicing of the life-books. Aegon selectively competes in the defined benefit market. This also includes
supporting employers in their transition towards defined contribution solutions under the new pension agreement. In 2021, new life
sales consisted mainly of immediate pensions annuities, indexations on existing group life contracts and risk insurance.
Strategic Assets are the businesses in which Aegon the Netherlands will invest to grow its customer base and increase margins.
Aegon the Netherlands strategically focuses on the following business: Mortgages (Aegon Hypotheken), Banking (Knab); and
Workplace solutions for employers. The last category consists of the following businesses: Aegon Cappital, TKP Pensioen, Aegon
Schadeverzekering, Robidus and Nedasco.
Overview of sales and distribution channels
Aegon the Netherlands uses avariety of distribution channels to help customers access the products and services appropriate
to their needs. All business lines use an intermediary channel, which focuses on independent brokers in different market segments
in the Netherlands.Aegon the Netherlands continues to invest in online capabilities to support customers and intermediaries, to further
enhance the digital self-service experience.
In 2021, Aegon decided to stop offering bank savings products to non-fee-paying customers. Due to low market interest rates, Aegon
could not offer these savings products to its customers in aprofitable way. These customers were offered the opportunity to either
transfer their funds to another bank or transfer their funds to afee-based Knab account. Going forward, new banking products will
be offered through the Knab label only, distributed fully online.
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Overview of the Netherlands
Overview of the Netherlands
Overview of the Netherlands
Overview of business lines
Life
Aegon the Netherlands’ Life entity (Aegon Levensverzekering) is managed as aFinancial Asset. This means that the focus
is onmaximizing its value through active in-force management, disciplined risk management and capital management actions.
These actions are focused on protecting the capital position, increasing capital generation, and reducing expenses by outsourcing
of the servicing of the life-books.
Pensions
Interest rates have been low for an extended period of time, creating ashift from Defined Benefit (DB) pension plans to Defined
Contribution (DC) pensions plans.In 2020, fundamental changes were proposed to the Dutch pension system. Although
implementation is delayed from 2026 to 2027, these include that new pension accrual is only allowed in DC schemes. As Aegon
the Netherlands offers DC schemes through aseparate legal entity - Aegon Cappital - the consequence for Aegon Levensverzekering
is that all of its Group pension products will become closed books.
Aegon the Netherlands will only selectively compete in the defined benefit market. This also includes supporting employers in their
transition towards defined contribution solutions under the new pension agreement. Renewals of existing contracts are possible, but
only if the renewal facilitates the existing customers in their transition to DC. In addition, Aegon Levensverzekering will continue to sell
risk insurance and annuities that are closely linked to DC schemes. More detail on annuities is provided further below.
The Group DB products that remain on the balance sheet of Aegon Levensverzekering are as follows:
•
Separate account group contracts with individually determined asset investment strategies, profit sharing and guarantees;
•
Contracts with profit sharing based on apre-determined interest rate;
•
Traditional variable unit-linked products;
•
DB subscriptions, astandardized product that offers a1-year guarantee; and
•
Contracts without profit sharing.
As the DB subscription product remains open for existing customers and, as some contracts have adue date in the future, there are still
premiums received for these products. In addition, indexations remain possible for all of the Group DB products.
Annuities
The actively sold products in this category are simple payout annuities and variable annuities without guarantees. These products are
linked to DC schemes in which participants build up their capital and are obliged, by law, to purchase an annuity at the pension date.
Participants can choose between aguaranteed annuity - where all risks are borne by Aegon - or avariable annuity without investment
guarantees, where all risks are borne by the participant. Given that asignificant shift has been observed to DC schemes, these annuities
are anatural driver of growth as they provide asolution for the payout phase. Annuity insurance also includes older products with
guaranteed interest rates and profit sharing for which no new business is written.
Risk insurance
This category mainly includes the survivor’s pension insurance sold as arider to DC pension schemes. Premiums are mainly paid
by the employer and the product pays benefits to the spouse/children in the event of the death of the insured.
Endowment insurance
Endowment insurance includes several products that accumulate acash value. Premiums are paid at inception or over the term
of the contract. These products pay benefits on the policy maturity date, subject to survival of the insured. Most policies also pay death
benefits should the insured die during the term of the contract.Minimum interest guarantees exist for all generations of endowment
insurance products written, except for universal life products, for which premiums are invested solely in equity funds. These products
are no longer being sold.
Term and whole life insurance
Term life insurance pays out death benefits should the insured die during the term of the contract. Whole life insurance pays out
death benefits in the event of death, regardless of when this occurs. Premiums and amounts insured are established at inception
of the contract and are guaranteed. The amount insured may be adjusted at the request of the policyholder. Term life insurance policies
do not include profit-sharing mechanisms. Part of the whole life insurance portfolio has profit-sharing features, which are based
on external indices or the return of related assets. In the first quarter of 2020, Aegon the Netherlands stopped offering these products.
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Mortgages
Aegon the Netherlands offers mainly annuity and linear residential mortgages, while also catering to consumers requiring interest
only mortgage loans. Mortgage loans are originated both as investments for Aegon the Netherlands’ insurance and bank entities
as well as distributed to third-party investors. Such investors are provided access to this high-quality asset class through the Aegon
Dutch Mortgage Fund, Robuust(a third-party label where Aegon has the exclusive right to purchase and distribute the mortgages
receivables), SAECURE (Aegon’s Dutch residential mortgage-backed securities program), Aegon Bank's covered bond program, and
various bespoke structures to tailor to investors’ needs. Investors value our mortgage offering for the attractive spread and low credit-
loss experience through disciplined underwriting. Consumers and independent financial advisors choose Aegon mortgages for the high
quality of service, reliable operations, and accessibility through the economic cycle.
Banking
In 2021, Aegon completed the migration and integration of the Aegon Bank brand to the Knab brand. Knab is afully online digital
bank that went live in 2012. By integrating both operations and rationalizing product offerings, costs are lower, operations more
efficient, and governance is unified. Knab continues to offer banking products like savings accounts and investments, as part
of Aegon's pension offerings in the Netherlands. In 2020, Banking wasclassified as aStrategic Asset and forms the gateway
to individual retirement solutions.
Knab customer growth is geared towards fee-paying customers and products. Increasing efforts to deliver products and offer
functionalities (e.g., Google pay, VAT savings) in ahigher customer demand environment is key for retaining and acquiring
new customers.
Workplace solutions
Non-life
Accident and Health
Aegon the Netherlands offers disability and sick leave products to employers that cover these payments for employees not covered
by social security and where the employer bears the risk. For some forms of disability, employers can choose to use the social
security system to insure these risks or opt out and seek private insurance, which Aegon also offers. Private insurance appeals
to employers,because it offers awider set of coverage options and therefore better tailor to the needs of the employer regarding
the disability risk of their employees, and as aresult helps reduce absenteeism and disability thanks to better reintegration efforts.
For individuals, Aegon the Netherlands offers adisability product mainly targeted at the growing self-employed market.
Property and Casualty (P&C)
Aegon the Netherlands has focused exclusively on retail lines in P&C insurance, offering products in the segments of property, motor,
travel, legal assistance, private liability claims, pet insurance, and injury. The ambition for the P&C retail segment is to provide the best
digital service in the Dutch P&C market while building long-lasting relationships with customers and distribution partners.
Through the service concepts, Aegon the Netherlands supports intermediaries with excellent digital processes to help their customers
in the best possible way. This is done by stimulating performance at sustainable levels for customers, intermediaries, and the insurer.
In addition to the intermediary market, Aegon the Netherlands has further developed digital and online capabilities, especially
as the direct market has sustained asizable share in the overall distribution in the past years, in particular for the Motor segment.
The direct market includes sales via Aegon’s own website and affiliates, as well as through aggregator websites.
Aegon Cappital
Aegon Cappital is alow-cost provider of DC pension schemes offered through intermediary advisors. Aegon Cappital offers DC pension
schemes in astandardized subscription-based model to small and medium enterprises and customized contracts for medium-to-large
corporations. The model enables employers to choose from avariety 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 managed by Aegon Investment Management B.V..
Aegon Cappital is one of the largest pension premium institutions (‘PPIs’) in the Netherlands and benefits considerably from economies
of scale. The low interest rate environment, and the fundamental changes of the Dutch pension system as of January 1, 2027, will
result in acontinued shift to DC schemes.
PPIs cannot bear any investment or insurance risks on their offerings due to regulatory requirements. The schemes include disability
and/or life insurance which are offered by partners Aegon Levensverzekering, Aegon Schadeverzekering and Elips Life AG, and
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the option for participants to buy deferred annuities offered by partner Aegon Levensverzekering. The main risks for Aegon Cappital are
operational and regulatory risk.
TKP Pensioen, Robidus and Nedasco
TKP Pensioen is atop three player in the Dutch market for pension administration
1
. TKP Pensioen administers pension rights for
several large company and industry pension funds, as well as other pension providers such as premium pension institutions. Their
customers – 67,000 employers representing 3.4million participants – rely on TKP Pensioen for correct and timely pension payments,
and clear and accessible pension information and communication. This ranges from the mandatory pension statements to customer
contact and digital customer services.
Robidus Groep advises corporations on the risks and associated costs of absenteeism and disability under Dutch social security
legislation and acts as an insurance broker for income related insurances.
Nedasco is an intermediary service provider that is mainly active in non-life business domains.
Competition
Aegon the Netherlands faces strong competition in all markets from insurers, banks, investment companies and pension funds. Its main
competitors are Allianz Benelux, ASR and NN Group.
Aegon has been akey player in the total life market for many years and was ranked fourth in 2020 based on gross premium
income
2
. The life insurance market in the Netherlands comprises pensions and life insurance. The top five life insurance companies
in the Netherlands by gross premium income accounted for over 80% of total premium (Individual Life and Pensions) income in 2020.
Aegon the Netherlands is one of many insurers in the non-life market with amarket share of around 2%
3
, making it the tenth largest
company in the market.
In the mortgage loans market, Aegon the Netherlands held amarket share of over 7% based on new sales in 2020, making
it the fourth largest mortgage loan provider in the market
4
. Rabobank, ABN AMRO, and ING Bank are the largest mortgage loan
providers in the market, but their market share is under pressure, because of ashift to fixed rates for longer periods. Competition is still
increasing from foreign competitors and capital from pension funds.
Aegon the Netherlands' share in the market for Dutch household savings was just over 3% in 2020
5
, which is relatively small
in comparison to the top three which are Rabobank, ING and ABN AMRO. In 2021, market share decreased as aresult from the decision
to stop selling products under the Aegon Bank label.
In the pensions market the defined contribution (PPI) segment is set to grow further due to the fundamental changes of the Dutch
pension system as of 2027 and the demand for transparent and cost-effective pension products. Significant growth of scale
is necessary to effectively serve this market. Aegon the Netherlands has identified this market as an opportunity for growth and
intends to maintain its leadership position with Aegon Cappital in cooperation with other Aegon units. Aegon Cappital is the number
two in the market based on number of participants and assets under management
6
.
Regulation and supervision
General
Regulation of the financial sector in the Netherlands is included in the Financial Supervision Act (Wet op het financieel toezicht or Wft).
The Wft embeds the cross-sectorial functional approach within the Dutch supervisory system. The supervision of financial institutions
pursuant to the Wft rests with the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM).
The DNB is responsible for prudential supervision, while the AFM supervises the conduct of business of financial institutions, and
the conduct of business on financial markets. The aim of the DNB's prudential supervision is to ensure the solidity of financial
institutions and contribute
to the
stability of the
financial sector. Regarding banks, the DNB undertakes its supervisory role, in particularwith respect to prudential supervision, together with the European Central Bank (ECB).
1
1 Company source data at the end of 2019
2
2 Dutch Association of Insurers – annual reports insurers 2020
3
3 Dutch Association of Insurers – Production data Non-Life 2021
4
4 Land register (Kadaster)
5
5 Market data DNB in combination with data Knab
6
6 PPI Association 2020
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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.
The Dutch supervisory authorities have several formal tools to exercise their supervisory tasks. These tools include the authority
to request information, if this is necessary for the purpose of prudential supervision, and the power to issue formal instructions
to financial institutions, to impose fines, or to publish sanctions. The DNB, as prudential supervisory authority, can, under certain
circumstances, require arecovery plan, ashort-term financing plan, appoint atrustee, draw up atransfer plan or (ultimately) withdraw
the license of afinancial institution.
The Dutch Data Protection Authority (Dutch DPA) supervises processing of personal data in order to ensure compliance with laws
that regulate such use. The tasks and powers of the Dutch DPA are described in the General Data Protection Regulation (GDPR),
supplemented by the Dutch Implementation Act of the GDPR.
Financial supervision of insurance companies
The Solvency II framework consists of, inter alia, an EU Directive and EU Delegated Regulation. The EU Directive has been transposed
into Dutch legislation, in particular the Wft. The EU Delegated Regulation is directly applicable, without transposition into local
legislation.
The following insurance entities of Aegon the Netherlands are subject to prudential supervision by the DNB:
•
Aegon Levensverzekering;
•
Aegon Schadeverzekering;
•
Aegon Spaarkas.
An insurance company is neither permitted to conduct both life insurance and non-life insurance business within asingle legal
entity (except for reinsurance), nor to carry out both insurance and banking activities within the same legal entity. Within Aegon
the Netherlands, Aegon Levensverzekering and Aegon Spaarkas conduct life insurance activities. Aegon Schadeverzekering conducts
non-life insurance activities.
Solvency II
The Solvency II framework is described in more detail in the section ‘Regulation and supervision’ of Aegon’s Integrated Annual
Report 2021.
Aegon the Netherlands uses apartial internal model (PIM) to calculate the solvency position of its life 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 Model Application Process. Following the Internal Model Application Process, Aegon the Netherlands made several
major changes to its PIM, which have all been approved by DNB.
Dutch Act on Recovery & Resolution for Insurers
The Dutch Act on Recovery & Resolution for Insurers (R&R Act) is the applicable intervention regime for insurance and reinsurance
companies in the Netherlands faced with financial difficulties.
The R&R Act has introduced arevised regulatory framework for recovery and resolution of Dutch insurance and reinsurance companies
and provides for arange of measures to be taken by these companies and the DNB 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 is subject to Basel requirements pursuant to the EU Capital Requirements Regulation (‘CRR’) and the Capital Requirement
Directive (‘CRD’), as implemented in the Netherlands in the Wft. The CRD and CRR include requirements with respect to the quality
and quantity of capital, as well as aliquidity framework. According to EU legislation, 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.
Taking into account the regulatory requirements mentioned above and the outcomes of the annual Supervisory Review and Evaluation
Process (‘SREP’), Aegon Bank’s minimal capital and liquidity requirements are set.
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Overview of the Netherlands
The Banking Recovery and Resolution Directive (‘BRRD’), as implemented in the Netherlands in the Wft, and the Single Resolution
Mechanism Regulation (‘SRM Regulation’) form the European framework for recovery and resolution for banks. The BRRD provides for
early intervention measuresand banks can be placed under resolution when aset of given conditions is met. The BRRD allows the DNB
to write down or convert capital instruments and exercise other instruments pursuant of its powers as in the BRRD.
Pursuant to the SRM Regulation and the BRRD, Aegon Bank is at all times required to meet aminimum amount of own funds and
eligible liabilities (‘MREL’), expressed as apercentage of the total liabilities and own funds. The DNB sets alevel of minimum MREL
on abank-by-bank basis based, but has not done so yet for Aegon Bank.
In 2017, the Basel Committee published the finalized Basel III reforms (informally known as ‘Basel IV') to improve the global regulatory
framework. The implementation of Basel IV in EU regulation will be completed through amendments in the CRD/CRR framework, for
which EC proposals were published on October 27, 2021.The proposed changes include stricter rules for internal models, acapital
floor, and revisions to the standardized approaches for credit risk, operational risk and the credit valuation adjustment specified
at acounterparty level ('CVA'). These changes only have alimited impact for Aegon Bank N.V. as it does not apply internal rating based
model for credit risk to which the capital floors apply.
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Overview of the Netherlands
Overview of United Kingdom
Aegon in the United Kingdom (hereafter referred to as Aegon UK) is the market-leading
investment platform in the UK, providing abroad range of investment, retirement
solutions and protection products to individuals, advisers and employers.
Aegon UK accesses customers through retail financial advisers and the workplace and has amarket-leading position in each, with
3.9million customers and GBP 215billion assets under administration (AUA).
Aegon has designated the UK as acore market with strategic focus on growing the Retail and Workplace channels, and on retaining
customers in its traditional insurance book. Aegon plans to invest in growing the customer base, improving customer retention and
growing margins.
Over 4,000 adviser firms have placed business with Aegon UK in the last year (just under one third of the market), and around
10,000employers.
It employs over 2,000people and its main offices are in Edinburgh, London, Peterborough, and Witham.
The UK is acore market for Aegon, and Aegon UK is viewed as astrategic asset which Aegon plans to invest in with aview to growing
the customer base, improving customer retention and growing margin.
Organizational structure
Aegon UK plc is Aegon's holding company in the UK. It was registered as apublic limited company in December 1998. The leading
operating subsidiaries, which all operate under the Aegon brand, are:
•
Scottish Equitable plc;
•
Cofunds Ltd.;
•
Aegon Investment Solutions Ltd.; and
•
Aegon Investments Ltd.
Overview of business Lines
Aegon UK has both amodern fee-based investment ‘platform’ business, built organically and scaled through the acquisition
of Cofund’s retail savings platform and BlackRock’s Workplace Defined Contribution business, and a‘traditional insurance’ business.
Aegon UK’s platform business delivers arange of propositions through Retail and Workplace channels, together with protection
products and an institutional trading platform business. This is supported by an investment solutions capability which allows customers
to invest in proprietary Aegon funds, driving additional fee margin.
Aegon UK’s traditional insurance business consists of older contracts that are no longer actively marketed to new customers. An out-
source relationship is in place with Atos to service and administer the book, building on an existing relationship, which has seen Atos
successfully administer over 400,000 protection policies since 2016.
Overview of sales and distribution
Aegon UK has two principal distribution channels: financial advisers who advise Retail customers and the workplace.
Aegon UK works with those advisers and employers to deliver an online experience for customers. The platform is designed to support
customers throughout their life as needs evolve by providing acomprehensive range of products and funds, moving with them each
time they change employers and allowing them to link in with different advisers.
This gives Aegon UK the ability to support customers throughout their lives with the flexibility required to support the modern, complex
lives they are living to and through retirement, unlike the majority of its competitors.
Aegon UK is now investing in organic growth where it is seeking to capitalize on its strong positions in the Retail and Workplace
pension markets, which are forecast to grow materially in the medium to long term.
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Overview of United Kingdom
Overview of United Kingdom
Overview of United Kingdom
Retail channel
The Retail channel provides financial advisers and other institutions access to long-term savings and retirement products, through
an open architecture investment platform. It aims to capitalize on the strong demand for advice, especially within the growing affluent
population nearing and in retirement.
Aegon UK offers acomprehensive proposition allowing advisers to manage their clients long-term investments by offering equity
trading, and achoice of over 4,500 funds.Aegon UK is continuing to develop astrong range of own brand investment solutions, and
plans to extend them in 2022.
Aegon UK provides atechnology platform that supports advisers and their customers in managing their finances, and is integrated with
the back offices of the advisers. The aim is to create aprimary platform relationship, which positions Aegon UK to receive the majority
of new business flows from the adviser partner.
Over 4,000 adviser firms have placed business with Aegon UK in the last yearacross awide range of business models. These include
leading wealth management firms such as Chase De Vere, financial services networks such as Quilter, and execution-only brokers.
Nationwide Building Society has been an important partner for Aegon UK since the relationship was established in 2017.
There areplans to expand the product offering beyond Individual Savings Accounts (ISAs) and General Investment Accounts
(GIAs) to pensions and other solutions. An important dimension of the Nationwide partnership is the inclusion of Aegon’s own
investment solutions.
Workplace channel
The Workplace channel provides UK-based employers with Workplace pensions and savings schemes. It allows Aegon UK to participate
in the strongly growing auto-enrolment market, cost effectively acquiring around 150,000individual customer relationships every year.
Aegon UK has amarket-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 Master Trust product, the fastest growing sector
of the UK Defined Contribution market, where Aegon UK has an established and market-leading offering.
Aegon UK works with leading employee benefits consultants and corporate advisers to provide aWorkplace savings platform
to employers such as WH Smith, EasyJet and Skanska. This combines its core pension capabilities with ISAs and GIAs, allowing
employees to maximize their savings whilst employed, then take the product with them when they leave or choose to take financial
advice in the future.
At the heart of this is Aegon UK’s employee digital portal, which provides tools to enable employees to make more informed decisions.
The portal also links into the wider engagement activities such as seminars in the workplace, and online innovations such as the launch
of digital personalized summaries and an app that helps customers consolidate assets held elsewhere, increase their savings and
transition into retirement.
The acquisition of Pensions Geeks in 2021 will allow Aegon UK to bring to market an interactive digital financial education platform
in 2022, which will utilize their award-winning marketing capability to further enhance the experience offered to the end customer.
Individual customer channel
Aegon UK has agrowing individual customer base of 1.5million, who are not attached to an adviser or employer. These individuals are
provided with tools that enable them to manage their finances, and with customer service support to help with guidance and referrals
available to Aegon UK’s in-house Financial Adviser business, Origen, where appropriate. The Pension Geeks education platform will also
be made available here.
Protection channel
Aegon UK offers arange of products for Retail 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 acustomer-centric proposition.
In addition, Aegon UK offers arange of protection products for small to medium-sized companies that wish to insure key personnel,
complementing the core offerings in the Workplace channel.
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Institutional channel
Aegon UK also participates in the institutional market in two areas where investment trading capability is provided to other parties who
provide policy administration to the end-client:
•
An institutional trading platform which powers 27of the UK’s leading platforms, wealth management firms and investment houses
(e.g., Brooks MacDonald, Charles Stanley); and
•
An investment-only proposition for Workplace pension schemes, which provides access to insured funds for approximately
154clients.
Competition
Aegon UK is well positioned for growth, possessing amarket leading position in markets with strong growth potential.
Aegon UK encounters different competitors in each of its core markets, but is unique in the way it supports intermediaries wishing
to operate across channels providing an end-to-end customer experience.
In the Retail market, Aegon UK aims to become the ‘primary platform’for intermediaries and competitors include Fidelity, Transact
and Quilter.
In the Workplace market, Aegon UK provides employee benefits, engagement, and scheme governance. And, competitors include Aviva,
Legal & General and Willis Towers Watson.
Regulation and supervision
All relevant Aegon UK companies based in the UK are either: authorized by the Prudential Regulation Authority (PRA) and regulated
by the Financial Conduct Authority (FCA) and the PRA; or authorized and regulated by the FCA, dependent on firm type.
The PRA is responsible for the prudential regulation of deposit takers, insurers and major investment firms. The FCA is responsible for
regulating firms' conduct in Retail and Wholesale markets. It is also responsible for the prudential regulation of those financial services
firms that do not come under the PRA's remit.
The Aegon Master Trust is subject to regulatory oversight by The Pensions Regulator.
The UK exit from the European Union (EU) has implications for financial services companies in the UK. Much of the financial
regulation applicable in the UK derived originally from EU legislation and has been retained by the UK. In light of their new autonomy,
the UK Government and Regulators are reviewing the UK Regulatory Framework to consider if changes are needed, as well as focusing
on specific changes in areas such as Solvency II.
Financial supervision of insurance companies
Scottish Equitable plc is authorized by the PRA and is subject to prudential regulation by the PRA and conduct regulation by the FCA.
Every life insurance company licensed by and/or falling under the supervision of the PRA must file audited regulatory reports
at least annually. 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, abreakdown of the Solvency Capital Requirements, extensive
actuarial information, and detailed information regarding the investments of the insurance company. The PRA's regulatory reporting
is based on asingle entity focus and is designed to highlight risk assessment and risk management.
Regulatory Solvency Requirements
The UK adopted Solvency II regulations and Binding Technical Standards as they stood at the end of the Brexit transition period
on December 31, 2020 into UK law. Temporary Transitional Powers are in place under which certain provisions of these onshored
regulations will continue to apply until March 31, 2022. Consequently, the UK continues to adopt regulatory solvency requirements
which are broadly aligned to those under Solvency II. UK life insurance companies are required to maintain Own Funds which are
sufficient to withstand a1-in-200 shock on a1-year value-at-risk basis, subject to certain absolute minimum requirements.
One area of divergence is that the PRA now publishes its own Technical Information, including basic risk-free term structures, which
must be used by UK Solvency II firms. The UK and EU are both conducting separate reviews of Solvency II which may lead to some
further divergence, although both the UK and EU remain committed to the principles underlying Solvency II.
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Overview of United Kingdom
Since the introduction of Solvency II on January 1, 2016, Scottish Equitable plc has been using the Aegon Group Partial Internal Model
(PIM) to calculate its solo solvency position and its contribution to group solvency. Following the end of the Brexit transition period,
the PRA approved the use of the existing PIM for the calculation of the solo regulatory solvency requirements of Scottish Equitable plc.
The UK PIM and Group PIM are currently aligned and Aegon UK intends to maintain close alignment in the future, where this remains
appropriate.
Scottish Equitable plc uses the Matching Adjustment in the calculation of the technical provisions for its annuities, and uses
the Volatility Adjustment in the calculation of the technical provisions for the With-Profits business with investment guarantees.
Following the sale of the majority of its annuity business in 2017, Scottish Equitable plc ceased the use of the Transitional Measures
on Technical Provisions.
Regulatory requirements for investment firms
In January 2021, Aegon UK Investment Holdings Ltd was established as awholly owned subsidiary of Aegon UK plc, and became
the direct parent of: Cofunds Ltd, Aegon Investment Solutions Ltd, Aegon Investments Ltd, Momentum Group Ltd, Origen Financial
Services Ltd, and Origen Ltd. Aegon UK Investment Holdings Ltd and these subsidiaries are referred to as Aegon UK Investment Group
(AUKIG). From January 1, 2021, much of Aegon UK's regulatory reporting has been on an AUKIG basis.
From January 1, 2022, the FCA's Investment Firm Prudential Regime (IFPR) rules entered into force. These are relevant to AUKIG.
Under the new regime, the Pillar 1 capital requirement is the higher of the Fixed Overhead Requirement (FOR), the Permanent Minimum
Requirement, or the new ‘K-factor’ requirement (which replaces the credit risk requirement). The IFPR also replaces the Pillar 2 Internal
Capital Adequacy Assessment Process (ICAAP), with anew Internal Capital and Risk Assessment (ICARA) process. Under ICARA, there
is more focus on the impact of risks and the potential harm to clients, wider markets and the firm itself. There is also agreater focus
on liquidity.
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Overview of International
Aegon International consists of the two growth markets, China and Spain & Portugal,
Aegon's business in Central and Eastern Europe, the high-net-worth life insurance
business and some smaller ventures in Asia. As of 2022, International will include Brazil
and be responsible for all three growth markets of Aegon.
Aegon's presence in the Spanish insurance market dates to 1980. The activities in Spain (and eventually Portugal) have developed
largely through distribution partnerships with major Spanish banks Banco Santander S.A. and Liberbank S.A. Spain & Portugal are
now one of the three growth markets of Aegon Group. In 1992, Aegon purchased the majority stake in Hungary’s former state-owned
insurance company, Állami Biztosító. It expanded in Central & Eastern Europe (CEE) in the 2000s. Operations in Asia were established
in 2003, starting with aJV in China, which is another growth market for Aegon. TLB was established in 2005and incorporated
in Hamilton, Bermuda followed by full-service branches openings in Hong Kong and Singapore in 2006. In 2008, ajoint venture in India
was formed.
In November 2020, Aegon announced an agreement to sell its Central and Eastern European operations (Poland, Romania, Turkey, and
Hungary) to Vienna Insurance Group, as part of its strategy to focus on key markets, simplify the footprint, and strengthen the balance
sheet. This transaction is still to complete.
Organizational structure
The key lines of business within the region are Spain & Portugal, Hungary, TLB, and China. The remaining business units are grouped
in one category called "Others" for reporting purposes. The corresponding subsidiaries and affiliates (including Aegon's ownership
percentages, where relevant) are as follows:
Spain & Portugal:
•
Aegon España S.A.U. de Seguros y Reaseguros (Aegon España Insurance and Reinsurance);
•
Santander Generales Seguros y Reaseguros S.A. (Santander General Insurance and Reinsurance) (51%);
•
Santander Vida Seguros y Reaseguros S.A. (Santander Life Insurance and Reinsurance) (51%);
•
Liberbank Vida y Pensiones, Seguros y Reaseguros, S.A. (Liberbank Life and Pensions, Insurance and Reinsurance) (50%);
•
Aegon Santander Portugal Não Vida-Companhia de Seguros S.A. (Aegon Santander Portugal Non-Life Insurance Co.) (51%); and
•
Aegon Santander Portugal Vida-Companhia de Seguros de Vida S.A. (Aegon Santander Portugal Life Insurance Co.) (51%).
Hungary:
•
Aegon Magyarország Általános Biztosító Zártkörűen Működő Részvénytársaság (Aegon Hungary Composite Insurance Co.).
•
Aegon Pension Fund Management Company
•
Aegon Intermediary and Marketing Company
•
Help 24 Assistance Company
•
Aegon Asset Fund Management Company
TLB:
•
Transamerica Life (Bermuda) Ltd.
China:
•
Aegon THTF Life Insurance Co., Ltd. (50%) in China.
Other key subsidiaries:
•
Aegon Towarzystwo Ubezpieczeń na Życie Spółka Akcyjna (Aegon Poland Life);
•
Aegon Powszechne Towarzystwo Emerytalne Spółka Akcyjna (Aegon Poland Pension Fund Management Co.);
•
Aegon Emeklilik ve Hayat A.Ş. (Aegon Turkey);
•
Aegon Pensii Societate de Administrare aFondurilor de Pensii Private S.A (Aegon Romania Pension Administrator Co.);
•
Aegon Life Insurance Company Ltd. (49%) in India; and
•
Aegon Insights Ltd.
Effective January 1, 2022, MAG Seguros, Aegon’s operations in Brazil, will be reported as part of Aegon International.
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Overview of International
Overview of International
Overview of International
Overview of sales and distribution channels
International distributes its products directly to consumers (online and/or physical branches) and via banks, brokers, (tied) agents, and
other digital/ e-commerce partners.
The sales and distribution channel mix varies per country, reflecting the differences in the local insurance markets. The strategy is to
invest in digital distribution platforms, particularly in China, to build distribution capabilities for the future.
Spain & Portugal
In Spain & Portugal, the life insurance and health products are sold by Santander Life Insurance and Reinsurance, whereas the non-life
insurance (accident, home, unemployment, disability, critical illness dependency and funeral) products are sold by Santander General
Insurance and Reinsurance Company.
Liberbank, S.A.,anotherbancassurance partner of Aegon, has anationwide presence with aspecial focus on retail markets in several
regions (Asturias, Cantabria, Castilla La Mancha and Extremadura). It distributes life insurance products through local branches where
the distribution agreement is ajoint venture between the Life and Pensions, Insurance and Reinsurance company of Liberbank, S.A. and
Aegon España, both parties holding equal ownership stakes.
In 2020, Aegon and Banco Santander completed the acquisition of the in-force term life policies previously sold through Banco Popular
branches, following Banco Santander’s acquisition of Banco Popular. The joint venture also acquired the right to write new term life and
selected lines of non-life policies through the former Banco Popular branches now owned by Banco Santander.
On July 30, 2021, amerger between Liberbank and Unicaja Bank was completed, with Unicaja being the acquiring legal entity. Liberbank
has ceased to be adistinct legal entity and all of its assets and liabilities have been transferred to Unicaja. As aresult of the merger,
Unicaja Bank now has bancassurance agreements with each of Aegon, Mapfre and Santa Lucía. These relationships are currently
under review.
Aegon España’s own distribution channel offers life, health and pension products. The network of brokers and agents accounts for
approximately 80% of the total sales of the fully owned subsidiary, and the remaining 20% is generated by the direct channel.
Central & Eastern Europe
Distribution channels in CEE are dominated by tied and external agency as well as brokers.
TLB and Aegon Insights
Transamerica Life (Bermuda) Ltd. (TLB) distributes its life insurance products to high-net-worth (HNW) customers through targeted
distribution relationships with selected local and international brokers, and bancassurance channels.
With its singular focus on the HNW segment, TLB has extensive experience in handling large sums assured and complex cases
supporting HNW customers’ legacy and business planning needs.
Aegon Insights is amarketing, distribution and administration services business operating in Asia Pacific. It primarily worked with local
insurers to develop tailored solutions to specific needs. The revenue is generated through underwriting reinsurance agreements and
fee income. With changes in consumer preferences, Aegon made the strategic decision to discontinue Aegon Insights’ new business
acquisition, while continuing to provide services to the existing customer base in Australia, Hong Kong, Indonesia, and Japan.
China: Aegon THTF
Aegon operates in China through ajoint venture with Tongfang Co. Ltd., Aegon THTF Life Insurance Co., Ltd. (hereafter: Aegon THTF).
The JV is licensed to sell life insurance, annuity, accident and health products in China. Since 2003, the company has expanded
its network of branches, primarily in the coastal provinces of Eastern China. It has access to apotential market of approximately
700million people.
Aegon THTF follows amulti-channel distribution strategy, including agency, brokerage, banks, direct marketing, group sales and digital
e-commerce platforms.
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Overview of International
India: Aegon Life
Since 2008, Aegon operates in India through its joint venture with Bennett, Coleman & Co. Ltd. (BCCL). The joint venture, Aegon Life
Insurance Company, Ltd. (hereafter: Aegon Life), has amobile and digital consumer model, working through large scale digital partners.
In order to focus on the digital, partnership-driven strategy, the traditional distribution channels were closed in December 2020.
Overview of business lines
Aegon International focuses on serving retail customers with individual life and different types of general, accident, and
health insurances.
Life Insurance, Savings & Protection
Spain & Portugal's life insurance business comprises of life savings and individual and group protection products, where individual
life-risk and health products form the larger part of the business. Customers' savings needs are serviced by Aegon España through
its affiliates, offering universal life and unit-linked products. Protection business, pursued both in Spain & Portugal, includes primarily
life, health, accident, and disability cover distributed through the JVs and AegonEspaña’s own channels. These products can typically
be complemented with critical illness, income protection and other riders.
In Hungary, Aegon offers primarily unit-linked and traditional savings products, which are frequently accompanied with riders that
provide customers with additional financial support in the event of an accident, disability or hospitalization.Similarly, in Poland Aegon
focuses on unit-linked and traditional life products. The Romanian branch currently sells term life insurance policies with guaranteed
interest, with or without profit sharing component. In Turkey, Aegon focuses on Return on Premium (ROP) and savings life products,
available in USD.
In Asia, Aegon provides abroad range of life insurance products, including unit-linked, universal life, and traditional life products.
Over the past year, TLB has updated and diversified its product suite. Along with its enhanced flagship product of Universal Life
Alpha Pro & Pro Century, its offerings now include the Genesis Indexed Universal Life (IUL) product, that provides alower guarantee
combined with agreater wealth accumulation potential, and the Trendsetter Ultra Term Life, designed for HNW personal and business
protection. In China, whole-life critical illness products are key products for many channels, such as agency and broker. Products such
as participating annuity and endowment (via agency), whole life insurance products (via agency, brokers) and protection with return
of premium (via direct marketing) are also offered. Regular premium whole-life insurance and single premium endowment are the key
products offered in the bancassurance channel, while the digital channel is currently focused on offering protection products, such
as term life.
In India, Aegon Life currently offers Group term plans, individual term plans and unit-linked life insurance plans.
Health insurance
Health insurance is primarily offered as riders on life insurance policies in Spain and China and as astandalone health insurance
in Turkey and Spain.
In Spain, health insurance is offered through own channels and through Santander’s branches. Aegon collaborates with medical
partners across the country. In Portugal, it is also offered through Santander Totta’s distribution network.
Aegon THTF offers non-life products, primarily consisting of short-term accident and short-term health products, mainly through group,
direct marketing and agency channels.
Pensions
As of December 31, 2021, Aegon managed the savings of approximately 3million pension fund members in Spain and the CEE.
In Spain, customers’ pension saving needs are serviced by the joint venture with Liberbank Life and Pensions and Aegon España through
its managed pension funds.
Aegon's pension business in CEE was impacted by reforms to the pension system in several countries during the past years. In 2021,
Aegon was active in the (formerly mandatory) private pension market in Poland and Romania. In the voluntary pension market, Aegon
was active in Hungary and Romania.In Turkey, Aegon is only servicing existing pension customers.
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General insurance
Aegon España has been offering general insurance products, mainly household protection, unemployment, accident, dependency and
funeral insurance, since 2013 through its joint ventures with Banco Santander.
Aegon Hungary also offers various non-life covers, mainly household and car insurance, in addition to some wealth and liability
industrial risk and travel insurance. It is amarket leader in home insurance in Hungary.
Aegon THTF in China also offers short-term accident products.
Competition
Spain & Portugal
The Spanish insurance market is highly competitive. For traditional life, unit-linked variable life and pension products, the major
competitors are retail bank-owned insurance companies. For health and general insurance products, the main competitors are both
foreign and local companies. Aegon España
is the
exclusive provider of protection products to Santander.
The exclusive partnership also
holds for Portugal.Key competitors for Aegon’s JVs with Santander in Spain and Portugal are large traditional insurance companies.
Central & Eastern Europe
In Hungary, Aegon is the third largest life insurance provider, based on annual standardized premium income, and third largest provider
in the non-life insurance market. Key competitors include Generali, Groupama, NN, and Allianz. It is the leading insurance company
in the Hungarian household market.
In Turkey, Aegon was ranked 5
th
in the life insurance market based on written premium in December 2021, following amerger of several
government owned insurers in the third quarter of 2020.Other competitors also include Allianz, MetLife, and Aviva.
Aegon is the 11
th
largest life insurance market participant in Poland (based on standardized APE), with PZU as amarket leader.
In Romania, Aegon ranks as the 6
th
player.
In the pension fund market in 2021, Aegon was ranked third in Hungary (voluntary pension scheme) and fourth in Poland (open pension
fund) and Romania (mandatory private pension scheme) in terms of both the number of participants and managed assets. Aegon has
asmaller share in the voluntary pension market in Romania, Turkey, and Spain.
China: Aegon THTF
As of September 30, 2021, there were 91 life insurance companies in the market, including 63 domestic life companies and 28 foreign
life insurers. Based on the gross written premium (GWP), Aegon THTF ranked 50
th
among 80 companies that have published their
GWP data and 15
th
among foreign life companies in China. Aegon THTF's market share among foreign life insurers was 2.0% in terms
of total premium.
India: Aegon Life
There were 24 licensed life insurers in India at the end of August 2021. While the state-owned Life Insurance Corporation of India
continues to maintain adominant share of new business premiums (both individual and group), private sector companies have grown
only modestly to obtain more than 62% of the individual recurring new business premiums written (April 2021 to August 2021). Aegon
Life India ranked 23
rd
among private life insurersaccording to individual recurring premiums (April 2021 to August 2021).
TLB
TLB's main competitors in Asia have mainly been other global life insurance providers such as HSBC Life, Manulife Bermuda, and Sun
Life Bermuda. The local subsidiaries of both Sun Life and Manulife, in addition to domestic insurers such as AIA, Great Eastern Life,
Singapore Life, Generali, AXA, and FWD, have also been developing competitive offerings for this market segment.
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Regulation and supervision
Spain, Portugal, and Central and Eastern Europe
In the European Union, asingle insurance company may only be licensed for and conduct either alife insurance business or anon-
life insurance business, not both. In Hungary, however, insurance companies established before 1995 are exempt from this rule. This
exemption therefore applies to Aegon Hungary, which is acomposite insurance company.
State supervision and oversight of the insurance industry is conducted by the following bodies and institutions:
•
General Directorate of Insurance and Pension Funds (DGSFP) (Spain);
•
The Insurance and Pension Funds Supervisory Authority (ASF) (Portugal);
•
The Central Bank of Hungary (MNB) (Hungary);
•
The Financial Supervision Authority (KNF) (Poland);
•
Authority for Financial Supervision (ASF) (Romania); and
•
Insurance and Private Pension Regulatory and Supervisory Board's (IRSB) (Turkey).
The authorities mentioned above promote consumer protection and have the right to investigate prudential activities and conduct,
financial position and solvency, and compliance with all relevant laws.
The foundation and operations of voluntary pension funds are regulated in Hungary by the country's Voluntary Mutual Pension
Funds Act. Activity in this area is also supervised by the MNB. In Romania, the private and voluntary pension system is regulated and
supervised by the ASF. The mandatory pension system is subject to the Privately Administered Pension Funds Act and the voluntary
pension system is subject to the Voluntary Pension Law, 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 System Law and Insurance Law. In Spain, the pension system is supervised by DGSFP and governed
by Law on Pension Funds and Plans approved by Royal Legislative Decree, and its implementing regulations.
China: Aegon THTF
China's insurance industry is regulated by the China Banking and Insurance Regulatory Commission (CBIRC). In 2021, the main work
focus of the CBIRC was to strengthen corporate governance and strengthen product control. In order to consolidate the management
responsibility of insurance institutions, new regulation has been introduced by the CBIRC with stronger controls, with the aim
of improving product development and compliance practices.
Since February 1, 2021, 91 life insurance companies have been divided into two groups: 39 insurers are under the direct supervision
of the CBIRC and 52 are under the territorial supervision of the local bureaus of CBIRC. Aegon THTF are now under the direct territorial
supervision of Shenzhen Bureau. Certain functions, including product filing and approval are still under CBIRC’s direct supervision.
India: Aegon Life
Indian life insurance companies are regulated by the Insurance Regulatory and Development Authority of India (IRDAI).
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.
TLB
TLB is incorporated in Bermuda and regulated by the Bermuda Monetary Authority, the Regulator of the financial services sector
in Bermuda. TLB has full-service branches which are registered and licensed in Hong Kong and Singapore, respectively. The Insurance
Industry is regulated in Hong Kong by the Hong Kong Insurance Authority (HKIA) and in Singapore by the Monetary Authority
of Singapore (MAS).Hong Kong’s Insurance Authority (IA) is currently developing HK RBC, arisk-based capital regime that is consistent
with core principles issued by the International Association of Insurance Supervisors (IAIS). Under this regime, the capital requirements
of licensed insurers will be determined based on the level of risk faced by the insurer. Once in effect, HK RBC will significantly transform
the current capital framework defined in the Hong Kong Insurance Ordinance (HKIO). TLB is well progressed in its RBC developments.
Aegon Insights
A broad range of regulations apply to Aegon Insights' activities. Depending on the precise nature of the activities undertaken and
the form of business entity used in the jurisdictions in which Aegon Insights operates, relevant regulations include marketing/
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 Australian Securities and
Investments Commission in Australia, and the Hong KongInsurance Authority.
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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 SEE use the Standard Formula to calculate the solvency position of their insurance activities. Aegon
Spain no longer applies the matching adjustment or transitional arrangements. The insurance activities in Turkey have been included
through Deduction & Aggregation on aSolvency II Standard Formula basis.
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 Bermuda capital regime. The regulatory regime
of Bermuda was granted full equivalence at the inception of Solvency II in 2016.
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Overview of Aegon Asset Management
Aegon Asset Management (Aegon AM) is an active global investor. 375 investment
professionals manage and advise on assets of EUR 410billion as of December 31,
2021, for aglobal client-base of pension plans, public funds, insurance companies,
banks, wealth managers, family offices and foundations.
Organizational structure
Aegon AM provides investment management expertise to institutional and private investors around the world. It has offices
in the United States, the Netherlands, the United Kingdom, China, Japan, Germany, Hungary, and Spain. Its investment capabilities
are focusedaround investment platforms, each with asset-class expertise: fixed income, real assets, equities, and multi-asset and
solutions. Across platforms, there is acommon belief in fundamental, research-driven active management, underpinned by afocus
on risk management and astrong commitment to responsible investing.
By organizing its investment teams globally, Aegon AM harnesses its expertise and research resources across regional boundaries.
Aegon AM believes this enhances performance potential and generates better investment outcomes for clients. Each of the four
investment platforms is led globally by achief investment officer who sits on the Global Board of Aegon AM. Aegon AM also has
aFiduciary services and multi-manager business in the Netherlands.
Aegon AM holds two key strategic partnerships:
•
In China, Aegon AM owns 49% of Aegon Industrial Fund Management Company (AIFMC), aShanghai-based asset manager that
offers mutual funds, segregated accounts, and advisory services;
•
In France, Aegon AM owns 25% of La Banque Postale Asset Management (LBPAM). LBPAM offers acomprehensive range
of investment strategies to French institutional clients, and to retail investors through La Banque Postale group’s retail banking
network and affiliated insurance company CNP;
Aegon AM’s main entities are Aegon USA Investment Management LLC, Aegon USA Realty Advisors LLC, Aegon Investment
Management B.V., Aegon Asset Management UK plc and Aegon Investment Management (Shanghai) Ltd. (a Wholly Foreign Owned
Enterprise).
In November 2020, Aegon announced an agreement to sell its Central & Eastern European operations (Poland, Romania, Turkey,
and Hungary) to Vienna Insurance Group, as part of its strategy to focus on key markets, simplify the footprint, and strengthen
the balance sheet.The asset management division (Aegon Hungary AM Company Zrt. - Assets under Management EUR 2.29 billion
perDecember31, 2021) is included in this transaction. The closing of the deal is subject to regulato
ry
approval.
Aegon AM has aglobal operational management board (Global Board). The strategic direction and global oversight of business
performance is executed by this Global Board, which has both global and local roles and responsibilities. This board is supported
by several sub-committees. Members of the Board are appointed by AegonN.V. The Risk Advisory Committee and the Remuneration
Committee support Aegon's oversight of Aegon AM.
Overview of sales and distribution channels
Aegon AM utilizes both institutional and wholesale distribution channels combining aglobal perspective with afocus on local
relationships in the Americas, Europe and Asia. Client types include banks, pensions funds, insurance companies, fiduciary managers
and Outsourced Chief Investment Officers (OCIO's), family offices, investment consultants, wealth managers, charities, foundations &
endowments,third-party investment platforms, as well as its affiliated companies and joint ventures.
Overview of business lines
Aegon AM has three distinct business lines:
Third-party business accounts for circa 53% of its Assets under Management (AuM). The main sources for this include third-party
business where Aegon Asset Management distributes its investment strategies directly to its clients. The wholesale businesses typically
sell collective investment vehicles (mutual funds) to customers through wholesale distributors and independent intermediaries.
The asset classes are fixed income, equities, real assets and multi-asset & solutions with fund performance usually measured against
abenchmark or peer group. The institutional businesses typically sell its services to large insurance companies, fiduciary managers and
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Overview of Asset Management
Overview of Asset Management
OCIO’s and pension funds. Aegon AM manages afull range of asset classes and manages the strategies against objectives, targets and
risk profiles agreed with clients. It offers both absolute and relative return products.
Affiliates source third-party business where Aegon AM manages funds for Aegon insurers and retirement companies. These funds have
various legal structures and performance is usually measured against abenchmark or peer group. The main asset classes include fixed
income, equities, real estate, and multi-asset.
The Aegon general account is the third source, this consists of funds held on the balance sheet of Aegon insurance companies
to back policyholder liabilities, typically when the insurer has given the policyholder aguarantee. These assets are managed to match
the insurers' liabilities. As arule, general account assets are managed in aclosed architecture structure, and the main asset classes are
fixed income and real assets. Furthermore, Aegon AM manages the general account derivatives book of Aegon the Netherlands.
Competition
Aegon AM competes with other asset management companies to acquire business from Aegon customers in the open-architecture
parts of the affiliate business and from third parties.
In the United States, Aegon AM focuses on offering investors fixed income, equity, and real estate related strategies. It works directly
with pension funds, insurance companies, family offices, endowments, and foundations as well as investment consultants within
the institutional market. In the wholesale market, Aegon AM works as asub-advisor with its insurance company affiliates and other
partners to offer competitive and relevant strategies for its client base. It also works with investment consultants and other partners
to offer products to third-party institutions. Primary competitors in the United States include AllianceBernstein, BlackRock, Invesco,
JP Morgan, Legg Mason, Principal, PIMCO and PGIM.
In continental Europe, Aegon AM focuses on offering investors fixed income, equities, real estate, multi-asset and solutions strategies
to institutional and wholesale clients, and through its affiliated insurance company to retail clients. In the Netherlands, Aegon AM also
offers fiduciary services to institutional clients. In the third-party institutional market, it competes with domestic and global asset
managers, as well as with fiduciary and balance sheet managers. Competition continues to be strong in the institutional market due
to both the ongoing consolidation of pension funds and the growing service requirements of pension fund clients. Primary competitors
in the Netherlands include BlackRock, Robeco, NN Investment Partners, Achmea and Kempen.
In the United Kingdom, Aegon AM focuses on offering investors fixed income, equities, real estate, and multi-asset and solutions
strategies. It serves institutional clients and their advisors and is active in the wholesale market. Primary competitors in the UK include
Abrdn, LGIM, Janus Henderson and M&G.
In mainland China, AIFMC focuses on Chinese equity, fixed income, multi-asset and money market strategies. It competes against
awide range of local based asset managers including Alibaba's Yuebao fund, China Universal Asset Management, E Fund Management,
Fullgoal Fund Management, and Yinhua Fund Management. The company’s products are distributed through banks, securities brokers,
and digital platforms.
In France, La Banque Postale Asset Management services private investors through La Banque Postale'sretail banking network,
representing LBPAM and Aegon Asset Management-advised strategies. In the institutional market, it also offers investment
strategies from Aegon Asset Management to compete for affiliate and third-party insurance and pension clients with large local
asset managers and specialized international competitors. In France, primary competitors include Amundi Asset Management, AXA
Investment Management, and BNP Paribas Investment Partners.LBPAM is in the process of selling its 45% stake in Ostrum, ajoint-
venture with Natixis that focuses on providing public market fixed income asset management and operational investment services
to insurance companies.
Regulation and supervision
Regulation of asset management companies in general differs to that of insurers. Aegon AM's local operating entities are regulated
by their local regulators, most notably the Dutch Authority for the Financial Markets (AFM) (conduct of business supervision) and
the DNB (prudential supervision) for Dutch-based entities, the Financial Conduct Authority (FCA) for Aegon Asset Management
UK plc, and the Securities & Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for the US-based
entities. Aegon Asset Management UK is also regulated by the SEC for its activities in the US market. Aegon Hungary AM is supervised
by the National Bank of Hungary. From aregulatory perspective, the asset management activities of the US-based entities of Aegon
AM in the United States do not fall directly under the responsibility of Aegon Asset Management Holding B.V., as these entities are
subsidiaries of Transamerica Corporation.
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Risk factors AegonN.V.
Aegon faces numerous risks, some of which may arise from internal factors, factors such as failures of compliance systems and other
operational risks. Others may arise from external factors, such as developments in financial markets, the business and/or political
environment, economic trends, politics and regulations. Any of the risks described below, whether internal or external, may materially
and adversely affect the Company´s operations, its earnings, the value of its investments, the sale of certain products and services
or its ability to fulfill its obligations in respect of securities issued or guaranteed by it. The market price of Aegon securities could
decline due to any of the risks described in this section and investors could lose some or all of the value of their investments. Additional
risks of which Aegon is not presently aware could also materially and adversely affect its operations and share price. The business of an
international financial services group such as Aegon is inherently exposed to risks that may only become apparent with the benefit
of hindsight.
This chapter groups the risk factors into different categories based on the origin of the risk, while recognizing that the identified risk
factor can have broader consequences, e.g. developments on financial markets (included under financial risks) can impact policyholder
behavior (included under underwriting risk). The categories used are: 1) financial risks, 2) underwriting risks, 3) operational risks, 4)
political, regulatory and supervisory risks, 5) legal and compliance risks, and 6) risks relating to Aegon’s common shares. Within each
category, the most material risk factors have been presented first. The order in which the remaining risk factors are presented is not
necessarily an indication of the likelihood of occurrence or the potential magnitude of the consequences of the materialization of risks,
as that can rarely be determined with any degree of certainty. Furthermore, risks with a low likelihood can have a large impact should
they materialize.
The described risk factors below may affect Aegon’s businesses and operations in normal market circumstances and in periods
of significant economic uncertainty, when the manifestation of those risks may be more acute.
Summary
In summary, the risk factors cover the following topics in the designated categories:
1. Financial risks
•
Interest rate volatility, and sustained low or negative interest rate levels
•
Rapidly rising interest rates
•
Disruptions in the global financial markets and general economic conditions
•
Illiquidity of certain investment assets
•
Declines in value and defaults in Aegon’s debt securities, private placements, mortgage loan portfolios and other instruments or the
failure of certain counterparties
•
Decline in equity markets
•
Downturn in the real estate market
•
Default of a major market participant
•
Failure by reinsurers to which Aegon has ceded risk
•
Downgrade in Aegon’s credit ratings
•
Fluctuations in currency exchange rates
•
Unsuccessful management of derivatives
•
Subjective valuation of Aegon’s investments, allowances and impairments
•
Higher inflation
2. Underwriting risks
•
Differences between actual claims experience/underwriting and reserve assumptions
•
Changes in assumptions, estimations, and discrepant valuations of DPAC and value of business acquired
•
Products with guarantees
•
Restrictions on underwriting criteria and the use of data
•
Unexpected return on offered financial and insurance products
•
Reinsurance may not be available, affordable, or adequate
•
Catastrophic events
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Risk factors Aegon N.V.
3. Operational risks
•
Competitive factors
•
Difficulty in managing theCompany’s acquisitions and divestments
•
Difficulties in distributing and marketing products through its current and future distribution channels.
•
Inability to adapt to and apply new technologies
•
Failure of data management and governance
•
Epidemics or pandemics
•
Unsuccessful in managing exposure to climate risk and adequately adapting investment portfolios
•
Unidentified or unanticipated risk events
•
Failure of Aegon’s information technology or communications systems
•
Computer system failure or security breach
•
Breach of data privacy or security obligations
•
Inaccuracies in econometric, financial, or actuarial models, or differing interpretations of underlying methodologies
•
Inaccurate, incomplete or unsuccessfulquantitative models, algorithms or calculations
•
Issues with third party providers, including events such as bankruptcy, disruption of services, or standards of service level
agreements not being upheld
•
Inability to attract and retain personnel
4. Political, regulatory and supervisory risks
•
Requirement to increase 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
•
Political or other instability in a country or geographic region
•
Changes in accounting standards
•
Inability of Aegon’s subsidiaries to pay dividends to Aegon N.V.
•
Risks of application of intervention measures
5. Legal and compliance risks
•
Unfavorable outcomes of legal and arbitration proceedings and regulatory investigations and actions
•
Changes in government regulations in the jurisdictions in which Aegon operates
•
Evolving ESG standards and requirements
•
Tax risks
•
Judgments of US courts may not be enforceable against Aegon in Dutch courts
•
Inability to manage risks associated with the reform and replacement of benchmark rates
•
Inability to protect intellectual property
6. Risks relating to Aegon’s common shares
•
Volatility of Aegon’s share price
•
Offering of additional common shares in the future
•
Significant influence of Vereniging Aegon over Aegon’s corporate actions
•
Currency fluctuations
•
Influence of Perpetual Contingent Convertible over the market price for Aegon’s common shares
Financial risks
Interest rate volatility and sustained low or negative interest rate levels may adversely affect Aegon’s profitability and
shareholders’ equity.
Aegon is exposed to interest rate risk as both its assets and liabilities are sensitive to movements in long- and short-term interest rates
as well as to changes in the volatility of interest rates.
During periods of decreasing interest rates, sustained low or even negative interest rates, as experienced in recent years, Aegon may
not be able to preserve profit margins in spread-based businesses due to the existence of minimum interest rate guarantees and
minimum guaranteed crediting rates provided in policies. Investment earnings may be lower because the interest earnings on new
fixed-income investments are likely to have declined with the market interest rates. A prolonged low or even negative interest rate
environment may also result in a lengthening of maturities of the policyholder liabilities from initial estimates, due to lower policy
lapses and longer duration of annuities. In this context, negative interest rates have comparable but larger impacts than low but
positive rates.
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In-force life insurance and annuity policies may be relatively more attractive to consumers due to built-in minimum interest rate
guarantees, resulting in increased premium payments on products with flexible premium features and a higher percentage of insurance
policies remaining in force year-to-year. The majority of assets backing the insurance liabilities are invested in fixed-income securities.
Aegon, in managing its investments and derivative portfolio, considers a variety of factors, including the relationship between
the expected duration of its assets and liabilities. However, if interest rates remain low or even negative, the yield earned upon
reinvesting interest payments from current investments, or from their sale or maturity, may decline. Reinvestment at lower
yields may reduce the spread between interest earned on investments and interest credited to some of Aegon’s products and
accordingly profitability may decline. In addition, borrowers may prepay or redeem fixed maturity investments or mortgage loans
in Aegon’s investment portfolio in order to borrow at lower rates. Aegon’s ability to lower crediting rates on certain products to offset
the decrease in spread may be limited by contractually guaranteed minimum rates or competitive influences.
Depending on economic developments, interest rates for securities with shorter maturities may remain at low or even negative
levels for a prolonged period. In such an environment, an anchored expectation of low inflation or deflation could further push down
the longer end of the interest rate curve, which could have significant implications for Aegon’s profitability.
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 perceived higher 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.
These cash payments to policyholders also result in a decrease in total invested assets and net result. Early withdrawals may also
require accelerated amortization of deferred policy acquisition costs (‘DPAC’), which in turn reduces net result.
In addition, if interest rates rise, unrealized losses on assets carried at fair value will be recorded in other comprehensive income
(available-for-sale investments) or as losses (investments at fair value through profit or loss) under International Financial
Reporting Standards as adopted by the European Union (‘EU-IFRS’). This is inconsistent with the EU-IFRS accounting on much
of Aegon’s liabilities, where corresponding economic gains from higher interest rates do not affect shareholders’ equity or net income
in the shorter term. Such temporal mismatch could cause Aegon’s results of operations to fluctuate significantly inthe short-term.
Disruptions in the global financial markets and general economic conditions may affect, and could have material adverse
effects on, Aegon’s businesses, profitability, liquidity and financial condition.
Aegon’s profitability and financial condition may be materially affected by uncertainty, fluctuations or negative trends in general
economic conditions, such as economic growth, levels of unemployment, consumer confidence, inflation and interest rate levels
in the countries in which Aegon operates. The COVID-19 pandemic, for example, has caused significant volatility and disruption
in the financial markets.
Any disruptions or downturns in the global financial markets or general economic conditions may result in reduced demand for
Aegon’s products as well as impairments and reductions in the value of the assets in Aegon’s general account, separate account,
and company pension schemes. Aegon may also experience a higher incidence of claims and unexpected policyholder behavior such
as unfavorable changes in lapse rates. Aegon’s policyholders may choose to defer or stop paying insurance premiums, which may
impact Aegon’s businesses, profitability, cash flows and financial condition, and Aegon cannot predict with any certainty if or when such
actions may occur.
Governmental action in the United States, the Netherlands, the United Kingdom, the European Union and elsewhere to address market
disruptions and economic conditions may impact Aegon’s businesses. Aegon cannot predict the effect that these or other government
actions, including economic sanctions, as well as actions by the European Central Bank (ECB) or the US Federal Reserve may have
on financial markets or on Aegon’s businesses, profitability, cash flows and financial condition.
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Illiquidity of certain investment assets may prevent Aegon from selling investments at fair prices in a timely manner and
Aegon’s access to external financing sources may be constrained under certain circumstances.
Aegon must maintain sufficient liquidity to meet short-term cash demands under normal circumstances, as well as in crisis situations.
Liquidity risk is inherent in many of Aegon’s businesses. Each asset purchased and liability (e.g. insurance products) sold has unique
liquidity characteristics. Some liabilities can be surrendered, while some assets, such as privately placed loans, mortgage loans,
real estate and limited partnership interests, are to some degree illiquid. In depressed markets, Aegon may be unable to sell or buy
significant volumes of assets at quoted prices.
Any security Aegon issues in significant volume may be issued at higher financing costs if funding conditions are impaired.
The necessity to issue securities can be driven by a variety of factors; for instance, Aegon may need liquidity for operating expenses,
debt servicing and the maintenance of capital levels of insurance subsidiaries. If these extreme conditions were to persist for
an extended period of time, Aegon may need to sell assets substantially below the prices at which they are currently recorded to meet
its insurance obligations.
Aegon makes use of bilateral and syndicated credit facilities to support liquidity requirements and meet payment obligations under
adverse (market) conditions. An inability to access these credit facilities, for example due to non-compliance with conditions for
borrowing or the default of a facility provider under stressed market circumstances, could have an adverse effect on Aegon’s ability
to meet liquidity needs and to comply with contractual and other requirements.
Aegon’s derivatives transactions require Aegon to provide collateral against declines in the fair value of these contracts. Volatile
financial markets may significantly increase requirements to provide collateral and adversely affect its liquidity position. Further,
a downgrade of Aegon’s credit ratings may also result in additional collateral requirements.
Declines in value and defaults in debt securities, private placements, mortgage loan portfolios and other instruments held in
Aegon’s general and separate accounts, or the failure of certain counterparties, may have a material adverse effect on Aegon’s
businesses, profitability, cash flows and financial condition.
Credit risk is the risk of loss resulting from the default by, or failure to meet contractual obligations of, issuers and counterparties.
Aegon also considers credit risk to include spread risk, that is, a decline in the value of a bond due to a general widening of credit
spreads. For general account products, Aegon typically bears the risk for investment performance equaling the return of principal and
interest on fixed income instruments. Aegon is exposed to credit risk on its general account fixed-income portfolio (debt securities,
mortgages, small and medium sized entities (‘SME’) and 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 profitability and financial condition.
Additionally, Aegon is indirectly exposed to credit risk on the investment portfolios underlying separate account liabilities. Changes
to credit risk can decrease the value of fixed interest assets in the separate accounts. Reduced separate account values will decrease
fee income and may accelerate DPAC amortization. In addition, certain separate account products sold in the United States and
the Netherlands include guarantees that protect the policyholders against some or all of the downside risks in their separate account
portfolios. Reconsideration of assumptions might also affect the DPAC amortization schedule. These factors may have a material
adverse effect on Aegon’s profitability and financial position.
Aegon’s investment portfolio includes Dutch government bonds, US Treasury, agency and state bonds, other government-issued
securities and corporate bonds. Especially in a weak economic environment Aegon may incur significant investment impairments due
to defaults and overall declines in the capital markets. Defaults or other reductions in the value of these securities and loans may have
a material adverse effect on Aegon’s businesses, profitability, cash flows and financial condition.
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A decline in equity markets may adversely affect Aegon’s profitability and shareholders’ equity, sales of savings and
investment products, and the value of assets under management.
Aegon and its customers run the risk that the market value of their equity investments can decline. Exposure to equity markets exists
in both assets and liabilities. Asset exposure exists through direct equity investment where Aegon bears all or most of the volatility
in returns and investment performance risk. Equity market exposure is also present in policyholders’ accounts for insurance and
investment contracts (such as variable annuities, unit-linked products, and mutual funds) where funds are invested in equities. Although
most of the risk remains with the policyholder, guarantees within certain products may transfer some or all of this risk to Aegon. Lower
investment returns also reduce the asset management and administration fee that Aegon earns on the asset balance in these products,
and prolonged investment under-performance may cause existing customers to withdraw funds and potential customers not to grant
investment mandates.
Some of Aegon’s insurance and investment contract businesses have minimum return or accumulation guarantees, which require Aegon
to establish reserves to fund these future guaranteed benefits when equity market returns do not meet or exceed these guarantee
levels. Aegon’s reported results under EU-IFRS are also at risk if returns are not sufficient to allow amortization of DPAC, which
may impact the reported net result as well as shareholders’ equity. Volatile or poor market conditions may also significantly reduce
the demand for some of Aegon’s savings and investment products, which may lead to lower sales and reduced profitability.
A downturn in the real estate market may adversely impact valuations and cash flows.
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. Aegon also has exposure to the real estate market in the US through commercial
mortgage loans. Risks for Aegon in the US and the Netherlands in the event of a downturn in the real estate market include lower
returns or valuation losses on its mortgage portfolio, lower margins due to higher prepayment in the mortgage portfolio in the event
of lower interest rates and increased payment defaults.
The default of a major financial market participant and systemic risk may disrupt the markets and affect Aegon.
The failure of a sufficiently large and influential financial market participant may disrupt securities markets or clearing and settlement
systems in Aegon’s markets. This may cause market declines or volatility. Such a failure may lead to a chain of defaults that may
adversely affect Aegon and Aegon’s contract counterparties. In addition, such a failure may impact future product sales as a potential
result of reduced confidence in the insurance industry. The default of one or more large international financial institutions, which may
result in disruption or termination of their cash, custodial and/or administrative services, may also have a material adverse impact
on Aegon’s ability to run effective treasury and asset management operations.
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. This risk is sometimes referred to as ‘systemic risk’ and may adversely affect
financial intermediaries, such as clearing members or futures commissions merchants, clearing houses, banks, securities firms and
exchanges with which Aegon interacts on a daily basis and financial instruments of governments in which Aegon invests. Systemic risk
could have a material adverse effect on Aegon’s ability to raise new funds and on its business, financial condition, profitability, liquidity
and/or prospects.
Reinsurers to which Aegon has ceded risk may fail to meet their obligations.
Aegon’s insurance subsidiaries cede premiums to other insurers under various agreements that cover individual risks, group risks
or defined blocks of business, on a co-insurance, yearly renewable term, excess or catastrophe excess basis. The purpose of these
reinsurance agreements is to spread the risk and minimize the effect of losses. The amount of each risk retained depends on an
evaluation of the specific risk, which is subject, in certain circumstances, to maximum limits based on the characteristics of coverage.
Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse for the ceded amount in the event a covered claim
is paid. However, Aegon’s insurance subsidiaries remain liable to their policyholders for ceded insurance if any reinsurer fails to meet
the obligations assumed by it. A bankruptcy or insolvency or inability of any of Aegon’s reinsurance counterparties to satisfy its
obligations may have a material adverse effect on Aegon’s financial condition and results of operations.
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A downgrade in Aegon’s credit ratings may increase policy surrenders and withdrawals, adversely affect Aegon’s relationships
with distributors, and negatively affect Aegon’s results of operations.
Claims-paying ability and financial strength ratings are factors in establishing the competitive position of insurers. A rating downgrade
(or a change in outlook indicating the potential for such a downgrade) of Aegon or any of its rated insurance subsidiaries may, among
other things, materially increase the number of policy surrenders and withdrawals by policyholders of cash values from their policies.
Aegon cannot predict what actions rating agencies may take, or what actions Aegon may take in response to the actions of rating
agencies. As with other companies in the financial services industry, Aegon’s credit ratings may be downgraded at any time and without
notice by any rating agency.
Withdrawals by policyholders 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
result. Among other things, early withdrawals may also cause Aegon to accelerate amortization of DPAC, reducing net result.
Aegon has experienced downgrades and negative changes to its outlook in the past and may experience rating and outlook changes
in the future. A downgrade or potential downgrade, including changes in outlook, may result in higher funding costs on future long-
term debt funding transactions and/or affect the availability of funding in the capital markets and lead to increased fees on credit
facilities. In addition, a downgrade may adversely affect relationships with broker-dealers, banks, agents, wholesalers and other
distributors of Aegon’s products and services, which may negatively impact new sales and adversely affect Aegon’s ability to compete.
A downgrade of Aegon’s credit ratings may also affect its ability to obtain reinsurance contracts at reasonable prices or at all.
Fluctuations in currency exchange rates may affect Aegon’s financial condition and 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 is 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 proceeds
from divestments or the foreign exchange component of expected dividends from its principal business units that maintain their equity
in currencies other than the euro.
To
the extent the foreign exchange component of proceeds from divestments or the expected dividends is not hedged, or actual
dividends vary from expected, Aegon’s net result and shareholders’ equity may fluctuate. As Aegon has significant business segments
in the Americas and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences
between the US dollar and the euro and between the UK pound and the euro. Aegon may experience significant changes in net result
and shareholders’ equity because of these fluctuations.
Aegon may be unable to manage asset liability management risks successfully through derivatives.
Aegon is exposed to changes in the fair value of its investments, as a result of 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 these asset liability management 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 derivatives, a counterparty’s failure to honor Aegon’s obligations or a systemic risk that is transmitted from
counterparty to counterparty may each have a material adverse effect on Aegon’s businesses, net result and financial condition.
Valuation of Aegon’s investments, allowances and impairments is subjective, and discrepant valuations may adversely affect
Aegon’s net result and financial condition.
The valuation of many of Aegon’s financial instruments is based on methodologies, estimations, and assumptions that are subject
to different interpretations. Changes to investment valuations may have a material adverse effect on Aegon’s net result and financial
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condition. In addition, the determination of the amount of allowances and impairments taken on certain investments and other assets
is subjective and based on assumptions, estimations and judgments that may not reflect or correspond to Aegon’s actual experience,
any of which may materially impact Aegon’s net result or financial condition.
Higher inflation may adversely affect Aegon’s business plans and strategy and the profitability of its business.
Inflation has increased in the major economies driven by many factors, such as supply chain disruption, energy and commodity costs.
Central banks and governments are assessing whether inflation increases are transitionary or lasting and recently started to consider
raising interest rates and other monetary policies to combat inflation.
A high inflation environment can adversely affect Aegon directly through higher claims and higher expenses or through broader macro-
economic impacts that are associated with high inflation, such as higher interest rates and a correction to the market value of assets.
Certain products Aegon offers have a direct or very strong link to inflation, most notably index linked pension products. Other products
have a high correlation to inflation over the longer term, such as long term care products. It is Aegon’s practice to hedge the indexation
of pension products but it is not possible to hedge the inflation associated with long term care products as no instrument exists
to match this risk. Rather Aegon mitigate this risk by close management of claims costs and benefits in the US.
Operating expenses have a strong correlation with inflation (wage and price inflation).An increase in observed inflation may lead
to increased expenses and a lower earnings if Aegon is unable to offset the expense of inflation through expense savings initiatives.
Higher inflation may have broader economic impacts on asset valuations and economic activity, which will adversely impact
Aegon’s business plans and strategy and its profitability.
Underwriting risks
Aegon’s reported results of operations and financial condition may be affected by differences between actual claims
experience and underwriting and reserve assumptions both due to incurred gains/losses and from potential changes in best
estimate assumptions that are used to value insurance liabilities.
There is a risk that the pricing of Aegon’s products turns out to be inadequate if the assumptions used for pricing do not materialize.
Aegon’s earnings depend significantly on the extent to which actual claims experience is consistent with the assumptions used
in setting the prices for Aegon’s products and the extent to which the established technical provisions for insurance liabilities,
both under IFRS and Solvency II reporting, prove to be sufficient. If actual claims experience is less favorable than the underlying
assumptions used in establishing such liabilities, Aegon’s net income would be reduced. Furthermore, if less favorable claims
experience became sustained, Aegon may be required to change its best estimate assumptions with respect to future experience,
potentially increasing the technical provisions for insurance liabilities, which may reduce Aegon’s net income and solvency ratio.
In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded
as assets on the balance sheet and are being amortized into net income over time. If the assumptions relating to the future profitability
of these policies (such as future claims, investment net income and expenses) are not realized, the amortization of these costs may
be accelerated and may require write-offs should there be an expectation that the costs are not fully recoverable. This may have
a material adverse effect on Aegon’s results of operations and financial condition.
Sources of underwriting risk include policyholder behavior (such as lapses or surrender of policies), policy claims (such as mortality
and morbidity) and expenses. For some product lines, Aegon is at risk if policy lapses increase, as sometimes Aegon is unable to fully
recover up-front sales expenses despite the presence of commission recoveries or surrender charges and fees. In addition, some
policies have embedded options which at times are more valuable to the client if they stay (lower lapses) or leave (higher lapses), which
may result in losses to Aegon’s businesses. Aegon sells certain types of policies that are at risk if mortality or morbidity increases,
such as term life insurance and accident insurance. Aegon also sells certain other types of policies, such as annuity products, that
are at risk if mortality decreases (longevity risk). For example, certain current annuity products, as well as products sold in previous
years, have seen their profitability deteriorate as longevity assumptions have been revised upward. Despite the disruption caused
by the COVID-19 pandemic, it remains possible for the trend toward increased longevity to return, such that Aegon’s annuity products
may continue to experience adverse effects due to longer expected benefit payment periods. Aegon is also at risk if expenses are higher
than assumed.
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Changes in assumptions, estimations, and discrepant valuations of DPAC and value of business acquired may adversely affect
Aegon’s results of operations and financial condition.
Changes in assumptions, estimations, judgments or actual experience may also require Aegon to accelerate the amortization of DPAC
and value of business acquired, establish a valuation allowance against deferred income tax assets, or recognize impairment of other
assets, any of which may materially adversely affect Aegon’s results of operations and financial condition.
Some of Aegon’s products have guarantees that may adversely affect its results of operations, financial condition or liquidity.
Some products, particularly Aegon’s variable annuity products in the US 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 more than account values. These guarantees are designed, among other things, to protect policyholders against downturns
in equity markets and interest rates. The value of the guarantees depends on market prices of such products. Failure to re-price
the products following a fall in interest rates or a move into more volatile markets could result in Aegon writing business at a loss and
potentially writing higher volumes of loss making business if competitors re-price their products. Alternatively, if competitors re-price
their products on aggressive pricing terms, then Aegon may be pressured to re-price with less favorable terms than it is willing to take
without the pressure.
Restrictions on underwriting criteria and the use of data may adversely impact Aegon’s results of operations.
Some jurisdictions impose restrictions on particular underwriting criteria, such as gender or race, or use of genetic test results,
for determination of premiums and benefits of insurance products.Such restrictions, now or in the future, could adversely impact
Aegon’s resultsofoperations if it is unable to take into consideration all factors that potentially bear correlation with risk. Further
developments in underwriting, such as automation and use of additional types and sources of data, may also be affected by future
regulatory developments regarding privacy and other restrictions with respect to the use of personal data.
Aegon’s products may not achieve expected returns and Aegon may be confronted with litigation and negative publicity.
Aegon may face lawsuits from customers and experience negative publicity if Aegon’s products fail to perform as expected, regardless
of the suitability of products for customers or the adequacy of the disclosure provided to customers by Aegon and by the intermediaries
who distribute Aegon’s products. Products that are less well understood and that have a lower performance track record may be more
likely to be the subject of such lawsuits. Any such lawsuits may have a material adverse effect on Aegon’s results of operations,
corporate reputation, and financial condition.
Reinsurance may not be available, affordable, or adequate to protect Aegon against losses.
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, which may lead to Aegon
incurring losses.
Catastrophic events, which are unpredictable by nature, may result in material losses and abruptly and significantly interrupt
Aegon’s business activities.
Aegon’s results of operations and financial condition may be adversely affected by volatile natural and man-made disasters such as
hurricanes, windstorms, earthquakes, terrorism, cyber-crime, riots, wars, fires and explosions, pandemics, and other catastrophes. Over
the past several years, changing weather patterns and climatic conditions have added to the unpredictability and frequency of natural
disasters in certain parts of the world and created additional uncertainty as to future trends and exposure. Aegon is also exposed to
the risk of epidemics or pandemics occurring in one or more of the countries in which Aegon operates or globally. For instance, Aegon
can be impacted through higher mortality rates in the countries in which it operates and through lower sales and higher lapses on
itsproducts due to limitations on customer interactions, pressure on customer income and increased uncertainty. Such events may lead
to considerable financial losses to Aegon’s businesses. These catastrophic events may also lead to adverse market movements which
increase the adverse impacts to Aegon’s financial position. For instance, prices and credit quality of investments can be impacted.
Inaddition, monetary policy measures from central banks can result in fluctuations in interest rates. Furthermore, natural disasters,
pandemics, terrorism, civil unrest, military actions, acts of war and fires may disrupt Aegon’s operations and result in significant loss of
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property, key personnel, and information about Aegon and its clients. If its business continuity plans have not included effective and
sufficient contingencies for such events, Aegon may also experience business disruption and damage to corporate reputation and
financial condition for a substantial period of time.
Operational risks
Competitive factors may adversely affect Aegon’s market share and profitability.
Competition in Aegon’s business segments is based on service, product features, price, commission structure, financial strength, claims
paying ability, ratings, and name recognition. Aegon faces intense competition from a large number of other insurers, as well as non-
insurance financial services companies such as banks, broker-dealers and asset managers, for individual customers, employers, other
group customers, agents and other distributors of insurance and investment products. Consolidation in the global financial services
industry can enhance the competitive position of some of Aegon’s competitors by broadening the range of their products and services
and increasing their distribution channels and their access to capital. New competitors backed by private equity investors may lead
to further pressure on Aegon’s margins. In addition, development of alternative distribution channels for certain types of insurance
and securities products, including use of digital technologies and platforms, may result in increasing competition as well as pressure
on margins for certain types of products. Traditional distribution channels are also challenged by a ban on sales-based commissions
in some countries. These competitive factors may result in increased pricing pressures on Aegon’s products and services, particularly
as competitors seek to win market share. This may harm Aegon’s ability to maintain or increase profitability.
Adverse market and economic conditions can be expected to result in changes to the competitive landscape. Financial distress
experienced by financial services industry participants as a result of weak economic conditions and newly imposed regulations may
lead to acquisition opportunities. 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 ability or that
of Aegon’s competitors to pursue such opportunities may be limited due to lower 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.
Aegon may have difficulty managing its expanding operations, and Aegon may not be successful in acquiring new businesses
or divesting existing operations.
Over time, Aegon has made a number of acquisitions and divestments around the world and it is possible that Aegon may make further
acquisitions and divestments in the future. Acquisitions and divestments involve risks that may adversely affect Aegon’s results
of operations and financial condition. These include: the potential diversion of financial and management resources from existing
operations; difficulties in assimilating or disentangling operations, technologies, products and personnel; significant delays
in completing the integration or disentangling of operations; the potential loss of key employees or customers; and potential losses
from unanticipated litigation and tax and accounting issues. In addition, expansion into new and emerging markets may involve
heightened political, legal and regulatory risks, such as discriminatory regulation, nationalization or expropriation of assets, price
controls and exchange controls.
Aegon’s acquisitions may result in additional indebtedness, costs, contingent liabilities, and impairment expenses related to goodwill
and other intangible assets. Acquisitions may also have a dilutive effect on the ownership and voting percentages of existing
shareholders if shares are used as consideration. Divestments of existing operations may result in Aegon assuming or retaining certain
contingent liabilities. Aegon may not be able to divest assets within the time or at the price planned. All of these factors may adversely
affect Aegon’s businesses, results of operations and financial condition. There can be no assurance that Aegon will successfully identify
suitable acquisition candidates or buyers for operations to be divested or that Aegon will properly value acquisitions or divestments.
Aegon is unable to predict whether or when any prospective acquisition candidate or buyer for operations to be divested will become
available, or the likelihood that any transaction will be completed once negotiations have commenced.
Aegon may experience difficulties in distributing and marketing products through its current and future distribution channels.
Although Aegon distributes its products through a wide variety of distribution channels, Aegon’s ability to market its products could
be affected if key relationships are interrupted. Distributors may elect to reduce or terminate their distribution relationship with
Aegon due to adverse developments in its (or their) business. Further, key distribution partners may also merge or change their
business models in ways that affect how Aegon’s products are sold, or new distribution channels could emerge and adversely impact
the effectiveness of its current distribution efforts.
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When Aegon’s products are distributed through unaffiliated firms, Aegon may not always be able to monitor or control the manner
of their distribution despite its significant compliance training and programs. If Aegon’s products are distributed by such firms in an
inappropriate manner, or to customers for whom they are unsuitable, Aegon may suffer reputational and other harm to its business.
Aegon may be unable to adapt to and apply new technologies.
New technologies are transforming the insurance industry. New technologies include but are not limited to communication channels,
automation, artificial intelligence, additional processing platforms and cloud services, data analytics and distributed ledger technology.
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. An inability to adapt and apply these technologies quickly, and in a controlled manner 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.
Failure of data management and governance can result in regulatory and reputational risk as well as missed business
opportunities.
Data is essential for Aegon’s operational performance. However, much of the data held by Aegon is subject to various legal, regulatory
and contractual restrictions. To be able to benefit from the data that Aegon holds, areas like data management and governance are
of key importance. Most internal processes and customer interactions are dependent on accessible, reliable, and compliant data
practices and operations. If Aegon fails to adequately execute on these obligations, it faces potential legal, regulatory, contractual and
reputational risks. Aegon also must endeavor to obtain adequate data rights to be able to execute its business strategy. Failure to do
so will expose it to additional legal risks, including litigation risks.
Aegon may be impacted by epidemics or pandemics.
Aegon is exposed to the risk of an epidemic or a pandemic – such as Asian flu, SARs or COVID-19 – occurring in one or more
of the countries in which it operates or globally. Aegon’s daily activities may be adversely impacted in addition to the financial and
underwriting consequences of higher mortality and economic hardship, as previously mentioned. If the health of a significant number
of employees or key functions is compromised or internal controls need to be executed in an atypical way, these could have an impact
on core business processes, service levels to customers, and the effectiveness of the control environment. In addition, Aegon faces
additional operational risks related to prolonged and expanded working from home/remote working by Aegon’s workforce, such
as additional remote access to company information which could increase information security risk. Also, Aegon can be impacted via
its relationships with third parties. These third parties can also be impacted by an epidemic or pandemic with consequential impacts
on Aegon such as disruption in service. The described risks may directly or indirectly impact Aegon’s financial health and its ability
to generate capital in the medium to long term.
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.
Climate change is a long-term risk associated with high uncertainty regarding timing, scope and severity of potential impacts. Climate
risks can be grouped into physical risks and transition risks. Physical risks relate to losses from overall climate changes (i.e. changing
weather patterns and sea level rise) and acute climate events (i.e. extreme weather and natural disasters). These physical risks impact
property & casualty (P&C) insurance, but also life insurance, for instance through higher-than-expected mortality rates. Losses can
also follow from credit risk and collateral linked to Aegon’s mortgage portfolio. Aegon is exposed to mortality risk and mortgage
underwriting risks. Beyond insured losses, climate change may have disrupting and cascading effects on the wider economy and may
lead to adverse market movements – prices and credit quality of investments and defaults on investments – and monetary policy
measures resulting in lower interest rates.
Transition risks are those arising from the shift to a low-carbon economy. These risks are a function of policy and regulatory
uncertainty, including political, social and market dynamics and technological innovations. Transition risks can affect the value
of assets and investment portfolios. Furthermore, Aegon may be unable to adjust to environmental and sustainability goals. Linked
to both the physical and the transition risks, there could also be litigation and reputational risks following from not fully considering
or responding to the impacts of climate change, or not providing appropriate disclosure of current and future risks. Aegon may not
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be able to fully predict or manage the financial risks stemming from climate change, resource depletion, environmental degradation and
related social issues.The risks can relate both to Aegon and the companies in which it invests.
Given the significant uncertainties related to climate change impacts and its long-term nature, it cannot be ruled out that climate
change may have a material adverse effect on Aegon’s businesses, results of operations and financial condition.
Aegon’s risk management policies and processes may leave it exposed to unidentified or unanticipated risk events, adversely
affecting its businesses, results of operations, and financial condition.
Aegon has devoted significant resources to the implementation and maintenance of a comprehensive enterprise risk management
framework in all aspects of the business. Nevertheless, it is possible that risks present in its business strategies and initiatives are not
fully identified, monitored, and managed or that risks are not properly measured. Risk measurements make use of historic and public
data that may be inaccurate or may not predict future exposures. As a result, Aegon’s businesses, results of operations, and financial
condition may be adversely affected.
Failure of Aegon’s information technology or communications systems may result in a material adverse effect on Aegon’s
businesses, results of operations, financial condition and corporate reputation.
Any failure of or gap in the systems and processes necessary to support complex transactions and avoid and/or detect systems failure,
fraud, information security failures, processing errors, cyber intrusion, loss of data and breaches of regulation may lead to a material
adverse effect on Aegon’s results of operations and corporate reputation. In addition, Aegon must commit significant resources
to maintain and enhance its existing systems in order to keep pace with applicable regulatory requirements, industry standards and
customer preferences. If Aegon fails to maintain secure and well-functioning information systems, Aegon may not be able to rely
on data for product pricing, compliance obligations, risk management and underwriting decisions. In addition, Aegon cannot assure
investors or consumers that interruptions, failures or breaches in security of these processes and systems will not occur, or that if they
do occur, that they can be timely detected and remediated. The occurrence of any of these events may have a material adverse effect
on Aegon’s businesses, results of operations, financial condition and corporate reputation.
A computer system failure or security breach of Aegon’s IT systems or that of critical third partiesmay disrupt Aegon’s
business, damage Aegon’s reputation and adversely affect Aegon’s results of operations, financial condition, and cash flows.
Aegon relies heavily on computer and information systems and internet and network connectivity (collectively, “IT systems”)to conduct
a large portion of its business operations. This includes the need to securely store, process, transmit and dispose of confidential
information, including personal information, through a number of complex systems. In many cases this also includes transmission
and processing to or through customers, business partners, (semi-) governmental agencies and third-party service providers.
The introduction of new technologies, computer system failures, cyber-crime attacks or security or data privacy breaches may material
disrupt Aegon’s business operations, damage Aegon’s reputation, result in regulatory and litigation exposure, investigation and
remediation costs, and materially and adversely affect Aegon’s results of operations, financial condition and cash flows.
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 and
potentially demand ransom. It also includes inside threats, both malicious and accidental. For example, human error, bugs and
vulnerabilities that may exist in Aegon’s systems or software,unauthorized user activity and lack of sufficiently automated processing
or sufficient logging and monitoring can result in improper information exposure or failure or delayed detection of such activity in a
timely manner. 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 IT systems or may not adequately keep pace with the dynamic changes in this area. Potential bad actors
that target Aegon and 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,
not only by companies such as Aegon, but also by society in general. Threats have increased in frequency and magnitude, and are
expected to continue to increase,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
potentially exploit. As a result of the COVID-19 pandemic, Aegon also faces increased cybersecurity risks due to the number of Aegon’s
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and Aegon’s service providers’ and partners’ employees who are (and may continue to be) working remotely, which creates additional
opportunities for cybercriminals to launch social engineering attacks and exploit vulnerabilities in non-corporate IT environments.
TheWhite House, SEC and other regulators have also increased their focus on cybersecurity vulnerabilities and risks.
Large, global financial institutions such as and including Aegon have been, and will continue to be, subject to information security
attacks for the foreseeable future. The nature of these attacks will also continue to be unpredictable, and in many cases may arise from
circumstances that are beyond Aegon’s control. Attackers are also increasingly using tools and techniques that are specifically designed
to circumvent controls, to evade detection and even to remove or obfuscate forensic evidence. As a result, Aegon may be unable
to timely or effectively detect, identify, contain, investigate or remediate IT systems in response to, future cyberattacks or security
breaches. Especially if and to the extent Aegon fails to adequately invest in defensive infrastructure, timely response capabilities,
technology, controls and processes or to effectively execute against its information security strategy, it may suffer material adverse
consequences.
To date the highest impact information security incidents that Aegon has experienced are believed to have been the result of e-mail
phishing attacks targeted at Aegon’s business partners and customers. This in turn led to the unauthorized use of valid Aegon
website credentials to engage in fraudulent transactions and improper data exfiltration. Additionally, Aegon has faced other types
of attacks, including, but not limited to, other types of phishing attacks, distributed denial of service (DDoS) attacks, technology
implementation and update errors, various human errors, e-mail related errors, paper-based errors, exploitations of vulnerabilities
andcertain limited cases of unauthorized internal user activity, including activity between different Aegon country units. Like many
other companies, Aegon could also be subject to malware, ransomware and similar types of attacks or intrusions. There is no guarantee
that the measures that Aegon takes will be sufficient to stop all types of attacks or mitigate all types of information security or data
privacy risks.
Aegon maintains cyber liability insurance to help decrease the financial impact of cyber-attacks and information security events, subject
to the terms and conditions of the policy; however, such insurance may not be sufficient to cover all applicable losses that Aegon
may suffer.
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 and semi-governmental and other administrative bodies have established numerous
rules protecting the privacy and security of personal information and other confidential or sensitive information held by Aegon.
Notably, certain of Aegon’s businesses are subject to laws and regulations enacted by US federal and state governments, the EU or
other non-US/EU jurisdictions and/or enacted by various regulatory organizations relating to the privacy and/or information security
of the information of customers, employees or others. Aegon’s European operations are mainly subjected to the General Data
Protection Regulation (GDPR). In addition, in several Asian and Latin American jurisdictions where Aegon has activities, new privacy and
information security laws and regulations have been enacted or existing legislation has been strengthened and updated.
In the United States, 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. Other states have adopted similar cybersecurity laws and regulations.
Numerous other US state and federal 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 and
implementing regulations (GLBA), the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA), and the Health
Insurance Portability and Accountability Act (HIPAA), among many others.These laws generally provide for governmental investigative
and enforcement authority, and in certain cases provide for private rights of action.
Numerous other legislators and regulators with jurisdiction over Aegon’s businesses are considering or have already enacted enhanced
information security risk management and privacy laws and regulations, with the overall number and scope of such laws and
regulations continuing to increase every year. A number of Aegon’s subsidiaries are also subject to contractual restrictions with respect
to the use and handling of the sensitive information of Aegon’s clients and business partners.
Aegon, and numerous of its systems, employees, third-party providers and business partners have access to, and routinely process,
the personal information of consumers and employees. Aegon relies on a large number of processes and controls to protect
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the confidentiality, integrity and availability of personal information and other confidential information that is accessible to, or in
the possession of, Aegon, its systems, employees and business partners. It is possible that an Aegon or a third party’s employee,
contractor, business partner or system could, intentionally or unintentionally, inappropriately disclose or misuse personal or confidential
information. Aegon’s data or data in its possession could also be the subject of an unauthorized information security attack. If Aegon
fails to maintain adequate processes and controls or if Aegon or its business partners fail to comply with relevant laws and regulations,
policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of personal information
or other confidential information could occur. Such control inadequacies or non-compliance could cause disrupted operations and
misstated or unreliable financial data, materially damage Aegon’s reputation or lead to increased regulatory scrutiny or civil or criminal
penalties or (class action) litigation, which, in turn, could have a material adverse effect on Aegon’s business, financial condition and
results of operations.
In addition, Aegon analyzes personal information and customer data to better manage its business, subject to applicable laws and
regulations and other restrictions. It is possible that additional regulatory or other restrictions regarding the use of such information
may be imposed. Additional privacy and information security obligations have been imposed by various governments with jurisdiction
over Aegon or its subsidiaries in recent years, and more similar obligations are likely to be imposed in the near future across
Aegon’s operations. Such restrictions and obligations could have material impacts on Aegon’s business, financial conditions and results
of operations.
Inaccuracies
in econometric, financial, or actuarial models, or differing interpretations of underlying methodologies, assumptions
and estimates, could have a material adverse effect on Aegon
’
s business, results of operations and financial condition.Aegon uses econometric, financial, and actuarial models to measure and manage multiple types of risk, to price products and
to establish and assess key valuations and report financial results. All these functions are critical to Aegon’s operations. Aegon
has a model risk management framework in place to manage modelling risk. If, despite this framework, models, their underlying
methodologies, assumptions and estimates, or their implementation and monitoring prove to be inaccurate, this could have a material
adverse effect on Aegon’s business, results of operations and financial condition.
Many of Aegon’s business units offer investment products that utilize quantitative models, algorithms or calculations that
could experience errors or prove to be incorrect, incomplete or unsuccessful, resulting in losses for clients who have invested
in such products and possible regulatory actions and/or litigation against Aegon and/or its affiliates.
Aegon’s business units may utilize quantitative models, algorithms or calculations (whether proprietary or supplied by third parties)
(Models) or information, or data supplied by third parties (Data) for the management of, or to assist in the management of, investment
products offered to clients. Examples of such investment products include volatility-controlled funds, mutual funds, separately
managed accounts, and other types of advisory accounts. Models and Data are used to construct sets of transactions and investments,
to provide risk management insights, and may be used to assist in hedging investments. If Models and Data prove to be incorrect
or incomplete, any decisions made, in whole or part, in reliance thereon expose the investment product to additional risks. For example,
by utilizing Models or Data, certain investments may be bought at prices that are too high, certain other investments may be sold
at prices that are too low, or favorable opportunities may be missed altogether.Similarly, any hedging based on faulty Models and Data
may prove to be unsuccessful. The applicable investment product bears the risk that Models or Data used will not be successful and
the product may not achieve its investment objective.
Models can be predictive in nature. The use of predictive Models has inherent risks. For example, such Models may incorrectly forecast
future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis. In addition, in unforeseen or certain
low-probability scenarios (often involving a market disruption of some kind), such Models may produce unexpected results, which
can result in losses for an investment product.Furthermore, the success of relying on or otherwise using Models depends on a
number of factors, including the validity, accuracy and completeness of the Model’s development, implementation and maintenance,
the Model’s assumptions, factors, algorithms and methodologies, and the accuracy and reliability of the supplied historical
or other Data.
Models rely on, among other things, correct and complete Data inputs. If incorrect Data is entered into even a well-founded Model,
the resulting information will be incorrect. However, even if Data is input correctly, Model prices may differ substantially from market
prices, especially for securities with complex characteristics. Investments selected with the use of Models may perform differently than
expected as a result of the design of the Model, inputs into the Model or other factors.
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Additionally, if investment products offered by Aegon’s affiliates experience Model errors or use erroneous Data, this could result
in regulatory actions and/or litigation brought against Aegon and/or its affiliates.
Issues with third party providers (outsourcing partners and suppliers), including events such as bankruptcy, disruption of
services, or standards of service level agreements not upheld may adversely impact Aegon’s operational effectiveness and
financial condition.
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 desired productivity improvements or cost efficiencies or customers might experience lower service levels. In addition, Aegon
may not be able to find an adequate alternative 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 financial condition. 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 and 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.
Aegon may be unable to attract and 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. The right talent for critical positions and availability
of required capabilities determines Aegon’s ability to deliver on its strategic objectives. Competition for key personnel in most countries
in which Aegon operates is intense. Aegon competes for talent in areas such as digital, information technology, with companies
in the consumer products, technology, financial sectors.Aegon’s success attracting and retaining key personnel is very much dependent
on the competitiveness of the compensation and benefits package and flexibility for employees in the market in which it competes and
the work environment it offers.
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 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 condition
and/or decrease Aegon’s returns on its products.
Prudential regulatory requirements such as with respect to the calculation of technical provisions, capital requirements, the eligibility
of own funds and the regulatory treatment of investments may change, which could require Aegon to increase technical provisions,
hold higher amounts of regulatory capital and subject it to more stringent requirements with respect to investments and/or own funds.
Important examples include changes to applicable capital requirements by the European Union and/or the interpretation thereof
by the European Insurance and Occupational Pensions Authority (‘EIOPA’), the National Association of Insurance Commissioners
(‘NAIC’) in the US or US state regulators or local regulators in jurisdictions in which Aegon operates. Aegon cannot predict specific
proposals that might be adopted, or what impact, if any, such proposals or, if enacted, such laws may have on its businesses, results
of operations, or financial condition.
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Prudential regulatory requirements may not only apply to the individual entities in the Aegon Group but may additionally apply at Group
level or apply to part of the Group. Consequently, those requirements may have different, and more or less impact depending on their
scope. Important examples of such requirements are Solvency II group supervision and consolidated requirements resulting from
the Capital Requirements Directive (‘CRD’) and the Capital Requirements Regulation (‘CRR’), as applied to groups containing bank and/
or asset management activities.
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
II group calculation, Aegon applies a specific methodology for its US insurance and reinsurance subsidiaries at Group level, in addition
to the requirements to which these subsidiaries are subject under their local prudential regime. This methodology is approved
by Aegon’s group supervisor, De Nederlandsche Bank N.V. (‘DNB’), but remains subject to periodic review. Changes to this methodology
might have an impact on Aegon’s capital position, as calculated under Solvency II group requirements and/or the manner in which
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 condition and results and operations:
•
TheEuropean Commission has recently published a formal legislative proposal for amendments to the Solvency II Directive
following an extensive technical advice by EIOPA to the European Commission. Proposals to amend the Solvency II Delegated
Regulation, amend existing or introduce additional technical standards and/or EIOPA guidelines may follow in a later stage. The
impact on Aegon’s financial position and results depends on the final form of the requirements, standards and guidelines;
•
Followingthe end of the Brexit transition period on 31 December 2020, UK insurers are no longer directly subject to regulation
under the EU’s Solvency II. The UK government launched a review into the European Union’s Solvency II framework in October 2020
which has resulted in divergence between the UK and EU regulatory regimes in 2021. Increasing divergence cannot be ruled out
going forward which could further impact the UK capital ratio;
•
Inthe US, the NAIC periodically updates various prudential requirements. The NAIC is currently updating the risk-based capital
(‘RBC’) charges for mortality risk and is embarking on a project to reconsider the RBC treatment of structured investments. These
initiatives or other regulatory changes to capital factors may lead to higher risk-based capital requirements. In addition, the NAIC
has constructed a US group capital calculation (‘GCC’) using an RBC aggregation approach that would be used by regulators as a
monitoring tool. The results of the GCC could impact the translation of RBC in the Group capital ratio for the United States; and
•
Aegonutilizes affiliated captive insurance companies to manage risks of various insurance policies issued before the adoption
of principle-based reserves, including universal life with secondary guarantees and level term life insurance. These structures have
been utilized to finance regulatory reserves. To the extent that state insurance regulations restrict or require insurers to restate the
valuation of the assets used to finance these structures, this could increase costs or reduce available capital.
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 Group and/or its regulated subsidiaries
to maintain their desired credit ratings.
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, reference is made to the section ‘Regulation
and supervision’ of Aegon’s Integrated Annual Report 2021.
Political or other instability in a country or geographic region, could adversely affect Aegon’s international business activities
and it’s financial condition.
Political developments such as, foreign investment restrictions, civil unrest, geopolitical tensions, or military action, and new or evolving
legal and regulatory requirements on business investment, hiring, migration, and global supply chains could have an adverse effect
on Aegon’s businesses, results of operations, financial condition and liquidity in many ways, including disruption to our business
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operations in countries experiencing geopolitical tensions as well as increased costs associated with meeting customer needs in such
regions, and impediments to Aegon’s ability to execute strategic transactions.
Changes in accounting standards may affect Aegon’s reported results of operations and shareholders’ equity.
Aegon’s financial statements are prepared and presented in accordance with EU-IFRS. Any future changes in these accounting
standards may have a significant impact on Aegon’s reported results of operations, financial condition, shareholders’ equity and
dividend. This includes the level and volatility of reported results of operations 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 – Financial Instruments and IFRS 17 – Insurance Contracts.
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 2017and issued amendments to the standard in June 2020.
Both IFRS 9 and IFRS 17 were endorsed by the European Union, except that the endorsement of IFRS 17 included an optional carve-
out regarding the grouping of policies for certain contracts. For Aegon, both standards will apply across the group for reporting periods
beginning on or after January 1, 2023.
An implementation project was started soon after the publication of the new accounting standards. It is expected that the impact
of the initial application on Aegon’s financial statements will be significant.
Local statutes, regulators, and decisions of supervisory and other authorities may limit the ability of Aegon’s subsidiaries to
pay dividends to Aegon N.V., thereby limiting Aegon’s ability to make payments on debt obligations and operating expenses.
Aegon’s ability to make payments on debt obligations and pay operating expenses is dependent upon the receipt of dividends
from subsidiaries, in particular, but not limited to, the operating companies in the US, the Netherlands, and the UK. Most of these
subsidiaries are subject to regulatory restrictions that can limit the payment of dividends. In addition, local regulators in the countries
where Aegon operates, supervisory and other authorities (such as EIOPA or the European Systemic Risk Board) may decide to impose
or advise on further restrictions to dividend payments, or discourage such payments, specifically in exceptional and unpredictable
economic circumstances. This may affect Aegon’s ability to satisfy its debt obligations or pay its operating expenses.
Risks of application of intervention measures may adversely affect Aegon’s business, results of operations and financial
condition.
The Dutch Act on Recovery & Resolution for Insurers (‘R&R Act’) allows DNB to intervene in situations where a Dutch insurer
or reinsurer is faced with financial difficulties. The powers under the R&R Act may also extend to the level of the Group and to entities,
in addition to insurance or reinsurance entities in the Netherlands, which are part of the Group, such as Aegon N.V.
In addition, the R&R Act allows DNB to require a Dutch insurance or reinsurance company or a group to remove, ex ante, material
impediments to effective resolution of a Dutch insurance or reinsurance undertaking (such as the revision of financing arrangements,
the reduction of exposures, the transfer of assets, the termination or limitation of business activities, or the prohibition on starting
certain business activities, changing the legal or operational structure of the Group, or securing certain critical business lines). The use
of this tool may adversely affect Aegon’s business, results of operations and financial condition.
In September 2021, the European Commission published a formal proposal for a European Insurance Recovery & Resolution
Directive, which will introduce minimum standards at European level for recovery & resolution frameworks in EU member states,
such as the Dutch R&R Act. This might lead to the introduction of intervention tools, largely similar to those included in the R&R Act,
in other EU member states in which Aegon’s subsidiaries are active.
Furthermore, to parts of the Aegon Group, in particular Aegon Bank N.V., the framework of the EU Directive on the recovery and
resolution of credit institutions and investment firms (the ‘Bank Recovery and Resolution Directive’) is applicable. The Bank Recovery
and Resolution Directive contains provisions that where both Aegon Bank N.V. and Aegon N.V. fail or are likely to fail, could be applied
to mixed financial holding companies such as Aegon N.V., including the right of bail-in of creditors.
Lastly, when the stability of the financial system is threatened by the condition of a financial institution the Dutch Minister of Finance
may intervene immediately, in which case legal or statutory provisions, applicable to the financial institution, might be superseded.
The intervention measures available to the Minister of Finance include, in particular, the right to expropriate assets of the financial
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institution, as well as securities and/or other financial instruments issued by or with the cooperation of the financial institution.
The exercise of this power may significantly impact the rights of the owners or holders of these assets, securities and/or financial
instruments.
There is a risk that the possible exercise of powers, or any anticipated exercise of powers, by DNB or the Ministry of Finance could have
a material adverse effect on the performance by the failing institution, including Aegon, of its obligations (of payment or otherwise)
under contracts of any form, including the expropriation, write-off, write-down or conversion of securities such as shares and debt
obligations issued by the failing institution. The R&R Act and the regime of the Bank Recovery and Resolution Directive are described
in the section ‘Regulation and supervision’ of Aegon’s Integrated Annual Report 2021.
Legal and Compliance
The outcome of legal and arbitration proceedings and regulatory investigations and actions may adversely affect Aegon’s
business, results of operations and financial condition.
Aegon faces significant risks of litigation as well as regulatory exams and investigations and actions relating to its and its subsidiaries’
businesses. Aegon is also subject to compliance with regulations applicable to it as a corporate entity.
Insurance companies and their affiliated regulated entities are routinely the subject of litigation, investigation and regulatory activity
by various governmental and enforcement authorities, individual claimants, and policyholder advocate groups in the jurisdictions
in which Aegon does business, including the United States, the Netherlands, and the United Kingdom. These actions may involve issues
including, but not limited to, employment or distribution relationships; operational and internal controls and processes; investment
returns; sales practices; claims payments and practices; transparency and adequacy of product disclosures including regarding initial
costs, ongoing costs, and costs due on policy surrender as well as changes to costs over time; environmental and climate change
related matters; competition and antitrust matters; data privacy; information security; and intellectual property.
Aegon entities are subject to anti-money laundering laws and regulations, including EU, US and UK laws and regulations and these
require Aegon to develop and implement customer identification and risk-based anti-money laundering programs, report suspicious
activity, and maintain certain records. Further, Aegon entities are required to adhere to certain economic and trade sanctions programs,
including EU, US, UK and UN programs, that prohibit or restrict transactions with suspected persons, governments, and in certain
circumstances, geographies. Changes in, or violations of, any of these laws or regulations may require additional compliance procedures,
or result in enforcement proceedings, sanctions or penalties, which could have a material adverse effect on Aegon’s businesses,
financial condition and result of operations.
Aegon entities are subject to anti-bribery legislation in the EU, the US and the UK and other jurisdictions. Any violations of these
or other anti-bribery laws by Aegon, its employees, subsidiaries or local agents, could have a material adverse effect on its businesses
and reputation and result in substantial financial penalties or other sanctions.
Government and regulatory investigations may result in the institution of administrative, injunctive, or other proceedings and/
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.
The existence of potential claims may remain unknown for long periods of time after the events giving rise to such claims. Determining
the likelihood of exposure to Aegon and the extent of any such exposure may not be possible for long periods of time after Aegon
becomes aware of such potential claims. Litigation exposure as well may develop over long periods of time; once litigation is initiated,
it may be protracted and subject to multiple levels of appeal, which can lead to significant costs of defense, distraction, and other
constraints.
In some jurisdictions, plaintiffs may seek recovery of very large or indeterminate amounts under enhanced liability legal theories
or claims of bad faith, which can result in tort, punitive and/or statutory damages. Damages allegedmay 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 business.
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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 condition. 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 litigations 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. Aegon’s subsidiary in the US has settled two such class
actions in the US District Court for the Central District of California. The settlement in the first of these cases, approved in January
2019, arose from increases implemented in 2015 and 2016. Over 99% of affected policyholders participated in that settlement. While
less than 1% of policyholders opted out of the settlement, they represented approximately 43% of the value of the settlement fund.
In the second case, Aegon’s subsidiary agreed to settle a class action lawsuit arising out of MDR increases in 2017 and 2018. The court
approved that settlement on September 16, 2020. Opt-outs in this case represent less than 7% of the value of the settlement
fund. The settlement fund was reduced proportionally for opt outs. In 2021, settlements were reached with some of the opt-
out parties from both settled class actions. The remaining opt-out cases and disputes are ongoing, and Aegon continues to hold
a provision for the remaining opt-outs from the settlements that were approved by the court in 2019 and 2020. If this provision for
these cases proves to be insufficient, then these cases could have an adverse effect on Aegon’s business, results of operations, and
financial condition.
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 Transamerica subsidiaries and 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 the Netherlands, unit linked products (beleggingsverzekeringen) have been controversial and the target of litigation since 2005.
Allegations include excessive cost, unfair terms, inadequate disclosure, and failure to perform as illustrated. Consumer groups have
formed to address these issues and initiate mass claims against insurers. Regulators as well as the Dutch Parliament have been
involved ever since, with the principal goal of achieving an equitable resolution. Aegon has made improvements across its product
lines, including after settlements reached in 2009 with Stichting Woekerpolis and Stichting Verliespolis. Aegon also decided to reduce
future policy costs for the large majority of its unit-linked portfolio. Some of the unit linked products are still involved in ongoing
litigation. In September 2014, the 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 (and revised in December 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. This court decision has been appealed by both parties. The Court of Appeal has
stayed the class action proceedings during the preliminary proceedings at the Supreme Court in another class action of Vereniging
Woekerpolis.nl against another insurance company. On February 11, 2022, the Supreme Court ruled in these preliminary proceedings.
The answers to the preliminary questions regarding transparency and consent about costs and cost levels are a (re)confirmation
of the EU Court ruling in a previous case against another Dutch insurance company. The legal debate will now continue at the level
of the Court of Appeal, Aegon expects the uncertainty about the possible impact to continue for the foreseeable future. Aegon expects
the claims and litigation, whether collective or on an individual basis and in court or through alternative dispute resolution mechanisms,
on unit linked products to continue for the foreseeable future. Developments in similar cases against other Dutch insurers currently
before regulators and courts may also affect Aegon.
Lawsuits have also been brought against providers of securities leasing products (aandelenlease producten). Although sales
of securities leasing products ended more than a decade ago, litigation relating to these products has resurfaced.
In December 2020, Aegon reached an agreement on a settlement with Leaseproces B.V. for claims regarding Vliegwiel and Sprintplan
customers represented by Leaseproces. Execution of the settlement is expected to be finalized in 2022. There are still individual
claims pending.
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 condition. For additional information on proceedings in which Aegon
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is involved, reference is made to the notes to the consolidated financial statements, note 45 ‘Commitments and contingencies’
of Aegon’s Integrated Annual Report 2021.
Changes in government regulations in the jurisdictions in which Aegon operates may affect profitability and operating models.
Aegon’s regulated businesses, such as insurance, banking, and asset management, are subject to comprehensive regulation and
supervision. The primary purpose of such regulation is to protect clients of these operating companies (e.g. policyholders), rather
than holders of Aegon shares, capital securities and debt instruments. Changes in existing laws and regulations may affect the way
in which Aegon conducts its businesses, including its relationship with distributors of its products and other third parties and
the structure of its relationship with employees. These changes may evolve over time and be open to interpretation through judicial and
enforcement action. Such changes may also affectthe profitability of its businesses and the products it offers. Additionally, the laws
or regulations adopted or amended from time to time may impose greater restrictions on Aegon’s financial flexibility and operations
or may result in higher costs to operate than currently is the case, including but not limited to financial and accounting requirements;
information security, data privacy, transfer, storage, and usage requirements; modeling and other actuarial requirements and standards;
investments, reserves, and financial management.
Aegon may not be able to comply fully with, or obtain appropriate exemptions from, the wide variety of laws and regulations applicable
to its businesses and legal entities. Failure to comply with or to obtain appropriate exemptions under any applicable laws and
regulations may result in restrictions on Aegon’s ability to do business in one or more of the jurisdictions in which Aegon operates and
may result in fines and other sanctions, which may have a material adverse effect on Aegon’s businesses, financial condition or results
of operations.
Certain key regulatory proposals that could materially impact Aegon’s financial condition and results of operations include
the European Commission’s proposal for amendments to the Solvency II framework, following the Solvency II 2020 review
and the European Commission’s proposal for an Insurance Recovery & Resolution Directive. Both proposals serve (inter alia)
as the implementation of the IAIS Holistic Framework for Systemic Risk in the Insurance Sector in the European Union and to some
extent the IAIS Common Framework for the supervision of internationally active insurance groups (‘ComFrame’).
Regulatory changes include preventive and corrective supervisory measures that aim to address macro-prudential concerns, referred
to in the Holistic Framework for Systemic Risk in the Insurance Sector, as adopted by the IAIS in November 2019 and recently
in the European Commission’s proposal to amend the Solvency II Directive in the context of the Solvency II 2020 review, which includes
macro-prudential tools, as well as in the European Commissions’ proposal for an Insurance Recovery & Resolution Directive.
In addition, regulatory changes may include measures that are addressed specifically to certain types of insurers or groups, in particular
larger and internationally active groups. 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. In Europe, such additional standards would
be introduced through the Solvency II framework.
Aegon was designated a Global Systemically Important Insurer (‘G-SII’)by the FSB in 2015. The FSB, in consultation with the IAIS,
has decided to suspend G-SII identification as from the beginning of 2020 and in November 2022 will, based on the initial years
of implementation of the holistic framework, review the need either to discontinue or re-establish an annual identification of G-SIIs.
On May 12, 2020, DNB announced, in line with expectations due to Aegon’s former designation as a G-SII, that it has identified Aegon
as one of the two IAIGs in the Netherlands, based on the size and international activities of the Aegon group. Although generally
large insurance groups are subject to a high level of supervisory scrutiny by DNB, thus far no requirements have been introduced
in the Netherlands or by DNB that have specifically been targeted at IAIGs.
The implementation of ComFrame and the holistic framework, as well as other requirements aimed to address macro-prudential
or concerns or concerns related to its capacity as internationally active group, may cause Aegon to engage in transactions that affect
capital or constrain Aegon’s ability to pay dividends or repurchase its own shares. Furthermore, such requirements may constrain
Aegon’s ability to provide guarantees and increase the cost to Aegon of offering certain products resulting in price increases, leading
to the 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.
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As referred to above, the Solvency II 2020 review covers a broad range of topics of the Solvency II framework. Aegon, at Group
level is, and Aegon’s EU insurance subsidiaries are, subject to the Solvency II framework. If the European Commission’s Directive
proposal is taken over by the European co-legislators without material changes, and depending on the scope of further amendments
to the Solvency II Delegated Regulation, the related technical standards and EIOPA guidelines (that might be necessary as a
consequence of changes to the Solvency II Directive), the amendments to the Solvency II framework may have a significant impact
on the activities, profitability and financial condition of Aegon and Aegon’s subsidiaries in the European Union.
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 adverse 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 Transamerica’s supplemental health insurance products business. The extent of any such changes
or the corresponding impact on Transamerica’s supplemental health insurance business cannot be determined at this time.
On June 5, 2019, the SEC adopted Regulation Best Interest (Regulation BI), a new rule requiring broker-dealers and investment advisers
to recommend only those financial products to their customers that are in their customers’ best interest, and to clearly identify
any potential conflicts of interest and financial incentives the broker-dealer may have in connection with the sale of such products.
In addition, since the Department of Labor (‘DOL’)Fiduciary Rule was vacated in July 2018, several states have moved forward with
developing their own similar rules and proposals, which in some instances substantially broaden the standard of care traditionally owed
by broker-dealers and/or insurance agents to their clients. The Biden Administration and the DOL have indicated an interest in revisiting
fiduciary-related issues but have not yet made any proposals.
The foregoing regulations and proposed regulations, along with any future regulations by the federal government and/or states that
impose new, heightened, conflicting or differing standards of care or restrictions on broker-dealers, insurance agents, or advisers, could
have a material impact on annuity sales and, as applicable, life insurance sales.
Changes
in pension and employee benefit regulation, social security regulation, financial services regulation, taxation and the regulation
of securities products and transactions, and regulation of employee workplace standards may adversely affect Aegon’s ability to sell
new policies or claims exposure on existing policies.
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 implemented them. Federal ERISA law raises questions
as to whether such plans are pre-empted by ERISA.
In general, changes in laws and regulations may materially increase Aegon’s direct and indirect compliance costs and other ongoing
business expenses and have a material adverse effect on Aegon’s businesses, results of operations or financial condition.
Aegon may not be able to meet evolving ESG standards and requirements, or may fail to meet its sustainability and
ESG-related goals and targets.
Increasingly, companies, including insurance companies, asset managers and banks are expected and/or required to disclose the extent
to which their activities and products, including their investments and the activities of the companies they invest in, meet ESG
standards. These requirements and standards are continuously and rapidly evolving and have not yet crystalized. While Aegon strives
to meet applicable ESG standards to the best of its abilities, it may not be successful in doing so, due to the dynamic nature and
evolution of these standards and might not be able to anticipate in all respects the further evolution of such standards. This may have
an impact on its reputation, products and sales, as well as on its activities and investments, including long term investments.Aegon
may face additional costs in the event it’s efforts do not meet expectations. Aegon has adopted certain sustainability and ESG-
related goals, targets and metrics, including greenhouse gas emissions reduction and diversity and inclusion targets and other
sustainability initiatives. If Aegon cannot meet these goals fully or on time, the Company may face reputational damage, litigation
or unexpected costs.
Tax risks may have a material adverse effect on Aegon’s businesses, profits, capital position, and financial condition.
Aegon is subject to the substance and interpretation of tax laws in all countries in which Aegon operates or invests. The majority
of tax risks relate to both Aegon’s products and its businesses, that would materialize due to (i) changes in tax laws, (ii) changes
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in interpretation of tax laws, (iii) later jurisprudence or case law, or (iv) the introduction of new taxes or tax laws. These tax risks include
for example the risk of changes in tax rates, changes in loss carry-over rules and changes in customer taxation rules.
Tax risks also include the risk of consequences arising from failure to comply with procedures required by tax authorities. Failure
to manage tax compliance risks could potentially leads to inaccurate, incomplete, or untimely tax returns. Materialization 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.
Most of Aegon’s insurance products enjoy certain policyholder tax advantages. This permits, for example, the build-up of earnings
on gross premium amounts with deferred taxation, if any, when the accumulated earnings are actually paid to Aegon’s customers.
Legislators have, from time to time, considered legislation that may make Aegon’s products less attractive to consumers, including
legislation that would reduce or eliminate this deferral of taxation. This may have an impact on insurance products and sales.
Overall, tax risks may have a material adverse effect on Aegon’s businesses, profits, capital position, and financial condition.
Judgments of US courts may not be enforceable against Aegon in Dutch courts.
There is no treaty between the United States and the Netherlands providing for the reciprocal recognition and enforcement
of judgments (other than arbitration awards) in civil and commercial matters. Judgments of US courts, including those predicated
on the civil liability provisions of the US federal securities laws, may not be enforceable in Dutch courts. Therefore, Aegon’s investors
that obtain a judgment against Aegon in the United States may not be able to require Aegon to pay the amount of the judgment unless
a competent court in the Netherlands gives binding effect to the judgment, or, if possible, the US investor has brought a successful
original action in a Dutch court. Therefore, investors are required to undertake more action in order to enforce a US court judgment
than in relation to any US counterparty.
Aegon may not manage risks associated with the reform and replacement of benchmark rates effectively.
Aegon recognizes that the reform of Interbank Offered Rates (‘IBORs’)and any transition to replacement rates entail risks for all
it’s businesses across it’s assets and liabilities. These risks include, but are not limited to:
•
The EUR 2 billion syndicated revolving credit facility and the USD 2 billion LOC facility have been updated in order to prepare for the
cessation of the relevant benchmark rates;
•
Financial risks, arising from any changes in the valuation of financial instruments linked to benchmark rates, such as derivatives and
floating rate notes, issued by, or invested in by Aegon;
•
Pricing risks, as changes to benchmark indices could impact pricing mechanisms on some funding instruments or investments;
•
Operational risks, due to the potential requirement to adapt informational technology systems, trade reporting infrastructure and
operational processes; and
•
Conduct risks, relating to communication regarding potential impact on Aegon’s customers, and engagement during the
transition period.
The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates London Interbank Offered Rate (“LIBOR”), has
announced that the publication of LIBOR on the current basis would cease and no longer be representative immediately after December
31, 2021 (in the case of all sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month USD settings) and
immediately after June 30, 2023 (in the case of all remaining USD settings). Despite this deferral in regard to USD, the FCA has
confirmed that use of USD LIBOR will not be permitted in most new contracts after December 31, 2021 and while the FCA is requiring
the LIBOR administrator to publish one-, three- and six-month sterling and Japanese yen LIBOR rates for a limited time following
December 31, 2021 using a synthetic methodology, such synthetic LIBOR rates are also only permitted for legacy use. If the methods
of calculating LIBOR change from their current form while Aegon continues to rely on LIBOR, or if Aegon adopts alternative benchmarks
for it’s current or future debt, interest rates on it’s debt obligations may be adversely affected.
Various supranational institutions, central banks, regulators, benchmark administrators and industry working groups play a role
in the benchmark reform and the preparation for the replacement of IBORs.Although a lot of work has been done, there is still
significant uncertainty around liquidity development, and mechanisms for implementation, including the change of methods
of calculating LIBOR from its original form,application of spread adjustments to the alternative reference rates. Accordingly, it is
not currently possible to determine whether, or to what extent, any such changes would affect Aegon. However, the implementation
of alternative reference rates may have a material adverse effect on Aegon’s business, financial condition, customers, and operations.
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Risk factors Aegon N.V.
Aegon may not be able to protect its intellectual property and may be subject to infringement claims.
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 material adverse effect on Aegon’s businesses, results of operations, financial condition
and Aegon’s ability to compete and pursue future business opportunities. As a result of any proceeding in which Aegon would have
to defend itself against a claim of infringement of a third-party’s intellectual property, Aegon may be required to pay damages and
provide injunctive relief, which may have a material adverse effect on Aegon’s businesses, results of operations and financial condition.
Risks relating to Aegon’s common shares
Aegon’s share price could be volatile and could drop unexpectedly, and investors may not be able to resell Aegon’s common
shares at or above the price paid.
The price at which Aegon’s common shares trade is influenced by many factors, some of which are specific to Aegon and
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 results of operations;
•
Announcements of intended acquisitions, disposals (and related approvals or refusals from governmental or regulatory authorities)
or financings, or speculation about such acquisitions, disposals (and related approvals or refusals from governmental or regulatory
authorities) or financings;
•
Changes in Aegon’s dividend policy, which may result from changes in Aegon’s cash flow and capital position;
•
Offering of additional shares by Aegon or 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.
Aegon and its significant shareholders may offer additional common shares in the future, and these and other sales may
adversely affect the market price of the outstanding common shares.
Aegon may decide to offer additional common shares in the future, for example, to strengthen Aegon’s capital position in response
to regulatory changes or to support an acquisition.
An additional offering of common shares by Aegon, the restructuring of Aegon’s share capital, the sales of common shares
by significant shareholders, or the public perception that an offering or such sales may occur, may have an adverse effect on the market
price of Aegon’s common shares.
Vereniging Aegon, Aegon’s major shareholder, holds a large percentage of the voting shares and therefore has significant
influence over Aegon’s corporate actions.
Vereniging Aegon holds 32.6% of Aegon’s voting shares. For details on the shareholding of Vereniging Aegon, its developments,
the Amended 1983 Merger Agreement and the Voting Rights Agreement, please see the section Major shareholders on pages 298
through 300 of the 2021 Integrated Annual Report.
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Risk factors Aegon N.V.
Following the 1983 Amended Merger Agreement between Aegon N.V. and Vereniging Aegon, Vereniging Aegon has a call
option on common shares B, which Vereniging Aegon may exercise to keep or restore its total stake at 32.6%, irrespective
of the circumstances which cause the total shareholding to be or become lower than 32.6%.
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 1/40 of the financial rights attached to a common share.
The Voting Rights Agreement between Aegon N.V. and Vereniging Aegon ensures that under normal circumstances, i.e. except
in the event of a Special Cause, Vereniging Aegon will no longer be able to exercise more votes than is proportionate to the financial
rights represented by its shares. This means that in the absence of a Special Cause, Vereniging Aegon will cast one vote for every
common share it holds and one vote only for every 40 common shares B. It is at the sole discretion of Vereniging Aegon if a Special
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.
Currency fluctuations may adversely affect the trading prices of Aegon’s common shares and the value of any cash
distributions made.
Since Aegon’s common shares listed on Euronext Amsterdam are quoted in euros and Aegon’s common shares listed on NYSE New York
are quoted in US dollars, fluctuations in exchange rates between the euro and the US dollar may affect the value of Aegon’s common
shares. In addition, Aegon declares cash dividends in euros, but pays cash dividends, if any, on Aegon’s New York registry Shares
in US dollars based on an exchange rate set the business day following the shareholder meeting approving the dividend. As a result,
fluctuations in exchange rates may affect the US dollar value of any cash dividends paid.
Perpetual Contingent Convertible Securities (or other securities that permit or require Aegon to satisfy its obligations by
issuing common shares) that Aegon may issue could influence the market price for Aegon’s common shares.
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% 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; (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, extraordinary dividends or stock dividends, 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.
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Non-financial information
About Aegon Governance and risk management Financial information
Non-financial information
349
Non-financial
information
2021
350 Basis of preparation
350 Reporting process for non-financial data
350 Reporting scope
350 Defining content
352 Integration and monitoring
352 Key performance indicators
353 Policies and procedures
357
Regulation
357 EU Non-Financial Reporting Directive (NFRD)
359 EU Taxonomy Regulation
363 Frameworks and initiatives
363 Reporting standards (<IR> Framework)
364 Global initiatives (UNGC, SDGs, TCFD)
379 Sector-specific initiatives (PSI, IRBC)
382 Value created
382 Customers
383 Employees
386 Business partners
387 Investors
388 Society
393 External recognition
394 Disclaimer
396 Contact
Non-financial information
TOC 6
TAB - Non-financial information
TOC-6
Basis of preparation
This Integrated Annual Report (IAR) is prepared in accordance
with the International Financial Reporting Standards (IFRS),
as adopted by the European Union, as well as the Integrated
Reporting Framework (<IR> Framework) of the International
Integrated Reporting Council (IIRC). Aegon has used the <IR>
Framework since 2014.
Introduction
This non-financial information section is specifically designed
to evidence and support Aegon’s overarching approach
to sustainable value creation. Our value creation approach
is introduced in detail under the section
‘Ae
gon in 2021/ Our strategy and value creation’ (pages 16-34). We use the six
capitals (financial, manufactured, intellectual, human, social
and relationship, and natural) as defined by the <IR> Framework
to communicate how our strategy, governance, and performance
create and protect value in the short, medium, and long term
for our key stakeholder groups. Accordingly, the section ‘Value
Created’ (page 382) is organized based on the value Aegon
creates for its main stakeholder groups, namely its customers,
employees, business partners, investors and society.
This non-financial information part of the IAR also contains
information related to our commitments to various global and
sector-specific sustainability initiatives such as the UN Global
Compact (UNGC), the UN Sustainable Development Goals
(SDGs), the Task Force on Climate-related Financial Disclosures
(TCFD), and the UN Principles for Sustainable Insurance (PSI),
as well as information required by regulatory authorities
such as the EU Non-Financial Reporting Directive (NFRD) and
the EU Taxonomy Regulation.
Reporting process for non-financial data
The non-financial metrics detailed in this section of the IAR
cover the full calendar year 2021, unless otherwise stated.
Explanatory notes and definitions are provided as footnotes
to the accompanying stakeholder tables under the section
‘Value created’ (page 382).
The aggregated data has been reviewed by dedicated subject
matter experts at Aegon and approved by Aegon’s Management
and Supervisory Boards before publication.
The non-financial information in this report has not been subject
to external audit or review.
In 2021, Aegon initiated a process to enhance its sustainability
reporting, with the aim to ensure Aegon’s ability to adapt
to changing mandatory and voluntary reporting requirements.
This entails integrating financial and non-financial data collection
and reporting processes to leverage the expertise of the Group
Finance function. This will ensure our readiness for limited
assurance on non-financial reporting as required from 2023
under the forthcoming Corporate Sustainability Reporting
Directive (CSRD) of the European Union. For more information
on CSRD, please refer to section ‘Regulation and compliance’
(pages 357-362).
Reporting scope
The scope of non-financial data reported in this section is all
entities over which Aegon has management control. Divested
businesses (of which closings are finalized by year end), or joint
ventures and associates are excluded from the scope unless
otherwise stated. The table 'Reporting scope by operating
segment' provides an overview of the scope of non-financial data
included in this section of the report, for each of our operating
segments. In some cases, the scope does not apply to certain
operating segments, and this is indicated in the table.
While the data presented covers the operating segments
illustrated in the table below, the data collection for our
‘Operational footprint’ focuses on our largest operations,
namely in the United States, the Netherlands, and the United
Kingdom. Based on this data (which covers approximately 81%
of our employees), by means of extrapolation, we report on our
operational footprint covering all our operating segments.
Defining content
This section of the IAR contains non-financial information
that is deemed important either to Aegon’s stakeholders or
to Aegon. To determine the content that is disclosed in this
section of the IAR, Aegon applies the principle of 'materiality'.
The <IR> Framework defines materiality as “A matter is material
if it could substantively affect the organization’s ability to create
value in the short, medium or long term”.
Non-financial information disclosed in this section of the report
focuses on information related to topics Aegon believes have,
or will have, a significant long-term impact on its profitability,
operations, strategy, reputation, brand, customer loyalty and
recruitment; and as well as on the environment and society
at large. In determining materiality, we take into account
numerous wide-ranging factors of significance for Aegon
and its stakeholders. Another input for identifying material
topics are the stakeholder expectations raised through various
communication channels. Moreover, we take into account
topics that have gained prominence in the reporting year
as well as material environment, social and governance (ESG)
topics that we disclose to various sustainability performance
benchmarks (page 393).
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Non-financial information
Basis of preparation
Basis of preparation
Basis of preparation
Reporting scope by operating segment
Indicator topics by stakeholder Operating segment
United States
Netherlands
United Kingdom
International
Asset Management
Holding and others
Customers
Number of customers
● ● ● ● ●
–
Customer satisfaction
● ● ●
– –
Complaints
● ● ● ●
– –
Fines and settlements
● ● ● ● ● ●
Claims, benefits and plan withdrawals
● ● ● ● ●
–
Employees
Workforce
● ● ● ● ● ●
Inclusion and diversity
● ● ● ● ● ●
Recruitment and retention
● ● ● ● ● ●
Health and safety
● ● ● ● ● ●
Training and development
● ● ● ● ● ●
Employee engagement
● ● ● ● ● ●
Remuneration
● ● ● ● ● ●
Business partners
Brokers and intermediaries
● ● ● ● ●
–
Reinsurers
● ● ● ● ●
–
Goods and services
● ● ●
● ●
Investors
Corporate governance
● ● ● ● ● ●
Financial returns
●
Society
Responsible investment
● ● ● ● ● ●
Investment footprint
● ● ● ● ●
–
Tax transparency
● ● ● ● ● ●
Community investment
● ● ● ● ● ●
Compliance
● ● ● ● ● ●
Operational footprint
● ● ● ● ● ●
●
reported
not reported
–
not applicable
For each topic listed in the table above, we have identified
a number of underlying and supporting non-financial indicators.
The tables under the section ‘Value Created’ (page 382) provide
our performance data related to these topics, broken down
by the relevant non-financial indicator.
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Basis of preparation
Key performance indicators Stakeholder group supported Description and purpose
Customer Satisfaction
1)
Customers To ensure customer satisfaction in each of our core markets
(measured in NPS) is in line with or above the average of those of
our peers.
Employee Engagement
2)
Employees
To ensure a 70% employee engagement score for 2022, measured
through our Global Employee Survey.
Gender Diversity
3)
Employees To ensure 36% female representation amongst our senior
management for 2022.
Net-Zero Emissions
4)
Society To ensure at least 25% reduction in weighted average carbon
intensity of our corporate fixed income and listed equity
investments by 2025.
1 Customer satisfaction is measured in benchmarked Net Promoter Score
(SM)
(NPS®), and is based on the question: ‘How likely are you to recommend
Aegon/Transamerica to a friend or colleague?” It is a single, easy-to-understand metric that predicts overall company growth and customer lifetime value.
Customers answer based on a 0-10 scale, where those answering 9 or 10 are deemed ‘promoters’, those answering 7 or 8 are ‘passive’, and 6 to 0 are
‘detractors’. NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. On an annual basis, we measure the NPS
of our core markets (the Netherlands, the United Kingdom, and the United States) and compare findings against peers in each local market. To achieve this,
each core market worked with local research experts who specialize in NPS benchmarking:
•
NL: In partnership with Ipsos, the aggregated gap to market average score has been calculated as a weighted average of the gaps to market average of
the various lines of business in active markets in the Netherlands. Weights are based on the number of contracts in each business line.
•
UK: In partnership with Respondi, the required market sample size was obtained from a group of panel participants. The Aegon score was taken from
Aegon UK's own NPS survey using the same questionnaire. The gap to market score is calculated as the difference between the Aegon NPS and the average
NPS of all active brands in the market as established by the external research partner.
•
US: In partnership with Qualtrics, the required sample size was collected through an external consumer panel for both the Life and Retirement businesses.
The aggregated gap to market average is calculated by weighting the gaps to market average for Life and Retirement. Weights are based on the number of
contracts for each product.
•
In the Netherlands, the competitive set used per line of business for the survey consisted of 25 brands (life), 37 brands (pension schemes), 22 brands
(savings), 30 brands (P&C), 27 brands (mortgages)
•
In the UK, the competitive set used for the survey consisted of 10 brands (pension providing peers)
•
In the United States the competitive set per line of business used for the survey consisted of 25 brands (life) and 19 brands (retirement)
2 Employee engagement is measured on a five-point scale (strongly disagree to strongly agree), and it is the average score of four statements:
•
“The company motivates me to go beyond expectations”
•
“I am proud to work for this company”
•
“I see myself still working at this company in two years' time”
•
“I would recommend this company as a great place to work”
engagement surveys were conducted throughout the year (Q1, Q2 and Q3), where the participation rate for the most recent one was 77%.
3 In this context, senior management includes our Management Board and extends up to two levels below the Management Board (depending on the number
of employees in each business or country unit).
4 Aegon will set targets on its General Account investments in line with membership requirements of the Net-Zero Asset Owner Alliance, following five-year
increments of increasing ambition toward achieving net-zero greenhouse gas emissions by 2050. For details on the methodology used, please see our TCFD
disclosure (Methodology) on page 378.
Integration and monitoring
As introduced in 'Our strategy and value creation' (page16),
in 2021 we took steps to further embed sustainability
as a central pillar within our company strategy. Guided by our
purpose, we aim to create long-term value for our stakeholders
through the integration of sustainability in our strategy.
We have identified climate change and inclusion and diversity
as two strategic sustainability priorities that are particularly
critical issues, and they will guide our sustainability agenda
in the years to come.
Key performance indicators
In line with our company strategy, we have identified key
performance indicators to measure our non-financial
performance, two of which align directly with the priority themes.
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Integration and monitoring
Integration and monitoring
Integration and monitoring
Policies and procedures
As a company, Aegon is committed to doing business responsibly.
We have internal policies, procedures and frameworks setting
out how decisions should be made in areas such as procurement,
investment, tax, product development, remuneration and
information security. Aegon also has a Code of Conduct, which
applies to all employees worldwide. The aim of these policies and
procedures is to protect stakeholders by ensuring we are aware
of all relevant financial and non-financial factors in our decision-
making. We monitor implementation and take remedial action
where necessary to ensure full compliance.
The Aegon website includes a dedicated library for our
ESG
policies
.The following table demonstrates the incorporation
of sustainability themes into Aegon’s decision-making processes
through specific policies and statements, and provides
an overview of the outcomes and our performance against
the indicators underpinning them.
The following table shows how various sustainability topics are
incorporated into Aegon’s decision-making processes, as well
as relevant policies and statements and the outcomes as a result
of the actions taken.
Topics Policy / Statement Indicators
(used to monitor compliance
and/or outcomes)
Outcome / Performance 2021
Business conduct
and ethics
Code of Conduct
Externally published document prescribing
amandatory set of conditions for how Aegon
employees should conduct business, comply with
all applicable laws and regulations, and exercise
sound judgment in reaching ethical business
decisions in the long-term interests of our
stakeholders. Training on the Code of Conduct is
mandatory for all employees). Aegon also has
the Speak Up program, allowing employees and
third parties to report suspected illegal or
unethical behavior in confidence.
•
Total number of incidents of
fraud involving employees,
intermediaries, and third parties
•
Incidents of possible fraud involving
employees, intermediaries and third
parties: 889 (2020: 4,014).
•
Significant fines (in excess of
EUR 100,000) to address cases
of mis-selling.
•
No significant fines were imposed
(2020: EUR 8.2 million).
•
Proportion of employees
completing mandatory training
on the Code of Conduct.
•
98% of employees completed
mandatory Code of Conduct
training (2020: 97%).
1)
Anti-Bribery & Corruption
In addition to the Code of Conduct, Aegon has
internal, globally applicable policies addressing
the prevention of financial crime (fraud, money
laundering, economic sanctions), including our
dedicated Anti-Bribery and Corruption policy.
•
Policy attestation for
Anti-Bribery and Corruption
policy
•
87% compliance with Aegon
Anti-Bribery and Corruption Policy
(2020: 86%).
2)
Conflict of Interest
In addition to the Code of Conduct, Aegon has
internal, globally applicable policies addressing
the prevention of financial crime (fraud, money
laundering, economic sanctions), including our
dedicated Conflict of Interest policy.
•
Policy attestation for Conflict of
Interest policy
•
98% compliance with Conflict of
Interest Policy (2020: 86%).
2)
Community
investment
Charitable Donations Standards
Externally published set of standards covering
Aegon’s objectives with regard to community
investment, including key themes ('financial
security and education' and 'well-being and
longevity'), selection criteria, governance and
approval. The Standards also detail Aegon’s
contribution to humanitarian aid.
•
Cash donations to charities and
other good causes.
•
Cash donations totaled EUR
9.4million (2020: EUR 9.5 million).
•
Allocation of more than 50% of
annual cash donations to the
key themes.
•
Proportion of cash donations to
priority areas amounted to 81%
(2020: 92%).
•
Employee volunteering time for
to charities and other good
causes.
•
Volunteering totaled 6,806 hours
with a value of EUR 0.3 million
(2020: 4,399 hours with a value
ofEUR 0.2 million).
•
Total value of community
investment
•
Total value of community
investment amounted to
EUR9.7million and 0.6% of our
net result (2020: EUR 9.7 million
and 17.6% of our net result).
1 A rate of (mandatory) completion less than 100% reflects new hires and legitimate circumstances where employees have not yet been through the annual cycle.
2 Prior to 2021, compliance with Aegon anti-bribery and corruption policies was expressed as combined metric of the separate Aegon Conflict of Interest and
Aegon Gift & Entertainment policies. The latter has since been incorporated into a new unified Aegon Anti-bribery and Corruption policy. As such, there is not
acomplete like-for-like comparison of 2021 performance with previous years. Compliance with the Aegon Conflict of Interest is now reported separately as
adistinct item, backdated to 2019 on a like-for-like basis.
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Integration and monitoring
Topics Policy / Statement Indicators
(used to monitor compliance
and/or outcomes)
Outcome / Performance 2021
Data protection
Global Information Security Policy
Internal policy overseen by the Global Chief
Information Security Officer, setting out the
company’s approach to cyberthreats and data
protection. The policy applies to all Aegon
businesses worldwide (including all units,
entities or joint ventures where Aegon has
operational control) and is supported by
mandatory training in data and cyber security.
•
Maintenance of an internal
ITControl Framework, and
actionitems to address gaps in
performance are documented
and monitored.
•
Institutions such as Aegon will
continue to remain subject to
information security attacks.
ToAegon’s knowledge, the
cyber-security attacks and events
itexperienced in 2021 were not
material in nature.
•
The internal IT Control
Framework is regularly mapped
and updated to embed new and
updated market standards.
•
Periodic attestation to the
internal IT Control Framework,
with certain exceptions as
applicable by country unit, for
among other reasons adequate
implementation timelines.
Inclusion and
Diversity
Statement on Inclusion & Diversity
Externally published statement setting out
Aegon’s approach to inclusion and diversity to
creating an environment where our employees
can bring their authentic selves to work.
Thestatement incorporates our commitment
toenabling this through our actions and
inclusive policies. The statement applies to
allAegon businesses worldwide.
Aegon UK also publishes its annual
Gender Pay
Gap Report
as required by the UK Equality Act
2010 (Gender Pay Gap Information)
Regulations2017.
•
Balanced representation of
women in senior management.
•
Against a target of 34% for 2021,
women accounted for 34% of
Aegon's senior management
(2020: 32%)
•
Balanced representation of
women across Aegon's
workforce.
•
Women accounted for 50% of
Aegon’s workforce (2020: 50%)
•
Employee perception of key
themes from the Statement
arealso tracked in the Global
Employee Survey.
•
New benchmark set in 2021, based
on updated question sets in the
Survey. On ‘Openness & Inclusion’
74% of participants scored favorably,
and on ‘Diversity & Equity’ 72% of
particpants scored favorably.
Environment
Environmental Policy
Externally published policy outlining how Aegon
seeks to minimize the negative impacts of its
direct business operations on the environment
whilst maximizing opportunities for
performance improvement.
1)
•
Commits Aegon to using
renewable or sustainable sources
of energy where possible.
•
Fuel (gas) consumption:
27,288MWh (2019: 30,002 MWh)
•
Electricity consumption:
49,863MWh (2019: 83,249 MWh)
•
Proportion of renewable electricity
consumption: 99% (2019: 98%)
•
Renewable electricity generated
on-site 24 MWh (2019: 28 MWh)
•
Renewable energy as a proportion
of total energy consumption: 64%
(2019: 72%)
•
Commits Aegon to assessing the
impact of air travel.
•
Total distance traveled:
16,3million km (2019: 103.4
million km)
•
Travel class as proportion of
totaldistance: Economy 87%,
Premium13%
•
Route type as proportion of
totaldistance: <500km 3%,
>500km 97%
•
Commits Aegon, to annually
reporting environmental impacts
and activities and monitoring
progress against targets.
•
Total (gross / location-based)
GHGemissions 24,024 metric tons
(2019: 52,536 metric tons).
•
Reduction in total (gross /
location-based) GHG emissions
on2019 target baseline: 54%
1 In line with the net-zero commitment announced in November 2021, Aegon has set a supporting GHG reduction target to reduce the carbon footprint of its
operational activities by 25% by 2025. While some of these reductions can be traced to our initiatives to stimulate hybrid working – there has also been a
temporary benefit from fewer employees in the office due to the COVID-19 pandemic, which we expect to reverse over time.
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Non-financial information
Topics Policy / Statement Indicators
(used to monitor compliance
and/or outcomes)
Outcome / Performance 2021
Human rights
Statement on Human Rights
•
Externally published statement designed to
frame Aegon's ongoing stewardship of human
rights, including both the direct impacts of
ourdaily operations as well as the indirect
impacts of our business activities. Based on
the UN Declaration of Human Rights, core
standards of the International Labor
Organization (ILO), and the principles of the
UN Global Compact. The statement commits
Aegon to upholding international human
rights standards at all businesses where the
company has sufficient management control
and, where possible, to ensure partners
uphold the same standards.
•
Consideration for human rights is built into
Aegon’s Responsible Investment Policy,
Vendor Code of Conduct and Statement on
Inclusion & Diversity. Other company policies
also cover aspects of human rights, including:
- Code of Conduct
- Speak Up
- Anti-bribery and corruption
- Conflict of Interest
- Employment Screening
- Anti-money laundering
- Sanctions
- Anti-fraud
- Distribution Risk management
- Third Party Risk management
•
Aegon UK also issues a modern slavery
statement (in line with the UK government's
2015 Modern Slavery Act)
•
Results of Aegon’s biennial
global Human Rights Risk
Assessment (conducted
internally and based on external
sources
1)
. The assessment scores
Aegon’s countries against a
combination of 10 publicly
available indicators:
- Civil and political rights
- Corruption
- Human development
- Health coverage
- Business environment
- Illicit economy
- Gender development
- Working conditions
- Rule of law
- Internet inclusion
•
Our most recent assessment
(2020) identified four ‘Aegon’
countries where the operating
environment presents a meaningful
human rights risk:
- China
- India
- Indonesia
- Turkey
•
These risks relate essentially to
outside political factors. In the
United States, the Netherlands and
the United Kingdom, Aegon faces
little or no significant human rights
risk. In Central and Eastern Europe,
the environment is potentially more
difficult, particularly with regard to
corruption. In the Americas, risk is
concentrated in Brazil. Again, this
relates mainly to corruption.
•
For those countries with the highest
risk, Aegon has recommended
preventative or remedial measures
for local management
2)
focusing on
indicators where Aegon has the
greatest potential to minimize the
human rights faced by the company.
The aim of these measures is to
ensure Aegon's overall human rights
risk remains low.
Investment
Responsible Investment Policy
Externally published policy acting as the basis
for how our assets should be managed
consistently with our responsible business
objectives and relevant laws and governance
standards. It is applicable to all of our
proprietary assets globally, regardless of
country of operation or whether they are
managed by Aegon business units or externally.
Local business units within Aegon may
implement additional mechanisms to further
identify, manage and mitigate ESG risks, within
the context of local norms and stakeholder
expectations.
The policy covers all major asset classes and
sets out minimum social and environmental
standards for Aegon’s investments that
incorporates exclusions in areas including
controversial weapons, tobacco, Arctic or oil
sands production and transportation and
thermal coal.
The policy also incorporates a commitment to
net-zero emissions, to ensure the reduction in
the weighted average carbon intensity of the
company’s investment portfolio is aligned with
its net-zero ambitions.
•
Total investments in responsible
investment solutions (RIS)
•
Our responsible investment
solutions totaled EUR 177.7 billion
at the end of 2021
•
Companies engaged with as part
of Aegon’s approach to
responsible investment
•
In 2021, 38% of our engagements
addressed corporate governance
matters, including corruption,
remuneration, and board structure.
Social issues addressed included
health and well-being (opioids,
drug price increases and meat
sourcing), and human rights (UN
Global Compact principles 1 & 2).
Climate change (GHG emission
reduction) and pollution were
topics most commonly discussed
inengagements concerning the
environment. Of our engagements
related to social themes, 27% of
those were related to human
rightsissues.
•
Weighted average carbon
intensity of the company’s
investment portfolio
•
In 2021, the weighted average
carbon intensity of our corporate
fixed income and listed equity
investments remained flat at
490metric tons CO
2
e/EURm
revenue), no change on 2019.
Atthe end of 2021, our business
units ensured our new commitment
was captured in their investment
mandates, as a first step towards
our net-zero commitment.
1 The methodology for Aegon's Human Rights Risk Assessment is derived from the UN Declaration of Human Rights. The assessment uses publicly available
data from 10 non-governmental organizations specializing in human rights and which have a reputation for conducting fair and appropriate assessments.
These organizations include Freedom House, Transparency International, UN Development Program, the World Bank and the World Health Organization.
2 These remedial measures include effective access to Speak Up, raising employees' awareness of human rights risk, ensuring basic healthcare and financial
services for employees, suggesting alternative employee representation where there is no independent trade union, ensuring neutrality at times of regime
change and enforcing a zero tolerance approach to corruption and discrimination in the workplace.
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Topics Policy / Statement Indicators
(used to monitor compliance
and/or outcomes)
Outcome / Performance 2021
Procurement
Vendor Code of Conduct
The externally published Vendor Code of
Conduct contains the standards for the business
relationship between Aegon and its vendors in
order to enable Aegon manage the most
material business conduct, social and
environmental risks (also referred to as
sustainability risks) associated with its
procurement of goods and services. The code
sets the standards for the business relationship
between Aegon and its vendors to enable
Aegon to manage the most material environ-
ment, social and governance (ESG) risks
associated with our procurement of goods and
services under the following categories:
- Corporate governance
- Human rights
- Labor rights and good health and well-being
- Climate change and biodiversity
Aegon requires its vendors to comply with the
Code and assesses the ESG-related performance
of those vendors against its standards.
•
Top 250 suppliers by spend
(in-scope suppliers) scored for
ESG performance through the
EcoVadis rating platform.
•
Spend with 'in-scope' suppliers
comprised 86% of overall
procurement spend in 2021
(2020:85%)
•
By the end of 2021, 59% of
Aegon's 'in-scope' spend had been
assessed for ESG performance
through the implementation of the
EcoVadis rating platform
(2020:56%)
Occupational
health and safety
Global Health & Safety Statement
Externally published statement committing
Aegon to provide and maintain high health
andsafety standards across all its business
units worldwide, outlining our objectives
andexpectations.
•
Aim to limit absentee rate to an
absolute minimum.
•
Employee absenteeism: 1.7%
(2020: 1.7%)
Product
development
Pricing and Product Development Policy
Internal policy setting out market conduct
principles, aimed at ensuring fair treatment of
customers and reasonable distribution of
returns between customers, intermediaries and
shareholders.
•
Policy attestation for terms of
Pricing and Product Development
Policy
•
97% compliance with Pricing and
Product Development Policy
(2020: 93%)
Remuneration
Global Remuneration Framework
Internal framework, detailing the company’s
approach to pay. The Framework is based on
theprinciple of pay for performance, setting
down the principles of governance covering
both fixed and variable pay. On variable pay,
remuneration for Aegon executives and other
senior management is based on both financial
and non-financial performance metrics
(including employee engagement and customer
loyalty scores).
•
Policy attestation for terms of
the Global Remuneration
Framework
•
95% compliance with requirements
of the Global Remuneration
Framework (2020: 95%)
1)
Tax
Global Tax Policy and Principles of Conduct
Externally published policy outlining Aegon's
approach to responsible taxpaying, which seeks
to align the long-term interests of all our
stakeholders, including customers, employees,
business partners, investors, and wider society.
Aegon seeks to pay ‘fair taxes’, which means
paying the right amount of tax in the right places.
•
Applying global tax reporting
standards that support public
disclosure of the company’s tax
policies and tax contributions on
a country-by-country basis.
•
Annual Aegon Global Tax Report
2)
•
Total taxes borne by Aegon:
EUR 381 million
(2020: EUR 319 million)
•
Taxes collected on behalf of others:
EUR 2.41 billion
(2020: EUR 2.51 billion)
1 The assessment of compliance against the Global Remuneration Framework was limited to our largest business units only (Aegon NL, Aegon UK and Transamerica).
2 Developed in accordance with the GRI 207: Tax standard of GRI Sustainability Reporting Standards, and which provides Aegon’s tax contributions on
acountry-by-country basis.
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Regulation
Regulation and compliance
The importance of non-financial factors in underpinning long-
term financial value creation is widely recognized. This includes
the identification and mitigation of aspects of economic activities
that erode non-financial value, as well as the identification of,
and capitalization on, opportunities to create value.
Reflecting this understanding, there is a clear and increasing
global trend of capital allocation toward economic activities that
manage non-financial value most effectively.
Around the world, governments are passing regulation to drive
transparency in the non-financial value aspects of any given
economic activity, for better-informed risk assessment and
decision-making in the allocation of financial capital. For
example, the EU Sustainable Finance Disclosure Regulation
(SFDR) is driving more transparency regarding how financial
market participants and financial advisors integrate sustainability
risks into their investment decisions or insurance advice. Financial
market participants should disclose information on those
procedures and descriptions and the impact of sustainability
risks on the performance of the financial products. To do so
they need sustainability-related information about their investees
(companies). This is why the European Union has been developing
two other key pieces of legislation, namely the Corporate
Sustainability Reporting Directive (CSRD) and the EU Taxonomy.
The CSRD and EU Taxonomy aim to ensure that investees
report on these topics, so financial institutions can use this
information in return. The 2021 reporting year is the first step
in the implementation of the EU Taxonomy. For more information
on the EU Taxonomy please refer to the section ‘EU Taxonomy
Regulation’ on page 359.
EU Non-Financial Reporting Directive (NFRD)
Non-financial reporting has been a regulatory requirement
for Aegon since the implementation of EU Directive 2014/95/
EU on non-financial reporting, hereafter referred to as
the EU Non-Financial Reporting Directive, for the 2018 reporting
year. The NFRD requirements, applicable to Aegon N.V. are
included in article 29a of Directive 2013/34/EU (Accounting
Directive). In the Netherlands, article 29a of the Accounting
Directive is implemented in Dutch law, on the basis of article 391
of Book 2 of the Dutch Civil Code in the Decree on the contents
of the management report (
Besluit inhoud bestuursverslag
), in the Decree on the establishment of further provisions
on the content of the Annual Report (
Besluit tot vaststelling
van nadere voorschriften omtrent de inhoud van het jaarverslag
)
and in the Decree on the publication of non-financial information
(
Besluit bekendmaking niet-financiële informatie
).
The NFRD requires ‘large companies’ such as Aegon to disclose
information regarding the way they operate and manage social
and environmental challenges. More specifically, it requires
companies to report on social, employee and environmental
matters, human rights, bribery and anti-corruption, as well
as information on board diversity. Information on board diversity
is included in the diversity section of
Aegon’s Corporate
Governance Statement
(page 17).
On the basis of the above-mentioned Decrees, Aegon is required
to publish non-financial information in a (consolidated)
non-financial statement. To this end, the table below
details the disclosures required, additionally referencing
the corresponding requirement of the NFRD itself and
the corresponding requirements in the Dutch decrees.
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Regulation
Regulation
Regulation
Regulation
EU Non-Financial Reporting Directive
(NFRD) requirement
1)
Reference (IAR 2021) Equivalent requirement
under Dutch law
2)
Brief description of company’s business model
Our strategy and value creation (pages 16-34)
Value creation (pages 24-25)
Decree non-financial information
(article 3.1.a)
Description of the policies relating to
environmental
matters (including due
diligence processes implemented)
Sustainability (page 20-23)
Table under ‘Policies and Procedures’ (pages 353-356)
Decree non-financial information
(article 3.1.b)
The outcome of these policies
Sustainability (pages 20-23)
Sharing value with our stakeholders (pages 26-32)
Table under ‘Policies and Procedures’ (pages 353-356)
Tables under ‘Value Created’:
Business partners/Goods and services, (page 386)
Society/ Investment footprint, and Operational footprint
(pages 388-392)
Description of the policies relating to
social
and employee
matters (including due diligence
processes implemented)
Sustainability (pages 20-23)
Table under ‘Policies and Procedures’ (pages 353-356)
Decree non-financial information
(article 3.1.b)
The outcome of these policies
Sustainability (pages 20-23)
Sharing value with our stakeholders (pages 26-32)
Table under ‘Policies and Procedures’ (pages 353-356)
Tables under ‘Value Created’:
Employees/Inclusion and diversity, Recruitment and
retention, Health and safety, Training and development
and Engagement (pages 383-385)
Business partners/Goods and services (page 386)
Society/Responsible investment, Tax transparency,
Community investment (pages 388-392)
Description of policies relating to
respect
for human rights
(including due diligence
processes implemented)
Sustainability (pages 20-23)
Table under ‘Policies and Procedures’ (pages 353-356)
Decree non-financial information
(article 3.1.b)
The outcome of these policies
Table under ‘Policies and Procedures’ (pages 20-23)
Sharing value with our stakeholders (pages 26-32)
Tables under ‘Value Created’:
Employees/Inclusion and diversity, Health and safety, and
Engagement (pages 383-385)
Business partners/Goods and services (page 386)
Society/Responsible investment (pages 388-392)
Description of policies relating to
anti-
corruption and bribery
matters (including
due diligence processes implemented)
Code of Conduct (page 88)
Table under ‘Policies and Procedures’ (pages 353-356)
Decree non-financial information
(article 3.1.b)
The outcome of these policies
Sharing value with our stakeholders (pages 26-32)
Table under ‘Policies and Procedures’ (pages 353-356)
Tables under ‘Value Created’:
Business partners/Goods and services (page 386)
Society/Responsible investment, and Compliance (pages
388-392)
Decree non-financial information
(article 3.1.b)
Description of the principal risks with regard
to environmental, social and employee matters,
respect for human rights, and the fight against
corruption and bribery; and, how these risks
are managed
Our business environment (pages 8-13)
Our purpose (pages 14-15)
Our strategy and value creation (pages 16-34)
Business environment scan (page 10)
Risk management (pages 73-77)
Risk factors Aegon N.V. (pages 326-348)
Task Force on Climate-related Disclosures (pages 372-378)
Decree non-financial information
(article 3.1.c)
Non-financial key performance indicators
relating to environmental, social and employee
matters, respect for human rights, and the
fight against corruption and bribery
Performance in 2021 (pages 33-34)
Sharing value with our stakeholders (pages 26-32)
Table under ‘Policies and Procedures’ (pages 353-356)
Tables under ‘Value Created’:
Employees/Inclusion and diversity, Recruitment and
retention, Health and safety, Training and development,
and Engagement (pages 383-385)
Business partners/Goods and services (page 386)
Society/Responsible investment, Investment footprint,
Tax transparency, Community investment, Compliance,
and Operational footprint (pages 388-392)
Decree non-financial information
(article 3.1.d)
Diversity of the Management Board and
Supervisory Board
Diversity section of
Aegon’s Corporate Governance
Statement
(page 17).
Tables under ‘Value Created’:
Employees/Inclusion and diversity (pages 383-385)
Investors/Corporate Governance (page 387)
Decree content of the
management report (article 3a)
1 As included in the EU Accounting Directive
2 The EU Non-Financial Reporting Directive was transposed into Dutch law through two decrees relating respectively to non-financial information and diversity
policy (
Besluit bekendmaking niet-financiële informatie
/Besluit Bekendmaking diversiteitsbeleid
, included in the Besluit tot vaststelling nadere voorschriften
omtrent de inhoud van het jaarverslag
).
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Regulation
About Aegon Governance and risk management Financial information
Non-financial information
EU Taxonomy Regulation
The EU Taxonomy Regulation has been adopted by the EU
in 2021 and is one of the cornerstones of the EU Action
plan on financing sustainable growth. The EU taxonomy is a
classification system to define environmentally sustainable
economic activities, based on the following criteria:
•
Substantially contributing to one of the six EU environmental
objectives:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and
marine
resources
- Circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
•
Doing no harm to any of the other objectives, and
•
Meeting minimum safeguards, including OECD Guidelines
for Multinational Enterprises and the UN Guiding Principles
on Business and Human Rights
For each of the six environmental objectives, delegated acts
are being developed at EU level. Thus far, one delegated act for
two objectives, climate change adaptation and climate change
mitigation, has been finalized and is in effect. The delegated acts
concerning the other four environmental objectives are expected
to be published by the EU during 2022. Related eligibility
disclosures are expected to follow in our IAR 2022.
Article 8 of the EU Taxonomy Regulation
Article
8 of
the EU Taxonomy Regulation requires undertakings
to report how and to what extent the undertaking
’
s activities are associated with economic activities that qualify as environmentally
sustainable.
The requirements are applicable for undertakings
which are subject to an obligation to publish non-financial
information
in accordance with the NFRD, such as Aegon N.V.
The information should be included
in the
non-financial statement or consolidated non-financial statement i
nformation.
Article
8 of
the EU Taxonomy Regulation aims to ensure that
large public-interest entities (such as Aegon) report on these
topics,
so financial institutions and other stakeholders can use
this information in return
.
The 2021 reporting year is the
first step in the
implementation of article 8 of
the EU Taxonomy
Regulation.
EU Corporate Sustainability Reporting Directive
From January 1, 2024, the Corporate Sustainability Reporting
Directive (CSRD) is expected to replace the NFRD and
as mentioned under section ‘Reporting process for non-financial
data’ on page 350, at Aegon we are preparing internally for this
change. The CSRD will require companies, including Aegon N.V.,
to include in their management report information necessary
to understand their impacts on sustainability matters, and how
sustainability matters affect their development, performance
and position, including the information that they are required
to disclose pursuant to article 8 of the Taxonomy Regulation.
The EU Taxonomy is linked to the CSRD. While the EU Taxonomy
is currently focused on environmental objectives only, the CSRD
will set sustainability standards based on a broader, ESG+,
definition. We expect that the CSRD will adopt an integrated
perspective to reporting and that disclosures should cover
key performance indicators around ESG matters and other
‘intangibles’ or value creators.
Disclosure of EU Taxonomy-eligible economic activities
and investments
In the IAR 2021, Aegon must disclose the proportion
of Taxonomy-eligible economic activities and investments related
to climate change mitigation and climate change adaptation
only. When estimates and proxies are used, disclosures under
Article 8 of the Taxonomy Regulation may not be classified as
‘mandatory’ and should be classified as ‘voluntary’.
To assess the eligibility of our investments, we are often
dependent on the information provided by our investees.
In many cases, this information is not yet available. Therefore,
we have used alternative methods and estimates which
we describe below under ‘Assumptions and data limitations’.
These investments are included in the voluntary disclosures.
Only for our underwriting activities and investments in mortgage
loans and real estate is actual information currently available
to assess eligibility. Therefore, these investments and activities
form the mandatory disclosures. The distinction between
‘mandatory’ and ‘voluntary’ disclosures is explicitly mentioned
in the EU Taxonomy tables below.
‘Eligible’ means that an economic activity is described in one
of the delegated acts as mentioned above, irrespective of
whether that economic activity meets any or all of the technical
screening criteria laid down in those delegated acts to qualify
as sustainable. ‘Alignment’ means that an eligible economic
activity meets the technical screening criteria to qualify
as sustainable. Aegon N.V. needs to disclose the alignment of
its economic activities in its IAR 2023.
Scope of assets and activities covered by the EU
Taxonomy disclosures
Aegon’s EU Taxonomy performance indicators are split between
underwriting activities and on-balance investments.
Investments
To calculate the proportion of Taxonomy-eligible investments,
the total of covered investments is used as the denominator,
which includes General Account investments, investments
in accounts of policyholders, derivatives and real estate for own
use. The total covered assets in proportion to the total balance
sheet is 82% (EUR 385 billion out of EUR 469 billion).
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Regulation
We also include in the covered assets, on a voluntary basis,
investments in undertakings that are not obliged to publish non-
financial information, unless the data is not available to assess
Taxonomy-eligibility. This includes investments in companies
established outside the EU.
Own activities
The underwriting disclosure includes an assessment of all non-
life business as prescribed by the EU Taxonomy. Non-life business
only relates to the EU Climate Change Adaptation objective,
as these products can significantly contribute to the protection
of policyholders for the negative impact of climate change, but
do not contribute to the Climate Change Mitigation objective.
We have only classified non-life activities as eligible when
there is a reference in the policy conditions to one or more
of the climate-related perils as defined by the EU Taxonomy
Climate Delegated Act (such as storm, flood, cold wave/frost, or
drought). We have assessed that this is applicable to our motor
vehicle, other motor and property insurance. As a consequence,
we have classified our medical expense, income protection and
worker’s compensation insurance products as non-eligible.
The Taxonomy Regulation allows different methods to measure
the total premium of eligible products. The total premium
of eligible products can be calculated at line of business level,
product level or coverage level. Aegon takes a product-level
approach, which means that the total gross written premium
of all eligible products is taken into account.
Assumptions and data limitations
To determine the eligibility of our investments in 2021 we used
publicly available sector information (referred to as NACE codes),
collected by an external data vendor to map the investments
in shares, debt securities and part of our private loans to
the EU Taxonomy. We have measured eligible investments for
the full carrying amount. In the alignment phase in 2023 we will
use actual information from the underlying companies to assess
the alignment percentage, which will likely be lower than 100%
of the IFRS value for most investments.
Our mortgage and real estate portfolio are classified as 100%
eligible in line with the EU Taxonomy. We expect that not
all properties will meet the screening criteria in 2023,
which is in large part based on the energy label information
of the underlying properties. As a result, we expect that
the actual alignment of our mortgage and real estate portfolio
in 2023 will also be lower than 100%.
The eligibility assessment of our investment funds is more
difficult since we are dependent on external asset managers
to provide relevant sustainability information of the underlying
companies. For 2021 we have a data limitation to assess
the eligibility of our investment funds. As a result we have
classified these investments as non-eligible. This mainly impacts
the eligibility of Investments for account of policyholders.
For our 2021 disclosures we do not make a distinction between
the two climate objectives Climate Change Mitigation and
Climate Change Adaptation. For investments the distinction
becomes relevant in the alignment phase as the screening
criteria for Mitigation are different than those for Adaptation.
In the eligibility phase these categories are very similar and
the information to make a distinction is not yet available.
As mentioned above, non-life activities are all related
to ClimateChange Adaptation.
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About Aegon Governance and risk management Financial information
Non-financial information
EU Taxonomy underwriting Eligibility based on actual information
(mandatory disclosure)
Absolute premium
(EUR million)
% of non-life premium
Eligible non-life activities 270 13%
- Of which reinsured 13
Taxonomy-non-eligible 1,774 87%
Total premium non-life
2,044
EU Taxonomy investment (on-balance) Eligibility based on actual information
(mandatory disclosure)
Eligibility including estimates
(mandatory and voluntary disclosure)
Absolute value
(EUR million)
Percentage of
investments covered
Absolute value
(EUR million)
Percentage of
investments covered
Eligible investments (numerator) 44,015 11%
1)
59,471 15%
- Of which General Account investments 43,267 55,898
- Of which Investments for account
of policyholders
563
3,388
- Of which real estate for own use 185 185
Non-eligible investments (numerator) 320,555 83% 305,099 79%
Excluded from numerator only:
exposures to derivatives
8,827 2% 8,827 2%
Excluded from numerator only:
exposures to undertakings that are
not obliged to publish non-financial
information pursuant to Article 19a
or 29a of Directive 2013/34/EU and
data is not available
11,304 3% 11,304 3%
Total investments covered
(denominator)
384,701 384,701
Excluded from numerator and
denominator: exposures to central
governments, central banks and
supranational issuers
33,727 33,727
Total investments in scope 418,428 418,428
Which includes:
- Investments General Account 158,463 158,463
- Investments for account
of policyholders
250,953 250,953
- Derivatives 8,827 8,827
- Real estate for own use 185 185
1 The percentage of eligible investments of total investments is 11% (44,015/418,428) and over total assets is 9% (44,015/468,884)
Note: When estimates and proxies are used, disclosures under Article 8 of the Taxonomy Regulation may not be classified as ‘mandatory’ and should be classified
as ‘voluntary’. Only for our investments in mortgage loans and real estate, actual information is currently available to assess the eligibility. Therefore, these
investments form the mandatory disclosures.
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Regulation
Breakdown
of eligible
investments
Eligibility per investment class covered Eligibility determined
based on actual
information
(part of mandatory
disclosure)
Eligibility determined
based on estimates
(part of voluntary
disclosure)
Eligible
(abs
olute value)
(EUR million)
Total value
of investment
class covered
(EUR million)
Percentage
of investment
class covered
General Account
investments in scope:
- Shares 71 644 11% No
Yes
- Debt securities 10,595 62,956 17% No
Yes
- Mortgage loans 40,624 40,624 100%
Yes
No- Private loans 1,910 4,886 39% No
Yes
- Policy loans - 1,893 0% No
Yes
- Real estate 2,643 2,643 100%
Yes
No- Other
1)
55 5,681 1% No
Yes
Total eligible General
Account investments
(numerator)
55,898 119,326 47%
Investments for account
of policyholde
rs
in scope:
- Shares 2,155 15,604 14% No
Yes
- Debt securities 581 6,098 10% No
Yes
- Unconsolidated
investment funds
89 208,976 0% No
Yes
- Real estate 563 563 100%
Yes
No- Other
1)
- 6,344 0% No
Yes
Total eligible
investments for account
of policyholders
(numerator)
3,388 237,586 1%
Total eligible Real
estate assets for own
use (numerator)
185 185 100%
Yes
No1 Mainly includes deposits with financial institutions and money market funds which do not qualify for eligibility.
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Non-financial information
Frameworks and initiatives
Aegon uses various general and sector-specific global
sustainability frameworks and initiatives, both to align
with and to report its sustainability strategy, policies, and
performance against.
Reporting standards
As mentioned above, the Integrated Reporting <IR> Framework
of the International Integrated Reporting Council (IIRC)
1)
provides
the basis of preparation of this IAR.
The Integrated Reporting <IR> Framework
The table below shows Aegon’s compliance with the ‘Guiding
Principles’ and the ‘Content Elements’ of the <IR> Framework.
Disclosure Topic Page reference
2)
(or details of omissions if applicable)
Guiding
principles
Strategic focus and future orientation Our business environment (pages 8-13)
Our purpose (pages 14-15)
Our strategy and value creation (pages 16-34)
Sustainability (pages 20-23)
Connectivity of information
The topics mentioned in Our busines environment (pages 8-13) and Business
Environment Scan (page 12) are linked to risks and opportunities, which are
considered for Our strategy and value creation (page 18)
Stakeholder relationships Sharing value with our stakeholders (pages 26-32)
Materiality Basis of preparation (pages 350-351)
Conciseness Pages 1-34 are structured around our material topics, risks, opportunities
and strategy, as well as the performance and value associated with these.
We have also applied the materiality principle to define the content of
this IAR (pages 350-351)
Reliability and completeness Basis of preparation (pages 350-351)
Consistency and comparability This Integrated Annual Report (IAR) is prepared in accordance with
the International Financial Reporting Standards (IFRS), as adopted
by the European Union, as well as the Integrated Reporting Framework
(<IR> Framework) of the International Integrated Reporting Council (IIRC).
Aegon has used the <IR> Framework since 2014. We are making the shift
to integrating more material frameworks; like that of the Task Force
on Climate-related Financial Disclosures (pages 372-378).
Content
elements
Organizational overview and
external environment
About Aegon (pages 2-3)
Our business environment (pages 8-13)
Business Environment Scan (page 10)
Governance Corporate governance (pages 38-41)
Business model Value creation (pages 24-25)
Risk and opportunities Our business environment (pages 8-13)
Business Environment Scan (page 10)
Strategy and resource allocation Our strategy and value creation (pages 16-34)
Sharing value with our stakeholders (pages 26-32)
Performance Performance in 2021 (pages 33-34)
Value created (pages 24-25)
Outlook Our business environment (page 8-13)
Performance in 2021 (pages 33-34)
Basis of preparation and presentation Basis of preparation (pages 350-351)
1 In June 2021, the IIRC merged with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation (VRF).
2 All page numbers in this table refer to Aegon’s Integrated Annual Report 2021, unless otherwise stated. Where there are several examples, we have included
principal references only.
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Frameworks and initiatives
Frameworks and initiatives
Frameworks and initiatives
Frameworks and initiatives
Reporting standards (<IR> Framework)
Global initiatives
Aegon has signed up and committed to several non-sector
specific international initiatives, including the United Nations
Global Compact (UNGC), the UN Sustainable Development
Goals (SDGs), and the Task Force on Climate-related Financial
Disclosures (TCFD). These initiatives guide our internal
practices and policies, and help shape our overall approach
to sustainability.
United Nations Global Compact
In 2021, Aegon N.V. became a signatory of the UNGC, thereby
committing to implement universal sustainability principles
in the fields of human rights, labor, environment, and
anti-corruption,
as well as taking steps to support the UN goals;
currently the SDGs. As a signatory, Aegon is committed
to disclosing its progress annually. In addition to integrating
the measurement of the outcomes under the UNGC Principles
into our annual reporting cycle, we have detailed Aegon's policies
and procedures to support each Principle and of how we align
and implement them. For measured outcomes against the SDGs,
please see ‘United Nations Sustainable Development Goals’
on pages 367-371. The Aegon website includes a dedicated
library for our
ESG policies
. See also pages 353-356 ‘Non-financial policies, procedures and outcomes’ for an overview
of our performance against the indicators of these policies.
UNGC Principles Policy and implementation
Human Rights
1. Businesses should support
and respect the protection
of internationally proclaimed
human rights; and
Aegon’s Statement on Human Rights commits the company to upholding international
human rights standards at all businesses where Aegon has sufficient management control
and, where possible, to ensure partners live up to the same standards. Consideration for
human rights is also built into Aegon's Code of Conduct, Aegon’s Responsible Investment
Policy, Vendor Code of Conduct, and Aegon’s Statement on Inclusion and Diversity.
We have committed to several global initiatives to support the development of human
rights, including the UN Declaration of Human Rights, the core labor and human rights
standards of the International Labor Organization (ILO) and UNEP-FI's Principles for
Sustainable Insurance (PSI).
2. make sure that they are not
complicit in human rights abuses.
Aegon’s Statement on Human Rights commits the company to upholding international
human rights standards. Consideration for human rights is also built into Aegon's Code
of Conduct, Aegon’s Responsible Investment Policy, Vendor Code of Conduct and
Aegon's Statement on Inclusion and Diversity.
We carry out a biennial Human Rights Risk Assessment, through which we aim to identify,
prevent, and mitigate adverse human rights impacts that may be linked to our operations,
products, and services.
Labor
3. Businesses should uphold
the freedom of association and
the effective recognition of the right
to collective bargaining;
Aegon adheres to local laws regarding the freedom of association and the right
to collective bargaining. For example, freedom of association and effective recognition
of the right to collective bargaining are covered under the Aegon N.V. Responsible
Investment Policy and the Aegon N.V. Vendor Code of Conduct.
4. the elimination of all forms
of forced and compulsory labour;
Aegon's Statement on Human Rights commits the company to upholding international
human rights. Consideration for human rights, and more specifically those related to forced
and compulsory labor, is also built into Aegon’s Responsible Investment Policy and Vendor
Code of Conduct.
In line with our Responsible Investment Policy and Framework, we engage with our
portfolio companies on issues related to human rights, including those related to forced
and compulsory labor.
In line with our Vendor Code of Conduct, we score our suppliers for sustainability
performance through the EcoVadis rating platform, which covers forced and
compulsory labor.
CONTINUED >
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About Aegon Governance and risk management Financial information
Non-financial information
Global initiatives (UNGC, SDGs, TCFD)
UNGC Principles Policy and implementation
5. the effective abolition
of child labour; and
Aegon's Statement on Human Rights commits us to upholding international human
rights. Consideration for human rights, and more specifically those related to effective
abolition of child labor, is also built into Aegon’s Responsible Investment Policy and Vendor
Code of Conduct.
In line with our Responsible Investment Policy and Framework, we engage with our
portfolio companies on issues related to human rights, including those related to forced
and compulsory labor.
In line with our Vendor Code of Conduct, we score our suppliers for sustainability
performance through the EcoVadis rating platform, which covers effective abolition
of child labor.
6. the elimination of discrimination
in respect of employment
and occupation.
Aegon's Statement on Human Rights commits us to upholding international human
rights standards. Consideration for human rights, and more specifically those related
to elimination of discrimination in respect of employment and occupation, is also built into
Aegon's Code of Conduct, Aegon’s Responsible Investment Policy, Vendor Code of Conduct,
and Aegon's Statement on Inclusion and Diversity.
Aegon considers certain human rights fundamental and universal for its workforce.
All Aegon employees are educated on the company's Code of Conduct and acknowledge
that they will abide by these standards.
In line with our Responsible Investment Policy and Framework, we engage with
our portfolio companies on issues related to human rights, including those related
to discrimination.
Our Vendor Code of Conduct sets clear expectations for our vendors, which are subject
to due diligence and monitoring procedures as per the Third Party Risk Management Policy.
Environment
7. Businesses should support
a precautionary approach
to environmental challenges;
As an insurance company, Aegon can support the transition to a climate-resilient economy
and a net-zero world using both sides of our balance sheet. We finance the upside
through our investment activities, while helping to mitigate the downside by managing
our operational carbon footprint and risk management processes, and the savings and
protection solutions we provide. The influence, both positive and negative, that we can
have as an investor is particularly significant, and Aegon has committed to transitioning
our General Account investment portfolio to net-zero GHG emissions by 2050.
As an office-based company serving the financial sector, Aegon does not operate energy
and resource-intensive processes as part of its business operations, for example those
typical of manufacturing industries, and is not aware of any incidents relating to these
activities impacting the natural environment. Energy consumption at our office buildings
makes up by far the largest portion of our energy use, followed by our data centers.
Our business operations have been carbon-neutral since 2019, which has been achieved
by substituting our energy consumption with renewable sources and offsetting our
remaining carbon emissions. In line with the net-zero commitment announced in November
2021, Aegon has set a supporting operational greenhouse gas emission reduction target
to reduce the carbon footprint of its operational activities by 25% by 2025 from a 2019
baseline. Energy consumption at our office buildings makes up by far the largest portion
of our energy use, followed by our data centers. and while our own operational footprint
as a business is relatively small, it is important that we set a good example.
CONTINUED >
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Frameworks and initiatives
UNGC Principles Policy and implementation
8. undertake initiatives
to promote greater environmental
responsibility; and
I
n line with our Responsible Investment Policy, through our investments, we encourage
the development and diffusion of technologies that offer solutions to environmental issues,
including those which reduce GHG emissions. With our net-zero commitment, we will engage
with carbon-intensive investee companies to drive real-world reductions
i
n emissions.
9. encourage
the development and
diffusion of environmentally friendly
technologies.
In line with our Responsible Investment Policy, through our (impact) investments,
we encourage the development and diffusion of technologies that offer solutions
to environmental issues, including those which reduce GHG emissions.
Anti-corruption
10. Businesses should work against
corruption in all its forms, including
extortion and bribery.
Aegon’s Code of Conduct sets out rules and guidelines that shape and govern the actions
of all our employees. It also commits us to complying with all legal and regulatory
requirements and to prevent insider dealing, corruption, and bribery.
In addition, in line with our Responsible Investment Policy and Framework, we engage with
our portfolio companies on issues related to governance, including anti-corruption.
In line with our Vendor Code of Conduct, we score our suppliers for sustainability
performance through the EcoVadis rating platform, which covers anti-corruption.
Aegon also has several relevant internal policies: Conflict of Interest Policy, Anti-Bribery
and Corruption Policy, Financial Crime and Corruption Risk Policy, Insider Dealing Policy.
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Non-financial information
United Nations Sustainable Development Goals (SDGs)
In 2015
,
the United Nations adopted 17 Sustainable Development Goals (SDGs). These goals cover poverty reduction, education,
gender equality, climate change and health. Accompanying each
of these goals is a series of targets and
indicators.
At Aegon, we are committed to supporting the UN SDGs, both
as a financial services provider and as an investor. We recognize
that sustainable development is in the long-term interest
of business and the global economy, but that a sustainable
future for people and the planet will not be attainable without
cooperation between the public and private sectors. Climate
change and inclusion & diversity have been selected as priority
themes in our sustainability vision, and as such our contributions
to the SDGs relating to these themes have been detailed most
comprehensively.
Sustainable Development Goal Aegon's contribution to relevant SDG targets in 2021 (examples)
1. No poverty
End poverty in all its forms
everywhere
1.4
By 2030, ensure that all men and women, in particular the poor and the vulnerable,
have equal rights to economic resources, as well as access to basic services, ownership
and control over land and other forms of property, inheritance, natural resources,
appropriate new technology and financial services, including microfinance.
•
Aegon UK has partnered with the Initiative for Financial Wellbeing and Edinburgh
University to launch the Financial Wellbeing Index, which helps advisors and
employee benefits consultants provide personalized, needs-based advice to
end-customers. (Strengthening engagement and trust, page 27)
•
As was the case in 2020, we prioritized helping our most vulnerable communities
navigate the COVID-19 pandemic and its economic consequences, with a specific
focus on people who needed help handling their finances. (Investing in our
communities, page 32)
1.5
By 2030, build the resilience of the poor and those in vulnerable situations and reduce
their exposure and vulnerability to climate-related extreme events and other
economic, social and environmental shocks and disasters.
•
Together with the Aegon Transamerica Foundation in the United States, Aegon
donated EUR 300,000 to support COVID-19 relief efforts in India. (Society,
Supporting COVID-19 relief efforts in India, page 31)
2. Zero hunger
To end hunger, achieve food
security and improved nutrition
and promote sustainable
agriculture
2.1
By 2030, end hunger and ensure access by all people, in particular the poor and
people in vulnerable situations, including infants, to safe, nutritious and sufficient
food all year round.
•
Aegon UK supports five schools in Edinburgh with breakfast clubs, which provide
children meals in the morning before school starts. (Aegon Integrated Annual
Report 2020,
A foundation for change
, page 5)3. Good health and well-being
Ensure healthy lives and promote
well-being for all at all ages
3.4
By 2030, reduce by one third premature mortality from non-communicable diseases
through prevention and treatment and promote mental health and well-being.
•
Aegon has developed a Future Ways of Working plan, covering most of Aegon's
global business units to help our people achieve a healthy and productive balance
between office-based and remote working. The approach is based on globally
agreed principles – hybrid working, office utilization and location, and employee
benefits – that are translated locally. (Employees, page 27, Introducing our hybrid
working model, page 28)
3.a
Strengthen the implementation of the World Health Organization Framework
Convention on Tobacco Control in all countries, as appropriate.
•
Aegon N.V. has excluded tobacco from its investments to help address health
concerns over smoking. (Policies and procedures, Aegon N.V. Responsible
Investment Policy, page 355)
4. Quality education
Ensure inclusive and quality
education for all and promote
lifelong learning
4.6
By 2030, ensure that all youth and a substantial proportion of adults, both men and
women, achieve literacy and numeracy.
•
In 2021 Aegon contributed EUR 1.6 million towards financial education and literacy
projects in the communities of our customers and employees. (Value created -
Society - Corporate citizenship, page 355)
5. Gender equality
Achieve gender equality and
empower all women and girls
5.1
End all forms of discrimination against all women and girls everywhere.
•
Aegon N.V. has explicitly incorporated the theme of 'Gender development' into its
biennial Human Rights Risk Assessment process. Consideration for gender equality
is incorporated into numerous Aegon policies including the Code of Conduct and
Aegon N.V. Responsible Investment Policy as a fundamental element of human
rights. (Policies and procedures, Aegon N.V. Statement on Human Rights, Aegon
N.V. Responsible Investment Policy, page 355)
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Frameworks and initiatives
Sustainable Development Goal Aegon's contribution to relevant SDG targets in 2021 (examples)
5. Gender equality (continued)
5.5
Ensure women’s full and effective participation and equal opportunities for leadership
at all levels of decision-making in political, economic and public life.
•
In June 2021, Aegon N.V. CEO Lard Friese pledged to the G20 EMPOWER (Alliance
for Empowerment and Progression of Women’s Economic Representation) Initiative.
(Inclusion and diversity, page 21)
•
Following Aegon surpassing its target for female representation in senior
management in 2020 (32% representation against a 30% target), a higher target
of 34% was set for 2021. Aegon reached this target by the end of the year, with
34% female representation. A renewed target of 36% has been set for 2022.
Sustainability, Inclusion and diversity, page 22)
5.c
Adopt and strengthen sound policies and enforceable legislation for the promotion
ofgender equality and the empowerment of all women and girls at all levels.
•
Aegon UK publishes its annual gender pay gap
report as required by the UK Equality
Act 2010 (Gender Pay Gap Information) Regulations 2017.
6. Clean water and sanitation
Ensure availability and sustainable
management of water and
sanitation for all
6.6
By 2020, protect and restore water-related ecosystems, including mountains, forests,
wetlands, rivers, aquifers and lakes.
•
The Aegon N.V. Responsible Investment Policy incorporates the company position
on biodiversity, which specifically covers management for availability of water
resources and their pollution. Furthermore, the Aegon N.V. Vendor Code of Conduct
sets the standards for the business relationship between Aegon and its vendors
in order to enable Aegon manage the most material ESG risks associated with our
procurement of goods and services, specifically including biodiversity. (Policies and
procedures, pages 355 and 356)
7. Affordable and clean energy
Ensure access to affordable,
reliable, sustainable and modern
energy for all
7.3
By 2030, ensure universal access to affordable, reliable and modern energy services.
•
Aegon the Netherlands has introduced a new 'green' mortgage to help people
finance energy-efficient home improvements. (2021 milestones, page 4, Enhancing
our propositions, page 26)
8. Decent work and economic
growth
Promote sustained, inclusive and
sustainable economic growth, full
and productive employment and
decent work for all
8.3
Promote development-oriented policies that support productive activities, decent job
creation, entrepreneurship, creativity and innovation, and encourage the formalization
and growth of micro-, small- and medium-sized enterprises, including through access
to financial services.
•
Knab, Aegon the Netherlands' digital banking platform provides entrepreneurs
with an extensive online library for topics related to finance and entrepreneurship
through their Knab Bieb. (Strengthening engagement and trust, page 27)
8.5
By 2030, achieve full and productive employment and decent work for all women and
men, including for young people and persons with disabilities, and equal pay for work
of equal value.
•
Aegon UK publishes its annual gender pay gap
report as required by the UK Equality
Act 2010 (Gender Pay Gap Information) Regulations 2017.
•
In the Netherlands, Aegon runs 'Silver Starters', a learning program for
entrepreneurs aged 50 and over.(Society - Adapting to the modern retirement
landscape, page 32)
8.7
Take immediate and effective measures to eradicate forced labour, end modern slavery
and human trafficking and secure the prohibition and elimination of the worst forms
of child labour, including recruitment and use of child soldiers, and by 2025 end child
labour in all its forms.
•
Aegon N.V. has explicitly incorporated the themes of forced and child labor into
its Statement on Human Rights and biennial Human Rights Risk Assessment
process. Consideration for these specific themes (and wider human rights concerns)
are also incorporated into numerous Aegon policies including the Code of Conduct,
Aegon N.V. Responsible Investment Policy and the Vendor Code of Conduct.
(Policies and procedures, Aegon N.V. Statement on Human Rights, Aegon N.V.
Responsible Investment Policy, Aegon N.V. Vendor Code of Conduct pages 353-356)
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Sustainable Development Goal Aegon's contribution to relevant SDG targets in 2021 (examples)
8. Decent work and economic
growth (continued)
8.8
Protect labour rights and promote safe and secure working environments for all
workers, including migrant workers, in particular women migrants, and those in
precarious employment.
•
Each year Aegon UK issues a modern slavery statement (in line with the UK
government's 2015 Modern Slavery Act). (Policies and procedures, Aegon N.V.
Statement on Human Rights, page 355)
•
Aegon employees in the Netherlands are covered by a collective bargaining / labor
agreement, which in 2021 equated to 17.3% of employees across Aegon N.V.
(Value created - Employees - Representation, page 385)
8.10
Strengthen the capacity of domestic financial institutions to encourage and expand
access to banking, insurance and financial services for all.
•
Aegon UK acquired Pension Geeks in April 2021, a business specializing in
connecting people with their finances through innovative engagement techniques,
communication, and events. Pension Geeks will continue to help employers to
encourage their people to engage with workplace benefits programs through the
customer-centric approach of the wider Aegon family. (Improving customer service,
page 27)
9. Industry, innovation and
infrastructure
Build resilient infrastructure,
promote inclusive and sustainable
industrialization and foster
innovation
9.4
By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with
increased resource-use efficiency and greater adoption of clean and environmentally
sound technologies and industrial processes, with all countries taking action in
accordance with their respective capabilities.
•
Aegon Asset Management engaged a leading multinational steelmaker, who has
introduced its first ‘green steel’ solutions for customers, which include steel
produced via carbon-neutral processes as well as through the use of ‘green’
hydrogen generated from renewables (Aegon Integrated Annual Report 2020,
Active ownership in action
, page 33)
10. Reduced inequalities
Reduce inequality within and
among countries
10.2
By 2030, empower and promote the social, economic and political inclusion of all,
irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or
otherstatus.
•
Aegon Asset Management (AAM) in the UK partnered with Black Professionals
Scotland (BPS) in early 2021 to further expand recruitment and engagement to
untapped talent. Members of BPS are provided with skills and information to
support their chosen careers. BPS supports organizations in realizing their inclusion
and diversity ambitions, and AAM UK now advertises all vacancies with BPS.
Furthermore, AAM and BPS members jointly participated in events to celebrate
Black History Month in the United Kingdom. (People at the heart of our
transformation journey, page28)
•
In 2021, Transamerica earned a score of 100% from the Human Rights Campaign
Foundation on its annual Corporate Equality Index (CEI). (2021 milestones, page4)
10.3
Ensure equal opportunity and reduce inequalities of outcome, including by eliminating
discriminatory laws, policies and practices and promoting appropriate legislation,
policies and action in this regard.
•
Aegon UK publishes its annual gender pay gap
report as required by the UK Equality
Act 2010 (Gender Pay Gap Information) Regulations 2017.
10.4
Adopt policies, especially fiscal, wage and social protection policies, and progressively
achieve greater equality.
•
In 2021 Aegon UK become a Living Wage Foundation accredited employer. (2021
milestones, page 5)
11. Sustainable cities and
communities
Make cities and human
settlements inclusive, safe,
resilient and sustainable
11.1
By 2030, ensure access for all to adequate, safe and affordable housing and basic
services and upgrade slums.
•
Aegon the Netherlands has invested in long-term residential property leases in the
affordable housing segment. (Investments in real estates, page 201)
•
In the United States we have investments that provide affordable housing to
individuals and families that meet median household income requirements.
(Incometax, page 194)
12. Responsible consumption
and production
Ensure sustainable consumption
and production patterns
12.2
By 2030, achieve the sustainable management and efficient use of natural resources.
•
We aim to capitalize on the Future Ways of Working plan to further reduce the
footprint of our direct business operations. (Employees, page 27, Introducing our
hybrid working model, page 28)
•
Year to year, the proportion of renewable electricity as part of our wider electricity
mix is consistently greater than 95%. (Value created - Society: Operational
footprint, page 392)
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Sustainable Development Goal Aegon's contribution to relevant SDG targets in 2021 (examples)
13. Climate action
Take urgent action to combat
climate change and its impacts
13.2
Integrate climate change measures into national policies, strategies and planning.
•
Aegon N.V. announced during the November 2021 ‘COP26’ UN Climate Change
conference that it had joined the Net-Zero Asset Owner Alliance (NZAOA),
a UN-convened group of institutional investors committed to decarbonization.
(Sustainability - Aegon commits to a net-zero portfolio, page 20)
•
In joining the NZAOA, Aegon N.V. announced its company-wide commitment
to transitioning its General Account investment portfolio to net-zero GHG emissions
by 2050, supported by an interim 25% reduction target by 2025. (Sustainability
- Aegon commits to a net-zero portfolio, page 20, Value created - Society:
Investment footprint, page 389)
•
Aegon AM has joined the Net-Zero Asset Managers initiative, a group of
international asset managers committed to supporting investing aligned with
net-zero emissions by 2050. (2021 milestones, page 5)
•
The latest Aegon N.V. Responsible Investment Policy excludes from its investment
universe companies that;
- derive 25% or more of their revenue from the exploration, mining or refining of
thermal coal (declining to 10% in 2027 and 5% in 2029);
- produce more than 20 million tons of thermal coal annually and are actively
expanding exploration, mining or refining operations;
- derive 50% or more of their revenue from thermal coal-fired electricity
generation;
- own coal-fired electricity generation capacity greater than 10 gigawatts and are
actively expanding coal-fired electricity production capacity;
- derive 5% or more of their total oil equivalent production from oil sands;
- are building or operating pipelines that significantly facilitate export of oil
extracted from oil sands; and
- derive 5% or more of their revenue from oil and gas exploration and production in
the Arctic. (Policies and procedures, page 355)
•
Aegon N.V set a new target in 2021 to reduce the carbon footprint of its
operational activities by 25% by 2025 from a 2019 baseline. (Value created -
Society: Operational footprint, page 392)
•
Aegon's direct business operations have been carbon-neutral since 2019 (on a
market-based measurement) through substitution of the company's energy
consumption with renewable sources and offsetting its remaining carbon emissions.
We have selected carbon offset projects with our customers and in alignment with
the socio-economic benefits they bring to our purpose of
Helping people live their
best lives
. (Climate change, page 21)
14. Life below water
Conserve and sustainably use the
oceans, seas and marine resources
for sustainable development
14.4
By 2020, effectively regulate harvesting and end overfishing, illegal, unreported and
unregulated fishing and destructive fishing practices and implement science-based
management plans, in order to restore fish stocks in the shortest time feasible,
atleast to levels that can produce maximum sustainable yield as determined by
theirbiological characteristics.
•
The Aegon N.V. Responsible Investment Policy incorporates the company
position on biodiversity, which specifically covers ocean use and over exploitation
(i.e. overfishing). Furthermore, the Aegon N.V. Vendor Code of Conduct sets
the standards for the business relationship between Aegon and its vendors
in order to enable Aegon to manage the most material ESG risks associated
with our procurement of goods and services, specifically including biodiversity.
(Policies and procedures, pages 355 and 356)
15. Life on land
Protect, restore and promote
sustainable use of terrestrial
eco-systems, sustainably
manageforests, combat
desertification, and halt and
reverse land degradation and
haltbiodiversity loss
15.5
Take urgent and significant action to reduce the degradation of natural habitats,
haltthe loss of biodiversity and, by 2020, protect and prevent the extinction
ofthreatened species.
•
The Aegon N.V. Responsible Investment Policy incorporates the company position
on biodiversity. Furthermore, the Aegon N.V. Vendor Code of Conduct sets the
standards for the business relationship between Aegon and its vendors in order to
enable Aegon to manage the most material ESG risks associated with our
procurement of goods and services, specifically including biodiversity. (Policies and
procedures, pages 355 and 356)
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Sustainable Development Goal Aegon's contribution to relevant SDG targets in 2021 (examples)
16. 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
16.1
Significantly reduce all forms of violence and related death rates everywhere.
•
Under the Aegon N.V. Responsible Investment Policy, we exclude investment in
controversial weapons. (Policies and procedures - Aegon N.V. Responsible
Investment Policy, page 355)
16.5
Substantially reduce corruption and bribery in all their forms.
•
Aegon’s Code of Conduct embodies the company’s values and helps ensure that
all employees act ethically and responsibly. The Code prescribes a mandatory set
of standards for how Aegon employees should conduct business, comply with all
applicable laws and regulations, and exercise sound judgment in reaching ethical
business decisions in the long-term interests of Aegon's stakeholders. (Code of
Conduct, page 88)
17. Partnerships for the goals
Strengthen the means of
implementation and revitalize the
Global Partnership for Sustainable
Development
17.16
Enhance the Global Partnership for Sustainable Development, complemented by
multi-stakeholder partnerships that mobilize and share knowledge, expertise,
technology and financial resources, to support the achievement of the Sustainable
Development Goals in all countries, in particular developing countries.
•
Aegon N.V. is a signatory of the United Nations Global Compact. (Global initiatives
- United Nations Global Compact, page 364)
•
Aegon AM is a signatory to the Principles for Responsible Investment (PRI).
(Task Force on Climate-related Financial Disclosures - Active Ownership, page 375)
•
Aegon N.V. is a signatory to the UN Principles for Sustainable Insurance (PSI).
(Sector specific initiatives, pages 379-380)
17.17
Encourage and promote effective public, public-private and civil society partnerships,
building on the experience and resourcing strategies of partnerships.
•
Aegon is dedicated to developing understanding around trends, issues, and
opportunities related to saving and planning for retirement, and to the achievement
of financial security in later life. This includes participating in relevant international
projects, such as an Organisation for Economic Co-operation and Development
(OECD) working group on the future of work, and the Living, Learning, and Earning
Longer initiative led by the World Economic Forum (WEF), to examine the benefits of
an age-inclusive workforce. (Adapting to the modern retirement landscape, page 32)
•
Aegon maintains a visible presence in the communities that benefit from its services,
through initiatives such as the 'Silver Starters' learning program for entrepreneurs
aged 50 and over. (Adapting to the modern retirement landscape, page 32)
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Frameworks and initiatives
Task Force on Climate-related Financial Disclosures (TCFD)
Introduction
Climate change represents one of the biggest risks to society,
the economy, and financial institutions. Mitigating climate
change, including the reduction of greenhouse gas (GHG)
emissions, is a major global challenge. Aegon believes that
governments, companies, and investors have a responsibility
to mitigate climate change and its impacts, and facilitate
a transition to a climate-resilient economy.
The present disclosure builds on earlier disclosures made
since 2017. It is made on behalf of Aegon N.V., an integrated
diversified international financial services group, as both an asset
owner and an asset manager.
Similar to previous years, it follows the Task Force on Climate-
related Financial Disclosures (TCFD)’s four-pillar framework
to facilitate disclosure. Aegon strives to continuously enhance
its reporting and business practices and welcomes feedback
from stakeholders on the appropriateness and relevance
of this disclosure.
Governance
Set
up by the Corporate Sustainability team, Aegon’s sustainability
approach is overseen by the Global Sustainability Board (GSB).
The GSB is a senior management committee established
in December 2021, replacing the former Responsible Business
& Investment Committee (RBIC), to enhance overall governance
and oversight of our company-wide approach to sustainability.
The GSB meets quarterly and advises the Management and
Executive Boards on Aegon’s strategic sustainability agenda,
including two priority themes: climate change and inclusion &
diversity. It is chaired by the CEO of Transamerica (who is also
a member of Aegon’s Management Board) and consists of senior-
level representatives from across the company.
The GSB is supported in its mission by local sustainability boards
that translate the global sustainability agenda into actions within
local business units and provide market-relevant feedback.
With respect to climate change, the GSB is also supported
by the Net-Zero Working Group (NZWG). The NZWG is tasked
with undertaking the required analysis and coordination
of actions on Aegon’s General Account investments in support
of our 2050 net-zero commitment and obligations under
the Net-Zero Asset Owner Alliance. It draws on staff-level
representation from across the company to generate insight and
recommendations for the GSB on potential management actions.
Additional climate oversight is provided by the Group Risk &
Capital Committee (GRCC), which oversees the Financial Risk
function’s climate scenarios that analyze the potential climate
impacts on our accounts. There is also the Non-Financial
Risk Committee (NFRC) which oversees the Operational Risk
function’s annual climate risk assessment that identifies possible
physical and transition risks that could impact Aegon.
Case study: Transamerica Climate Risk Working Group
Transamerica has established a local cross-functional
Climate Risk Working Group (CRWG) to assist in climate
change risk oversight, determining activities necessary
to comply with related regulatory requirements, and
achieving organizational goals. The CRWG supports
the Americas’ Operational Risk Committee (AORC) and
is responsible for reporting climate risk-related activities
to not only the AORC but also the Transamerica Board Risk
Committee, which has oversight of the implementation
of the Enterprise Risk Management Framework including
climate risk. As Transamerica’s oversight of the risks
and opportunities related to climate change matures
the CRWG will continue to integrate its work into
the relevant committees.
Strategy
At Aegon we have embedded sustainability as a central pillar
within our company strategy. Aegon is committed to a
responsible
way of doing business and seeks to meet the increasing
expectations of multiple stakeholders – investors, but also
customers, employees, business partners, and the wider
community. Through these engagements, Aegon has established
two thematic sustainability priorities for our strategy: inclusion
and diversity, and climate change. Both themes support our
corporate purpose. As the effects of climate change become
increasingly palpable, the need for action has never been
more urgent, or more universal. Only then can people live
their best lives.
As an insurance company, Aegon can support the transition
to a climate-resilient economy and a net-zero world using both
sides of its balance sheet. We finance the upside through our
responsible investment activities, while mitigating the downside
through integrating ESG into our risk management processes and
the savings and protection solutions we provide. The influence,
both positive and negative, we can have as an investor
is particularly significant.
We have committed to transitioning our General Account
investment portfolio to net-zero GHG emissions by 2050.
To-date we have set a reduction target in the weighted average
carbon intensity of our corporate fixed income and listed equity
investments; by 25% for 2025 against a 2019 baseline. We will
look to further substantiate this commitment over the coming
years with additional science-based targets. Albeit at a smaller
scale, Aegon is also committed to reducing GHG emissions from
our direct operations. Finally, we aspire to further integrate
climate considerations in our day-to-day processes, such
as procurement.
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Risks
Aegon undertakes a Business Environment Scan (BES) to identify
macro-economic opportunities and challenges that are expected
to have a high likelihood of occurring and a high impact on our
business. The most recent BES included consideration of climate
change and the loss of biodiversity. While the exposure of direct
physical risks from environmental catastrophes and loss
of biodiversity is expected to be limited for Aegon, we expect
to be exposed to regulatory risks associated with new and
emerging market requirements. As a result, we seek to further
embed climate and environmental considerations in our business
and investment decisions – both to avoid damaging the planet
and to safeguard our reputation. See discussion of the Business
Environment Scan for further detail (page 10).
For our life insurance business, most of our liabilities are exposed
to mortality and morbidity rates, both the current levels and
the uncertainty around how these will develop relative to our
assumptions over the coming decades. An important driver when
assessing
the value of our liabilities is how past trends in longevity
are extrapolated into the future. Climate change plays a role
in the
development of future mortality and morbidity rates, just
like other factors – including the continuing COVID-19 pandemic
,
medical advancements, limits to human biology, and changes
in lifestyle
.
The relationship between mortality and morbidity and climate change is complex, and the nature
of the
impactcan also vary geographically. Furthermore, it is expected that
climate change will have a relatively lower impact on longevity
and health
of the
insured population compared with the generalpopulation,
as this group is more affluent and is more likely to be
able
to better adapt to changing conditions. Taking all this into
consideration, Aegon follows widely adopted industry methods
where
the extrapolation of future longevity is performed based
on past experiences of mortality and morbidity rates, without
separately modelling each
of the
underlying drivers such as climatechange. With this approach the changing circumstances are
gradually introduced into our
assumptions.
In contrast, our investments are exposed to both physical and
transition risks. While we expect the transition risks associated
with policy and market actions intended to mitigate climate
change to be most salient in the near term, the value of our
holdings can reasonably be expected to be influenced by both
these risks
in the
longer term. However, previous scenario analysis has shown that our relatively high allocation to fixed income,
including government bonds, should limit our overall exposure.
For our property and casualty (P&C) business, we expect a more
direct impact from climate change through, for example, higher
claim frequencies arising from an increase in extreme weather
events. However, prices for P&C insurance can be adjusted
periodically. Prices are determined by closely monitoring past
claim frequencies and adjusting the premiums over time while
maintaining an adequate level of expected profitability.
Opportunities
As an investor, Aegon has an important role to play in supporting
the climate transition. By making climate-smart investment
choices, we can contribute to a cleaner, healthier environment
and provide our clients with opportunities to minimize their
own climate impacts. Climate change continues to be a focus
of our investment strategy and is guided by our Responsible
Investment Policy.
Case study: Net-Zero Asset Owner Alliance
In November 2021, Aegon N.V. joined the Net-
Zero Asset Owner Alliance, an UN-convened group
of institutional investors committed to transitioning their
portfolios to net-zero GHG emissions by 2050. Through
the analysis conducted by its business units, Aegon N.V.
defined a specific, actionable target for 2025 and will
continue to set targets in five-year intervals in line with
the Alliance’s principles.
Case study: Net Zero Asset Managers Initiative
In November 2021, Aegon Asset Management joined the Net
Zero Asset Managers Initiative, a group of international
asset managers committed to supporting investing aligned
with net-zero GHG emissions by 2050. This commitment
requires Aegon Asset Management to work in partnership
with asset owner clients on decarbonization goals consistent
with an ambition to reach net-zero emissions by 2050
across all assets under management, and set interim targets
at five-year intervals for the share of assets managed in-line
with net-zero principles.
Risk management
Identification and management
Climate change is a long-term risk associated with high
uncertainty regarding timing, scope, and severity of potential
impacts. 2021 saw no material changes to the overall climate risk
identification, assessment, and evaluation processes described
in previous years’ disclosures.
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Frameworks and initiatives
Case study: Global General Account scenario analysis
Aegon worked with Ortec Finance to perform an extensive
and systematic climate risk assessment for the General and
Separate Account assets of all business units within Aegon.
The analysis investigated three plausible climate pathways
(orderly, disorderly and failed transitions) to explore potential
future climate policies, interventions, and consequences
of the world failing to mitigate climate change. These
pathways are in line with the industry standard IPCC and
Network of Central Banks and Supervisors for Greening
the Financial System (NGFS) emission and climate scenarios.
The employed climate model translates transition (i.e. policy
& technological changes) and physical risks (i.e. gradual
impact & extreme weather events) associated with climate
change to produce a climate change adjusted economic
and financial outlook. The model outcomes enable Aegon
to identify portfolio weak spots - in terms of asset type,
geography and sector - to aid decision making in responding
to climate risk.
Modelling results indicate resilience of the Aegon General
Account portfolio allocation to key systemic climate risk
drivers across all modelled climate scenarios. High allocation
of fixed income assets is the key driver that limits the
cumulative climate-related impact on returns over a 40-year
horizon. Continuing to monitor developments in climate
science, policy, technology and consumer sentiment will
remain critical for understanding and adapting to the future.
The results provide an initial directional signal; however,
climate-related risks are dynamic in nature. Transition
risks are expected to dominate in the near to medium term
(certainly to 2030) if society is to achieve the objectives
of the Paris Agreement while physical risks will materialize
at any time as global temperatures continue to rise. As a
result, continuing to monitor developments in climate
science, policy, technology and consumer sentiment
is critical for understanding and adapting to the future.
Short-term climate-induced GDP losses for EU & US
(in %)
1
0
-1
-2
-3
Simulated cumulative GDP loss
(% relative to climate-uninformed baseline)
2022 2024 2026 2028 2030 2032 2034
1.6°C - EU
1.6°C disorderly - EU
4.0°C - EU
1.6°C - US
1.6°C disorderly - US
4.0°C - US
Long-term climate-induced GDP losses for EU & US
(in %)
0
-5
-10
-15
-20
Simulated cumulative GDP loss
(% relative to climate-uninformed baseline)
2035 2040 2045 2050 2055 2060
1.6°C - EU
1.6°C disorderly - EU
4.0°C - EU
1.6°C - US
1.6°C disorderly - US
4.0°C - US
Climate impact on nominal investment return
(relative to baseline, in % cumulative)
2
0
-2
-4
-6
-8
Climate induced loss in
nominal investment returns
2020 2025 2030 2035 2040 2045 2050 2055
2060
4.0°C - Failed transition
1.6°C - Paris disorderly
1.6°C - Paris orderly
Paris Orderly Transition
Orderly
transition pathway
Net Zero by
2070
CO
2
emissions ~
RCP2.6
Locked-in physical impacts of
1.6°C
by 2100
CO
2
emissions ~
RCP2.6
Locked-in physical impacts of
1.6°C
by 2100
CO
2
emissions ~
RCP8.5
Dramatic physical impacts of
4°C
by 2100
Disorderly
transition pathway
Net Zero by
2070
Business-as-usual
(only currently
committed transition efforts)
Paris Disorderly Transition Failed Transition
Overview of Climate Scenarios Considered
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About Aegon Governance and risk management Financial information
Non-financial information
Case study: Operational climate risk assessment
Aegon performs a regular operational assessment of its
exposure to climate risk. The assessment uses research
and position papers from renowned institutions as input
and is executed in cooperation with subject matter experts
from Aegon’s risk, asset management and sustainability
functions. In 2021, Aegon updated and enriched its
assessment by incorporating findings from local climate
risk assessments executed by Aegon’s country units
and developments captured in the United Nations’
Intergovernmental Panel on Climate Change (IPCC) Sixth
Assessment Report. The risk assessment identifies
the relevant risks for the company and assesses severity
per risk in terms of likelihood and impact and its
manageability in terms of the speed of materialization and
the possibilities for mitigation. The assessment concludes
with recommendations and considerations to be taken
forward and is included as part of our Own Risk Solvency
Assessment (ORSA).
Active ownership
Engagement with corporates
As an institutional investor, Aegon expects investee companies
to work toward reducing their environmental impact. We engage
with the companies we invest in both individually and collectively
through networks to encourage better climate-related risk
practices, including emissions measurement, disclosure, target
setting and reporting in line with TCFD recommendations.
Aegon and its business units are active members or participants
in several collaborative initiatives targeting climate action,
including but not limited to: Net-Zero Asset Owner Alliance,
Net Zero Asset Managers Initiative, Principles for Responsible
Investment (PRI), the Institutional Investors Group on Climate
Change (IIGCC), and Climate Action 100+ (CA100+).
For further details on Aegon’s active ownership activities, see
the Responsible Investment and Active Ownership reports
published by Aegon Asset Management.
Engagement with policymakers
Aegon acknowledges the importance and necessity
of government action in addressing climate change. Engagement
with policymakers is critical to shaping our investment
environment, and we work independently and in collaboration
with industry groups to engage on key climate issues.
At the European level, Aegon supports the goals of the
EUstrategy for financing the transition to a sustainable economy
and recognizes the important role financial actors play in the
transition. Aegon has engaged with officials and contributed
toconsultations on the corresponding sustainable taxonomy
andESG disclosure regulations, the incorporation of sustainability
risks into the Solvency II regulatory regime, and the development
of standards for the reporting of non-financial information.
Aegon has also continued to advocate for action to complete
theCapital Markets Union to unlock capital from institutional
andcross-border investors to fund sustainable transition
projects in Europe.
In the United States, Aegon has engaged with policymakers
at both the federal and state levels to ensure appropriate
climate-related regulation. Aegon has supported regulatory
measures that appropriately differentiate between the climate
exposures of life insurers and property-casualty insurers. At both
the federal and state levels, Aegon has supported TCFD-based
disclosure standards that would provide uniform and consistent
information to stakeholders, while minimizing the potential for
duplication and redundancy. Aegon expects that these efforts
will support the transition to a more sustainable economy.
Metrics and targets
Own operations
Aegon measures and reports annually on its operational
carbon footprint. Our main operations (the United States, the
Netherlands, the United Kingdom, and AAM) have been carbon
neutral since 2016 by reducing their facility-level emissions
and supporting offset projects. In 2019, we extended the scope
of our offsetting to cover all of our wholly-owned operations.
Anoverview of our total operational emissions can be found on
page 392, Value Created (Society/Operational Footprint).
In line with our net-zero commitment announced in November
2021, Aegon has set a supporting target to reduce the carbon
footprint of its operational activities by 25% by 2025, compared
to the 2019 baseline. The target includes the consumption
of natural gas and electricity. In 2021, the carbon footprint
of Aegon’s operational activities was 54% lower than 2019.
While some of these reductions can be traced to our initiatives
to stimulate hybrid working - which for instance led to the closing
of several offices in Iowa in 2021 - there has also been
a temporary benefit from fewer employees in the office due
to the COVID-19 pandemic, which we expect to reverse over
time. Through implementing our hybrid working policy and other
initiatives, we will work towards achieving our target. Aegon will
also look towards expanding the scope of measurement of our
greenhouse gas emissions and explore setting further targets
against these in the future.
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Frameworks and initiatives
Investments and holdings
Targets
In late 2021, as part of its commitment to the Net-Zero Asset
Owner Alliance, Aegon set initial targets for its investments.
Following the guidance in the
Inaugural 2025 Target Setting
Protocol
, for 2025 Aegon intends to reduce the weighted average
carbon intensity of corporate fixed income and listed equity
General Account assets by 25% against a 2019 baseline.
In 2021, the weighted average carbon intensity of our corporate
fixed income and equity investments stayed flat, compared
to 2019. At the end of 2021, our business units ensured our new
commitment was captured in their investment mandates, as a
first step towards our net-zero ambition.
Weighted Average Carbon Intensity of Corporate Fixed Income and Listed Equity
2019 2021 Change
Weighted average carbon intensity
tCO
2
e/EURm revenue 490 490 0%
Source: Aegon calculation. Values as of December 31, 2021. Climate metrics calculated per Methodology section below. Climate change data availability
maychange over time and characteristics will vary. Certain information ©2022 Sustainalytics, MSCI ESG Research L.L.C. Reproduced with permission.
Not for further distribution.
Disclosure
Since 2020 we have extended the scope of measurement and
reporting of the carbon footprint of our investments to our global
General Account holdings. In 2021, we have updated the figures
to better align with the scope of our reduction target.
Global general account by asset class
(in %)
Fixed income and equity
Mortgages & loans
Other (investment funds, cash, etc.)
99
3030
6161
66
18
18
37
37
Source: Aegon calculation. Values are as of December 31, 2021 and may not
add up to 100% due to rounding.
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Global General Account – Corporate Fixed Income and Listed Equity
Corporate FI Coverage
Absolute footprint
tCO
2
e 4,886,000 72%
Relative intensity
tCO
2
e/EURm invested 110 72%
Weighted average carbon intensity
tCO
2
e/EURm GDP 490 97%
Climate change resiliency
ND-GAIN rating 9.9 73%
Source: Aegon calculation. Values as of December 31, 2021. Climate metrics calculated per Methodology section below.Relative intensity, weighted average
carbon intensity, and carbon risk values have been adjusted to account for variance in coverage. Climate change data availability may change over timeand
characteristics will vary.Certain information ©2022 Sustainalytics, MSCI ESG Research L.L.C. Reproduced with permission. Not for further distribution.
Corporate fixed income and listed equity results are dominated
by holdings
in the
utilities, energy, and materials sectors where their contribution
to the
footprint and intensity of the
accountgreatly outweighs their financial position. The chart below provides
an indication of active weight by sector against both the absolute
footprint and weighted average carbon intensity (WACI).
Active contribution by sector
(in %)
Telecommunication services
Healthcare
Information technology
Consumer discretionary
Financials
Real estate
Consumer staples
Other
Industrials
Materials
Energy
Utilities
0%0%
1
0% 20%
30% 40% 50% 60%
(1
0%)(20%)(30%)
Weighted average carbon intensity Absolute footprint
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Frameworks and initiatives
Global General Account – Sovereign Fixed Income
Sovereign FI Coverage
Absolute footprint
tCO
2
e 15,088,000 100%
Relative intensity
tCO
2
e/EURm invested 620 100%
Weighted average carbon intensity
tCO
2
e/EURm GDP 310 100%
Climate change resiliency
ND-GAIN rating 67 100%
Source: Aegon calculation. Values as of December 31, 2021. Climate metrics calculated per Methodology section below. Relative intensity, weighted average
carbon intensity and carbon vulnerability values have been adjusted to account for variance in coverage. Climate change data availability may change over time
and characteristics will vary.
While our largest sovereign holdings are in US and EU member
state-issued bonds, the results are dominated by holdings
from other countries, including emerging markets, where their
contribution to the footprint and intensity of the account greatly
outweighs their financial position. The chart below provides
an indication of active weight by region against both the absolute
footprint and weighted average carbon intensity (WACI).
Active contribution by region
(in %)
EU
USA
Other
0%0%
5% 10% 15%(5%)(10%)(15%)
Weighted average carbon intensity Absolute footprint
Methodology
Corporate fixed income and listed equity metrics were calculated
following the Partnership for Carbon Accounting Financials
(PCAF) guidelines and include scope 1 and 2 emissions.
For sovereign assets, Aegon follows a “whole economy”
approach based on country-level emissions and GDP. Weighted
Average Carbon Intensity (WACI) was calculated in line with
the TCFD’s recommendations. Carbon risk for corporate issuers
is measured using the Sustainalytics Carbon Risk Rating, while
climate vulnerability for sovereign issues is measured using
the Notre Dame Global Adaptation Initiative (ND-GAIN) Country
Index. Target figures are set in line with Net-Zero Asset Owner
Alliance guidance.
Next Steps
Aegon will seek to continue to improve its climate change
strategy, governance, and approach to risk and opportunity
measurement and implementation in the coming years. For
example, in 2022 we expect to further enhance our 2025
targets to meet Net-Zero Asset Owner Alliance membership
requirements. As the company’s experience with climate issues
grows, Aegon will look to increase the breadth of disclosures and
further incorporate climate considerations across the business
as appropriate.
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Non-financial information
Sector-specific initiatives
Aegon has signed up and committed to several-sector specific
initiatives, including the UN Principles for Sustainable Insurance
(PSI), and the Dutch International Responsible Business Conduct
(IRBC) Agreement.
UN Principles for Sustainable Insurance (PSI)
Aegon is one of the founding signatories of the UNEP
FI's Principles for Sustainable Insurance. The aim of the PSI
is to make sure sustainability becomes 'business as usual'.
The PSI comprises four basic principles. As a signatory, Aegon
reports annually on the actions taken to implement the PSI’s
four principles, as shown in the following table.
Principles Actions taken (2021)
1. We will embed in our decision-making
environmental, social and governance (ESG) issues
relevant to the insurance business.
As of December 2021, Aegon replaced its Responsible Business and Investment
Committee (RBIC) with a Global Sustainability Board (GSB) that interfaces with Local
Sustainability Boards in the business units. This step was taken to further integrate ESG
topics across our organization. The GSB consists of relevant Management Board members,
Local Sustainability Board Chairs and senior management. They discuss ESG matters
related to the business and investing on a quarterly basis, and provide advice to Aegon’s
Executive Board. Additionally, as per our Executive Board’s Remuneration Policy, at least
50% of a member’s variable compensation must be determined by non-financial
performance indicators, where at least one must be ESG-related. Moreover, a significant
risk or compliance incident related to ESG may result in a malus adjustment or claw-back
of a member's variable compensation.
In November 2021, Aegon signed up to the UN Global Compact and the Net-Zero
Asset Owner Alliance. In support of this, Aegon’s Responsible Investment Policy
was updated in January 2022. All of our public ESG policies and frameworks are available
at www.aegon.com.
ESG risks are covered by Aegon’s risk universe. Risk management regularly interacts and
cooperates on ESG risks, including climate risk. This is covered in more detail in the
Sustainability section and the TCFD section of this report. Of note for 2021, were the
climate scenarios run on our accounts to refine our understanding of our exposure to
climate risk.
We are working on expanding our offering of products and services that factor in ESG
criteria. In 2021, we enhanced our customer propositions in the Netherlands by introducing a
new ‘green’ mortgage to help people pay for sustainable home improvements. Aegon Asset
Management (AAM) and Aegon UK partnered with the Global Ethical Finance Initiative (GEFI)
to introduce the new Aegon Global Sustainable Sovereign Bond Fund. Aegon UK also
acquired Pension Geeks, a business specializing in connecting people with their finances
through innovative engagement techniques, communication, and events.
From a general investment perspective, ESG integration and active ownership are
principles we follow across all decisions and portfolios. AAM is a signatory to the
Principles for Responsible Investment.
For more information, please see: Business Environment Scan – page 10;
Sustainability – pages 20-23; Sharing value with our stakeholders – pages 26-32;
Policies and Procedures – pages 353-356;
Enterprise Risk Management (ERM) framework – pages 73-77;
Task Force on Climate-related Financial Disclosures – pages 372-378.
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Frameworks and initiatives
Sector-specific initiatives (PSI, IRBC)
Principles Actions taken (2021)
2. We will work together with our clients and business
partners to raise awareness of ESG issues, manage
risk and develop solutions.
For clients, guided by our overarching Responsible Investment Policy, Aegon Asset
Management (Aegon AM) has established a Responsible Investment Framework that
reflects these key elements including similar policies put forward by Aegon AM's clients.
Our Responsible Investment Framework is structured as follows:
1. ESG integration – Material ESG factors are fundamental to our investment decision-
making across all Aegon AM portfolios. By integrating ESG considerations into
traditional financial analysis, the Aegon AM research team arrives at an independent
view of an issuer's fundamentals.
2. Active ownership – We actively engage with investee companies across a wide range of
industries to improve their ESG profile and address sustainability issues, often in
cooperation with other investors to maximize our influence. We also exercise any
shareholder voting rights we have to support our engagement efforts and enhance
long-term value creation for all stakeholders.
3. Solutions – Aegon AM provides a range of responsible investment solutions to pursue
ESG objectives alongside financial returns. These solutions are categorized into four
types: exclusion-based strategies, best-in-class strategies, sustainability-themed
strategies, and impact investments.
For our business partners, in specific our suppliers, we are steadily integrating best-
practice ESG criteria and requirements into our supplier selection, development, and
ordering processes. 2021 was our second year working with sustainability rating company
EcoVadis to evaluate the ESG risks of our top 250 vendors by spend (representing 85.5%
of Aegon’s total procurement spend). We now have valid EcoVadis scorecards for 81 of
our top vendor accounts, covering 59% of the spend of these relationships.
For more information, please see: Sustainability; Sharing value with our stakeholders –
pages 29-30.
3. We will work together with governments,
regulators and other key stakeholders to promote
widespread action across society on ESG issues.
Aegon has a dedicated Global Government & Public Affairs department, whose aim is to
support regulators and lawmakers. We advocate worldwide for people to have access to
insurance and financial services, for people to be aware of opportunities for flexible
employment in old age and for governments to plan and provide for their citizens in an age
of increasing longevity. Aegon also encourages financial literacy around the world and
engages with individuals and policymakers in service of helping people to achieve wealth
and health wherever we can. Aegon is active in many international projects that aim to
fulfill this goal; for example, an Organization for Economic Cooperation and Development
(OECD) working group on the future of work, and the Living, Learning, and Earning Longer
initiative led by the World Economic Forum (WEF). Within Aegon, our Silver Starters
program (developed jointly with the Leyden Academy on Vitality and Ageing) provides
online coaching to entrepreneurs aged 50 and over to promote lifelong learning and
healthy attitudes to aging.
For more information, please see: Sharing value with our stakeholders – pages 31-32.
4. We will demonstrate accountability and
transparency in regularly disclosing publicly our
progress in implementing the Principles.
Each year, we publish progress against the PSI principles. Our progress
report is included as part of our IAR, and is available at www.aegon.com.
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Non-financial information
International Responsible Business Conduct (IRBC)
Agreement in the insurance sector
In 2018, Aegon stated its intent to support the spirit and
objectives of the Dutch International Responsible Business
Conduct Agreement in the insurance sector (also known as
‘the covenant’). By doing so, Aegon will attempt to act, where
possible, in accordance with the objectives and undertakings
agreed in the covenant and will be receptive to commitment,
cooperation, and knowledge-sharing during the implementation
of the covenant. The covenant is a collaborative initiative
of the Dutch government, non-governmental organizations,
and Dutch insurers.
The objective of the covenant is to prevent, mitigate,
and/or remediate adverse impacts on stakeholders and
the environment that are caused or contributed to by
Aegon's investee companies The covenant asks insurance
companies to apply investment policies and practices
in accordance with the processes and principles of the OECD
Guidelines for Multinational Enterprises and the UN Guiding
Principles on Business and Human Rights.
Aegon N.V.'s Responsible Investment Policy draws heavily
on the aforementioned Principles and Guidelines. To stipulate
the relevance hereof, Aegon became a signatory to the UN Global
Compact (UNGC) in November 2021. The Policy is instrumental
to Aegon's investment practices as executed by Aegon Asset
Management (Aegon AM), the company's global asset manager
responsible for managing most of Aegon's investments.
At the beginning of 2021, Aegon AM conducted a global
investment screening to identify investee companies that
allegedly breach the Principles and Guidelines, as well as
the wider UNGC Principles (or are at risk of doing so). In addition,
our screening exercise looked specifically at companies' supply
chain oversight, biodiversity controversies, access-to-medicine
programs, and labor rights controversies. Applying these findings,
we set the prioritization for our engagement activity, which
in 2021 saw Aegon AM initiate or continue engagements with
over 60 companies.
In most cases, Aegon AM continues the process of engagement
until we believe that the portfolio company is aligned with our
policies, although exclusion ultimately remains an option. More
information on the active ownership approach and practices
on behalf of Aegon and other clients, see the Responsible
Investment and Active Ownership reports published
by Aegon AM.
With biodiversity being the IRBC's annual theme for 2021,
Aegon AM actively participated in a series of dedicated
collaborative engagements and in drafting a thematic
framework. The framework brings together relevant information,
international legislation and regulations, tips, and other
support that insurers can use in relation to biodiversity.
The engagements were geared toward reducing deforestation
risks and providing relevant input and learnings. Together with
signatories of the covenant including NGOs, Aegon AM supported
engagement efforts with three major listed food companies
processing, amongst others, meat and dairy products. With soy
often being used as feed for cattle and with tropical forests
in parts of Brazil being cleared for both soy production and
use as pasture for grazing cattle, the selected companies were
considered to be at risk of contributing to deforestation via their
supply chain. Engagement focused on supply chain oversight
regarding deforestation, sustainable use of soy, alternative
sourcing, and the use of viable alternative protein sources. This
included locally-sourced animal feed, nature-inclusive farming,
and considerations on a different protein product selection, such
as plant-based products.
As in previous years, good health and wellbeing (SDG 3)
continues to be one of our focal topics. The continued ill-effects
of the COVID-19 outbreak confirmed our decision to address
access to adequate health services and improve access
to medicine. To avoid situations in which health emergencies
push people into bankruptcy or poverty, we believe it is
crucial to strive for universal health coverage and sustainable
financing for health. It is also the case that, in the second year
of the COVID-19 pandemic, a significant part of the global
population still lacks sufficient and equitable access to vaccines.
Based on the IRBC's 2020 annual theme, Aegon AM continued
to emphasize access-to-medicine programs in its collaborative
engagement and voting efforts, where considered to be effective.
Mitigating climate change (SDG 13) remains another focus area
for Aegon. Please refer to the TCFD section for discussion of our
actions and progress through 2021.
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Frameworks and initiatives
Value created
Aegon strives to create long-term value for a broad range
of stakeholders, including its customers, employees, business
partners, and investors, as well as society at large. Our Value
Creation Model (pages
24-25
) provides a high-level overview of the value we create for each stakeholder group. The Value
Creation Model also depicts Aegon’s inputs and outputs based
on the six capitals as introduced by the Integrated Reporting
<IR> Framework of the International Integrated Reporting
Council (IIRC).
This chapter builds on Aegon’s Value Creation Model and
provides detailed data related to Aegon’s inputs, outputs and
outcomes with a specific focus on the company’s sustainability
performance. The data included in this chapter is grouped based
on Aegon’s five stakeholder groups. Each indicator disclosed
in the tables is linked to the relevant (IIRC) capital to illustrate
their aligment.
Many figures in the tables have been rounded, and as such some
totals may not sum. Year-on-year changes have been calculated
using unrounded numbers.
Customers
Delivering long-term value to customers is central
to Aegon’s purpose of
Helping people live their best lives
and provides the foundation for the company’s strategy. While we aim
at increasing our customer base and delivering customer value
in terms of claims, benefits and plan withdrawals, our main focus
stays on customer satisfaction.
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Customer: Number
Customer
Total customers
31.7 million 30.4 million
4.4%
29.9 million Americas
17.5 million 16.2 million
8.3%
16.1 millionThe Netherlands
2.7 million 2.5 million
7.1%
2.6 millionUnited Kingdom
3.9 million 3.8 million
1.1%
3.7 millionInternational
7.7 million 7.9 million
(3.1%)
7.5 millionNew customers
3.8 million 4.6 million
(17.5%)
4.3 million Customer: Satisfaction
Customer
Benchmarked Net Promoter
Score (NPS)
1)
Market Position
United States
= Market Average NM
NA
NMThe Netherlands
≤ Market Average NM
NA
NMUnited Kingdom
> Market Average NM
NA
NMComplaints
Total customer complaints
2)
86,075 80,510
6.9%
91,348Customer: Value
Manufactured
Claims, benefits and plan
withdrawals
Total claims, benefits and retirement
plan withdrawals
EUR 61.9 billion EUR 57.4 billion
7.9%
EUR 59.4 billion NA – not applicable
NM – not measured
pp – percentage points
1 Customer satisfaction is measured in benchmarked Net Promoter Score
(SM)
(NPS®), and is based on the question: ‘How likely are you to recommend
Aegon/Transamerica to a friend or colleague?” It is a single, easy-to-understand metric that predicts overall company growth and customer lifetime value.
Customers answer based on a 0-10 scale, where those answering 9 or 10 are deemed ‘promoters’, those answering 7 or 8 are ‘passive’, and 6 to 0 are
‘detractors’. NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. On an annual basis, we measure the NPS
of our core markets (the Netherlands, the United Kingdom, and the United States) and compare findings against peers in each local market. Our target is
to ensure that customer satisfaction in each of our core markets, measured in benchmarked Net Promoter Score
(SM)
(NPS®), remains at or above the average
of our peers. In the UK, the competitive set used for the survey consisted of 10 brands (pension providing peers). In the Netherlands, the competitive set used
per line of business for the survey consisted of 25 brands (life), 37 brands (pension schemes), 22 brands (savings), 30 brands (P&C), 27 brands (mortgages).
In the United States the competitive set per line of business used for the survey consisted of 25 brands (life) and 19 brands (retirement).
2 Includes all written and verbal complaints.
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Value created
Value created
Value created
Employees
Employees are a key part of our success, and, at Aegon, we want
them to share in that success. As our business progresses and
grows, we are better able to provide fulfilling careers,
advancement opportunities, and development. Our value creation
efforts for our employees focus on topics including inclusion
and diversity, employee engagement, and employee training
anddevelopment.
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Employees: Workforce
Human
and
Intellec-
tual
Location
Workforce
1)
22,271 22,322
(0.2%)
23,757United States
7,675 7,960
(3.6%)
8,570The Netherlands
3,855
3,930
(1.9%)
3,998
United Kingdom
2,476 2,307
7.3%
2,261International
6,590 6,598
(0.1%)
7,393Asset Management
1,675 1,527
9.7%
1,535Direct employees
17,936
17,989
(0.3%)
18,905
Employees: Inclusion and diversity
Human
Gender
Proportion of women employees
50%
50%
1pp
49%
Proportion of women in senior management
34% (at target)
32% (at target)
2pp
29%
Proportion of women in senior management (target)
2)
34% 32%
2pp
NAProportion of women in Supervisory Board
38%
38%
0pp
29%
Proportion of women in Executive Board
0% 0%
0pp
0%Proportion of women in Management Board
3)
20% 17%
3pp
18%NA – not applicable
NM – not measured
pp – percentage points
1 Direct employees and tied agents
2 In this context, senior management includes our Management Board and extends up to two levels below the Management Board (depending on the number of
employees in each business or country unit). The 2021 target and performance data do not include employees in our Central and Eastern Europe businesses that
are in the process of being divested.
3 Includes the members of the Management Board and the Executive Board.
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Value created
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Employees: Recruitment and retention
Human and Intellectual
Recruitment
Number of new hires
2,540
2,217
15%
2,974
Leavers
Number of leavers
1,727
2,831
(39%)
3,935
Proportion voluntary leavers
78%
69%
8pp
59%
Resignation
69% NM
NM
NMRetirement
6% NM
NM
NMOther voluntary
1)
3%
NM
NM
NM
Proportion involuntary leavers
22%
31%
(8pp)
41%
Redundancy
13%
20%
(7pp)
36%
Termination
7%
NM
NM
NM
Transfer
0%
NM
NM
NM
Other involuntary
1%
NM
NM
NM
Turnover
Turnover rate
12%
15%
(3pp)
22%
Voluntary
10% 10%
0pp
13%Involuntary
2)
3% 5%
(2pp)
9%NA – not applicable
NM – not measured
pp – percentage points
1 Includes leavers due to natural causes or personal reasons.
2 Involuntary turnover does not include strategic transfers where employees continue paid employment outside Aegon.
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Capital Indicator 2021 2020 Change 2020
to 2021
2019
Employees: Health and safety
Human
Absence
1)
Number of days lost to employee
absence
96,479 93,464
3.2%
107,313Employee absence rate
1.7%
1.7%
0pp
1.8%
Employees: Training and development
Intellectual
Investment in training and career
development
EUR 9.5 million EUR 10.8 million
(12.1%)
EUR 16.9 millionAverage investment in training and
career development per employee
(EUR)
428 486
(11.9%)
711Employees: Engagement
Social and Relationship
Global Employee Survey
2)
Engagement
68 72
(4pp)
67Leadership
57
63
(6pp)
55
Inclusion
74 79
(5pp)
76Diversity
72 73
(1pp)
69Participation rate
77% 82%
(5pp)
86%Proportion of employees covered
by collective bargaining / labor
agreements
3)
17.3% 17.6%
(0.3pp)
16.8%Employees: Remuneration
Human
Total employment costs
EUR 1.9 billion EUR 2.0 billion
(4.9%)
EUR 2.1 billionSalary costs
EUR 1.3 billion EUR 1.3 billion
(0.5%)
EUR 1.3 billionRatio of median to CEO salary
4)
28:1 32:1
NM
33:1Policy compliance
(Global Remuneration Framework)
95% 95%
0.0pp
94%NA – not applicable
NM – not measured
pp – percentage points
1 Employee absence refers to time off from work as a result of illness or injury. It excludes permitted leave of absence such as holiday, study/training, maternity
or paternity leave and compassionate leave.
2 Global Employee Survey is provided through Culture Amp. In 2021, three engagement surveys were conducted throughout the year (Q1, Q2 and Q3). The results
and participation rate disclosed are regarding the most recent survey, which was conducted in the third quarter of 2021.
3 All of Aegon’s employees in the Netherlands, other than senior management, are covered by the collective labor agreement of Aegon NL. Aegon, the unions and
the Dutch Central Works Council are working closely together in a co-creation steering group which prepares new agreements and tracks the implementation
thereof. The current collective labor agreement has a duration of two years, from July 1, 2020 up to and including June 30, 2022. Aegon has experienced no
significant strike, work stoppage or labor dispute in recent years.
4 Figures cover all employment costs relating to both staff and CEO. Please refer to the Remuneration Report 2021 (pages 55-72) for more details.
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About Aegon Governance and risk management Financial information
Non-financial information
385
Value created
Business partners
Our global network of partners and suppliers helps us operate
a successful business that creates value for all stakeholders.
We design our procurement processes to deliver excellent value
for money for our business functions while also contributing
to a sustainable global supply chain through integrating best-
practice ESG criteria and requirements into our supplier selection,
development, and ordering processes.
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Business partners: Brokers and intermediaries
Financial
Commissions paid to brokers and
otherintermediaries
EUR 2.6 billion EUR 2.3 billion
12.2%
EUR 2.4 billionBusiness partners: Reinsurers
Financial
Premiums paid toreinsurers
EUR 3.5 billion EUR 2.7 billion
30.1%
EUR 2.4 billionBusiness partners: Goods and services
Social and Relationship
Total spend on goods and services
EUR 1.7 billion EUR 1.6 billion
4.8%
EUR 1.6 billionSpend on goods and services with top
250 ('in-scope') suppliers
1)
EUR 1.4 billion EUR 1.3 billion
5.1%
NMProportion total spend on goods and
services with top 250 ('in-scope')
suppliers
85.5% 85.3%
0.3pp
NMNumber of 'in-scope' suppliers assessed
for ESG performance
2)
81 67
20.9%
NMSpend on goods and services with
suppliers assessed for ESG
performance
2)
EUR 0.8 billion EUR 0.8 billion
10.4%
NMProportion spend on goods and
services with top 250 ('in-scope')
suppliers assessed for ESG
performance
59.2% 56.4%
2.8pp
NMNA – not applicable
NM – not measured
pp – percentage points
1 Our top 250 suppliers consistently represent at least 80% of our total supplier spend.
2 Scored for environment, social and governance (ESG) performance through the EcoVadis rating platform.
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Value created
About Aegon Governance and risk management Financial information
Non-financial information
Investors
Aegon seeks to provide a consistent and attractive return
on investment to its investors around the world, based
on aresilient and sustainable business model.
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Investors: Corporate Governance
1)
Human and Intellectual
Supervisory Board
Membership
8 8
NA
6Average tenure (years)
4 NM
NA
NM Average age
63 NM
NA
NM Executive Board
Membership
2 2
NA
2Average tenure (years)
3 NM
NA
NM Average age
58 NM
NA
NM Management Board
Membership
8 10
NA
9Average tenure (years)
4 NM
NA
NM Average age
52 NM
NA
NM Investors: FInancial Returns
Financial
Returns to investors paid in the year
EUR 509 million EUR 370 million
37%
EUR 899 million Dividend payments
2)
EUR 289 million EUR 123 million
135%
EUR 611 million Interest (payments to
bondholders)
3)
EUR 220 million EUR 248 million
(11%)
EUR 288 million Dividend over the fiscal year per
common share
4)
EUR 0.17 EUR 0.12
42%
EUR 0.31 Share price (change)
35.8% (20.0%)
NM
0.3%Total shareholder return (TSR)
40.6% (18.4%)
NM
8.0%NA – not applicable
NM – not measured
pp – percentage points
1 Aegon has a two-tier system of corporate governance, with an independent Supervisory Board and a separate Executive Board. The Executive Board (consisting
of the CEO and CFO) is supported by a Management Board.
2 Does not include impact of share buy-backs. Calculation reflects IFRS accounting of inventory effects of share repurchases relating to dividends paid in stock.
3 This was referred to as 'Coupon payments' in our previous IAR.
4 Aegon’s final dividend for 2021 is subject to approval by the company’s Annual General Meeting of Shareholders, due to take place in May 2022.
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387
Value created
Society
We strive to add value to the communities where we operate
through tax payments, charitable donations, and volunteer work.
Where possible, we seek to ensure a positive environmental
impact, whether through our direct operations or our investment
activities.
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Society: Responsible investment
Manufactured
Responsible investment solutions (RIS)
Assets under management in RIS
1)
EUR 177.7 billion EUR 167.0 billion
6.4%
NMExclusions
2)
EUR 160.5 billion
EUR 157.6 billion
1.9%
NM
Best-in-class
3)
EUR 10.2 billion
EUR 3.3 billion
207.9%
NM
Sustainability-themed
4)
EUR 2.9 billion EUR 2.4 billion
23.5%
NMImpact investments
5)
EUR 4.1 billion
EUR 3.7 billion
8.2%
NM
Engagement and voting
6)
Intellectual
Number of engagements with investee
companies
7)
596 575
3.7%
564Proportion engagements addressing
environment themes
31%
25%
6pp
NM
Proportion engagements addressing
social themes
19% 21%
(2pp)
NM Proportion engagements addressing
governance themes
38%
53%
(15pp)
NM
Proportion engagements addressing
general disclosure themes
11% 8%
3pp
NM Number of shareholder meetings of invested
companies where votes cast
2,963 2,511
18.0%
2,321NA – not applicable
NM – not measured
pp – percentage points
1 Assets under management/advisement by Aegon Asset Management, comprises both proprietary and non-proprietary assets of third party clients. Joint
ventures are excluded. Responsible investment products and services may vary regionally. We have evaluated our approach to measuring assets under
management (AuM) that follow exclusionary strategies, and have decided to narrow the definition thereof to make it more relevant. Although the Aegon N.V.
Responsible Investment Policy and its mandated exclusions apply to all General Account assets of Aegon N.V. entities, we added a relevancy standard to our
process to determine whether certain General Account asset classes should be counted in AuM subject to exclusions, given the applicability of the Aegon N.V.
exclusion list to that asset class. The removal of asset classes such as commercial mortgage loans and US structured securities drove the decrease. Based on
this evaluation, we re-stated 2020 figures.
2 Utilize negative screening to avoid certain sectors, companies or practices based on specific criteria. Covers proprietary investments of Aegon Asset Management
and funds of third party clients which are also aligned to those same criteria.
3 Seek to outperform by emphasizing positive screening of issuers with better or improving ESG profiles relative to sector peers.
4 Focus on issuers whose activities or practices are aligned with sustainability themes in an effort to generate competitive returns over the long term.
5 Pursue financial returns alongside measurable positive social and/or environmental impact.
6 With regards to engagement, through our investment exposure, and where appropriate, we look to build a constructive dialogue with the companies and bodies
either bilaterally or as part of an investor consortium, as we promote responsible business practices. With regards to voting, for Aegon AM’s relevant investment
strategies that incorporate equities, we seek to execute votes in alignment with our engagement objectives and clients’ best interests, often in favor of
shareholder resolutions.
7 Source Aegon AM as of December 31, 2021. Percentages may not sum to 100 due to rounding. Themes are divided according to the main issue. At times,
there is more than one theme for an engagement. A small number of engagements were outsourced and therefore not included in this dataset.
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Value created
About Aegon Governance and risk management Financial information
Non-financial information
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Society: Investment footprint
Natural
Corporate Fixed Income + Listed Equity (CFI)
1)
Proportion CFI holding assessed for carbon emissions
72%
77%
(5pp)
NM
CFI absolute footprint (metric tons CO
2
e)
4,886,000 4,878,000
0.2%
NMCFI relative intensity (metric tons CO
2
e/EURm invested)
110
110
0.0%
NM
Weighted average carbon intensity (metric tons CO
2
e/EURm revenue)
490 470
0.0%
2)
490
Weighted average carbon intensity (coverage)
97% 97%
(0pp)
95%Carbon Risk Rating (Sustainalytics)
9.9 9.4
0.5
NMCarbon Risk Rating (Sustainalytics) (coverage)
73% 63%
10pp
NMSovereign Fixed Income (SFI)
3)
Proportion SFI holding assessed for carbon emissions
100% 98%
2pp
NMAbsolute footprint (metric tons CO
2
e)
15,088,000
13,863,000
8.8%
NM
Relative intensity (metric tons CO
2
e/EURm invested)
620 500
24.0%
NMWeighted average carbon intensity (metric tons CO
2
e/EURm GDP)
310
330
(6.1%)
NM
Weighted average carbon intensity (coverage)
100%
98%
2pp
NM
Climate change resiliency (ND-GAIN rating)
67 67
0
NMClimate change resiliency (coverage)
100% 98%
2pp
NMNA – not applicable
NM – not measured
pp – percentage points
1 Global General Account assets only. Aegon calculation. Values as of December 31, 2021. Climate metrics calculated per Methodology section. Relative intensity,
weighted average carbon intensity and carbon risk values have been adjusted to account for variance in coverage. Climate change data availability may change
over time and characteristics will vary. Certain information ©2022 Sustainalytics, MSCI ESG Research L.L.C. Reproduced with permission. Not for further
distribution.
2 The change expressed here concerns 2019 to 2021.
3 Global General Account assets only. Aegon calculation. Values as of December 31,2021. Climate metrics calculated per Methodology section. Relative intensity,
weighted average carbon intensity and carbon vulnerability values have been adjusted to account for variance in coverage. Climate change data availability may
change over time and characteristics will vary.
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389
Value created
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Society: Tax transparency
Social and
Relationship
Tax transparency
Total taxes borne by Aegon
EUR 381 million EUR 319 million
NA
EUR 615 million Corporate income tax
1)
(EUR 18 million) EUR 10 million
NA
EUR 42 million Americas
EUR 55 million (EUR 43 million)
NA
(EUR 12 million) The Netherlands
(EUR 75 million) EUR 33 million
NA
EUR 32 million United Kingdom
(EUR 2 million) EUR 14 million
NA
(EUR 9 million) Others
(EUR 3 million) EUR 6 million
NA
EUR 31 million Taxes collected on behalf of others
EUR 2.41 billion EUR 2.51 billion
NA
EUR 2.45 billionSociety: Community investment
Social and
Relationship
Community investment
Cash donations
2)
EUR 9.4 million EUR 9.5 million
(1.3%)
EUR 8.2 million Financial security and education
EUR 2.0 million
EUR 3.0 million
(35.7%)
NM
Financial Education and Literacy
EUR 1.6 million EUR 2.7 million
(40.9%)
NM Employability Later in Life
EUR 0.3 million
EUR 0.3 million
8.9%
NM
Well-Being and Longevity
EUR 5.6 million EUR 5.7 million
(1.1%)
NM Physical Fitness
EUR 0.2 million EUR 0.2 million
(16.0%)
NM Mental Vitality
EUR 0.5 million EUR 0.9 million
(38.7%)
NM Prevention of Diseases
EUR 1.3 million EUR 1.7 million
(23.2%)
NM Livable Communities
EUR 3.6 million EUR 2.9 million
25.2%
NM Other
EUR 1.8 million EUR 0.8 million
131.5%
NM Proportion of cash donations to key themes
81% 92%
(11pp)
NM Financial security and education
21% 32%
(11pp)
NM Well-Being and Longevity
60% 60%
0pp
NM Number of organizations receiving donations
469 481
NA
541Volunteering
Volunteering hours
6,806 4,399
54.7%
19,448Volunteering value
3)
EUR 0.3 million EUR 0.2 million
46.5%
EUR 0.9 million Total investment
Total value community investment
EUR 9.7 million EUR 9.7 million
(0.3%)
EUR 9.0 million Total value community investment as
proportion of net result
0.6%
17.6%
(17pp)
0.6%
NA – not applicable
NM – not measured
pp – percentage points
1 Please note, there is often no direct correlation between tax reported on earnings for any given year and amounts paid or received in tax. Part of the explanation
for this is that certain tax-deductible items are not recognized in the Company’s profit & loss statement but directly in equity. Additionally payments and refunds
for prior years can impact the amounts paid or received in the current year. Furthermore, the 2021 US tax liability will be satisfied entirely by losses
carryforwards and tax credits, including low income housing tax credits.
2 Cash donations refer to charitable donations to charities and other non-profit organizations, done in accordance with the Aegon N.V. Charitable Donations
Standards.
3 Volunteering value is calculated using an average hourly employee expenses rate based total employment costs.
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Value created
About Aegon Governance and risk management Financial information
Non-financial information
Capital Indicator 2021 2020 Change 2020
to 2021
2019
Society: Compliance
Social and Relationship
Policy compliance
1)
Proportion employees completing
training on Code of Conduct
98%
97%
2pp
95%
Anti-bribery and corruption
87%
89%
(2pp)
89%
Conflict of interest
98% 92%
6pp
85%Pricing and product development
97% 93%
4pp
94%Systematic Integrity Risk
Assessment (SIRA)
2)
Actions completed
77% 76%
1pp
69%Actions completed and progressing
within deadline
81%
80%
1pp
77%
Incidents
Incidents/attempts of fraud
889 4,014
(77.9%)
4,541Proportion through employees
0.1% NM
NM
NMProportion through intermediaries
21.4% NM
NM
NMProportion through third parties
78.5% NM
NM
NMFines and settlements
3)
Significant fines to address cases of
mis-selling
EUR 0.0 million EUR 8.2 million
NM
EUR 0.3 millionNA – not applicable
NM – not measured
pp – percentage points
1 Policy compliance reflects business units’ compliance with specific requirements of those policies. Where there is not full compliance, this does not indicate a
breach of the policy, but areas where units have requested time to further strengthen internal governance. Prior to 2021, compliance with Aegon anti-bribery
and corruption policies was expressed as combined metric of the separate Aegon Conflict of Interest and Aegon Gift & Entertainment policies. The latter has
since been incorporated into a new unified Aegon Anti-bribery and Corruption policy. As such, there is not a complete like-for-like comparison of 2021
performance with previous years. Compliance with the Aegon Conflict of Interest is now reported separately as a distinct item, backdated to 2019 on a
like-for-like basis.
2 Aegon undertakes an annual systematic integrity risk assessment (SIRA), as part of which all regions provide insight into their local anti-fraud programs and
indicate that controls with regard to internal, external, and intermediary fraud are properly designed and operating effectively. Aegon takes actions to address
any gaps in performance.
3 Includes any fines in excess of EUR 100,000.
CONTINUED >
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Non-financial information
About Aegon Governance and risk management Financial information
Non-financial information
391
Value created
Capital Indicator 2021 2020 Change 2019 to 2021
3)
2019
Society: Operational footprint
Natural
Greenhouse gas (GHG) emissions
(metric tons CO
2
e)
1)
Scope 1 (gas)
5,557 NM
(9.5%)
6,138Scope 2 (electricity gross/location)
16,366 NM
(54.1%)
35,659Scope 2 (electricity net/market)
203 NM
(60.7%)
516Scope 3 (air travel)
2,101 NM
(80.4%)
10,739Total GHG emissions (gross/location)
24,024 NM
(54.3%)
52,536Total GHG emissions / EUR million
revenue (gross/location)
1.0 NM
(48.8%)
1.9Total GHG emissions / employee
(gross/location)
1.3 NM
(52.4%)
2.8Total GHG emissions (net/market)
7,861 NM
(54.8%)
17,392Total GHG emissions / EUR million
revenue (net/market)
0.3 NM
(49.4%)
0.6Total GHG emissions / employee
(net/market)
0.4 NM
(53.0%)
0.9Operational reduction target
2)
Absolute reduction against baseline
(28,512) NM
(54.3%)
NAEnergy (MWh)
Fuel (gas)
27,288 NM
(9.0%)
30,002 Electricity (renewable)
49,283 NM
(39.4%)
81,282 Green tariff / Renewable Energy
Certificate (REC)
49,259 NM
(39.4%)
81,254 Self-generated
24 NM
(11.5%)
28 Electricity (non-renewable)
580 NM
(70.5%)
1,968 Electricity (total)
49,863 NM
(40.1%)
83,249 Energy (total of fuel and electricity)
77,151 NM
(31.9%)
113,252 Renewable electricity
(% of total electricity)
99% NM
1pp
98%Renewable energy
(% of total energy)
64% NM
(8pp)
72%Air travel (million km)
Total distance
16.3 NM
(84.2%)
103.4Travel class as proportion
of total distance
Economy
87% NM
NA
NMPremium
13% NM
NA
NMRoute type as proportion
of total distance
<500km
3%
NM
NA
NM
>500km
97% NM
NA
NMNA – not applicable
NM – not measured
pp – percentage points
1 Operational GHG emissions are based on the energy consumption and air travel activity of our four largest business units (Transamerica, Aegon the Netherlands,
Aegon UK and Aegon Asset Management), which in 2021 comprised 81% of our global (direct employee) headcount. GHG emissions are calculated according to the
‘market’ and ‘location’ based methodologies of the GHG Protocol, on a country-level basis and using locally applicable emission conversion factors. For the
market-based measurement we source conversion factors for electricity consumption from individual suppliers, 99% of which is zero carbon through our purchase of
renewable electricity in the form of ‘green tariff’ supply contracts and renewable energy certificates (RECs). For the location-based approach, we source conversion
factors for electricity consumption from the Environmental Protection Agency (eGRID) for the US, from the European Environment Agency for the Netherlands and
from the Department for Environment, Food & Rural Affairs (Defra) for the UK. Under both approaches, we source conversion factors for gas consumption from
Defra (100% mineral for the US, and 5% biofuel blend for the Netherlands and the UK). Conversion factors for air travel are sourced solely from Defra due to
applicability for all countries. As part of the calculation of GHG emissions, the underlying activity data is extrapolated to cover for unmeasured headcount.
2 Aegon has set a target to reduce the carbon footprint of its operational activities by 25% by 2025 against a 2019 baseline (using the location-based
measurement). In 2021, the carbon footprint of Aegon’s operational activities reduced by 54.3% compared with 2019. While some of these reductions can be
traced to our initiatives to stimulate hybrid working for instance reductions in leased space across the US in 2021 there has also been a temporary benefit from
fewer employees in the office due to the COVID-19 pandemic, which we expect to reverse over time. Through implementing our hybrid working policy and other
initiatives, we will work towards achieving our target. Aegon will also look towards expanding the scope of measurement of our GHG emissions and explore setting
further targets against these in the future.
3 Supporting data and calculation methodology for measurement of GHG emissions has been re-evaluated for the 2019 baseline year, and applied to the 2021
reporting year. Operational GHG emissions for 2020 have not been recalculated, and to avoid inconsistency have been omitted from reporting. The change
expressed here concerns 2019 to 2021.
Aegon Integrated Annual Report
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Value created
About Aegon Governance and risk management Financial information
Non-financial information
External recognition
At Aegon, we actively participate in high-profile sustainability
performance benchmarks to provide transparency for our
stakeholders and wider society in the integration of sustainability
considerations into our business operations. We also proactively
engage with business information platforms incorporating
sustainability performance data, including Bloomberg and Refinitiv.
Performance ratings
We have received independent recognition from sustainability
ratings, demonstrating that our baseline practices are in good
shape. Improvement during the course of 2021 shows, in part,
the positive impact of our current sustainability focus and related
commitments. As these assessments are conducted throughout
the year, we regularly update our latest scoring and peer
positioning via the dedicated ‘
External recognition
’ page included under ‘Sustainability’ on the Aegon website. The overview
provided below details our scores at February 2022.
MSCI:
As of 23 December 2021, Aegon N.V. received a rating
of AA (on a scale of AAA-CCC) in the MSCI ESG Ratings
assessment
1)
.
Sustainalytics:
As of November 2021, Aegon N.V. received
an ESG Risk Rating of 14.6 and was assessed by Sustainalytics
to be at low risk of experiencing material financial impacts from
ESG factors. Aegon NV’s ESG Risk Rating places it in the 5
th
percentile in the Insurance industry assessed by Sustainalytics
2)
.
ISS:
As of 12 February 2022, Aegon N.V. has received an ESG
Corporate Rating of C+ (Prime) from ISS, a provider of end-to-end
responsible investment and governance solutions to the global
financial community
3)
.
FTSE4Good:
As of June 2021, Aegon N.V. is a constituent
company in the FTSE4Good Index Series, designed to identify
companies that demonstrate strong environmental, social and
governance practices measured against globally recognized
standards
4)
.
Moody’s ESG Solutions:
As of January 2022, Aegon N.V. has an
‘ESG overall score’ rating of “robust”. We are a constituent in two
Euronext indices
using Moody’s ESG Solutions data
5)
:
•
Eurozone 120
(the 120 most advanced companies in the
Eurozone region)
•
Benelux 20
(the 20 most advanced companies in the
Benelux region)
CDP:
We participate
in the annual CDP Climate Change disclosure,
where we publish performance data, policies and practices
related to the impacts and opportunities related to climate
change in the context of our business activities. We maintained
a rating of 'C' for our 2021 reporting year disclosure
6)
.
1 ©2022 MSCI INC. ALL RIGHTS RESERVED
www.msci.com/research-and-insights/esg-ratings-corporate-search-tool
2 © 2022 Sustainalytics. All rights reserved. This information has been developed by Sustainalytics (www.sustainalytics.com). Such information and data are
proprietary of Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an
endorsement of any product or project, nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose.
Theiruse is subject to conditions available at
www.sustainalytics.com/legal-disclaimers
3 © 2022 ISS Corporate Solutions. All Rights Reserved.
www.issgovernance.com/esg/ratings/corporate-rating/
4 © FTSE Russell 2022
www.ftserussell.com/products/indices/ftse4good
5 © 2022 MOODY’S CORPORATION, MOODY’S INVESTORS SERVICE, INC., MOODY’S ANALYTICS, INC., FOUR TWENTY SEVEN, INC. (“FOUR TWENTY SEVEN”),
VIGEO SAS (“V.E”) AND/OR THEIR LICENSORS AND AFFILIATES (COLLECTIVELY, “MOODY’S”). ALL RIGHTS RESERVED.
www.moodys.com/esg-solutions
6 © 2022 CDP Europe AISBL
www.cdp.net/en
'AA' rating
1)
14.6 (low risk). 5
th
percentile
in the Insurance industry assessed
by Sustainalytics
2)
.
C+ (Prime) rating
3)
Constituent company in the
FTSE4Good Index Series
4)
.
Constituent of Euronext Eurozone
120 and Benelux 20 indices
5)
.
‘C’ score
6)
Aegon Integrated Annual Report
2021
About Aegon Governance and risk management Financial information
Non-financial information
About Aegon Governance and risk management Financial information
Non-financial information
393
External recognition
External recognition
External recognition
Disclaimer
Cautionary note regarding non-EU-IFRS measures
This document includes the following non-EU-IFRS financial
measures: operating result before tax, income tax and result
before tax. These non-EU-IFRS measures are calculated by
consolidating on aproportionate basis Aegon’s joint ventures
and associated companies. The reconciliation of these measures
to the most comparable EU-IFRS measure is provided in note 5
Segment information of this report. Aegon believes that these
non-EU-IFRS measures, together with the EU-IFRS 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.
Currency exchange rates
This document contains certain information about Aegon’s
results, financial condition and revenue generating investments
presented in USD for the Americas and Asia, and in GBP for the
United Kingdom, because those businesses operate and are
managed primarily in those currencies. None of this information is
asubstitute for or superior to financial information about Aegon
presented in EUR, which is the currency of Aegon’s primary
financial statements.
Forward-looking statements
The statements contained in this document that are not historical
facts are forward-looking statements as defined in the US Private
Securities Litigation Reform Act of 1995. The following are
words that identify such forward-looking statements: aim,
believe, estimate, target, intend, may, expect, anticipate, predict,
project, counting on, plan, continue, want, forecast, goal, should,
would, could, is confident, will, and similar expressions as they
relate to Aegon. These statements may contain information
about financial prospects, economic conditions and trends and
involve risks and uncertainties. In addition, any statements that
refer to our sustainability, environmental and social targets,
commitments, goals, efforts and expectations and other events
or circumstances that are partially dependent on future events
are forward-looking statements.These statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions that are difficult to predict. Aegon undertakes
no obligation, and expressly disclaims any duty, to publicly update
or revise any forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which merely reflect company expectations at the time
of writing. Actual results may differ materially and adversely
from expectations conveyed in forward-looking statements due
to changes caused by various risks and uncertainties. Such risks
and uncertainties include but are not limited to the following:
•
Unexpected delays, difficulties, and expenses in executing
against our environmental, climate, diversity and inclusion or
other “ESG” targets, goals and commitments outlined in this
document, and changes in laws or regulations affecting us,
such as changes in data privacy, environmental, safety and
health laws;
•
Changes in general economic and/or governmental conditions,
particularly in the United States, the Netherlands and the
United Kingdom;
•
Civilunrest, (geo-) political tensions, military action or other
instability in a country or geographic region;
•
Changes in the performance of financial markets, including
emerging markets, such as with regard to:
•
The frequency and severity of defaults by issuers in
Aegon’s fixed income investment portfolios;
•
The effects of corporate bankruptcies and/or accounting
restatements on the financial markets and the resulting
decline in the value of equity and debt securities Aegon
holds;
•
The effects of declining creditworthiness of certain public
sector securities and the resulting decline in the value of
government exposure that Aegon holds; and
•
The impact from volatility in credit, equity, and interest
rates;
•
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
Netherlands, the United Kingdom and emerging markets;
•
Catastrophic events, either manmade or by nature, including
by way of example acts of God, acts of terrorism, acts of war
and pandemics, could result in material losses and
significantly interrupt Aegon’s business;
•
The frequency and severity of insured loss events;
•
Changes affecting longevity, mortality, morbidity, persistence
and other factors that may impact the profitability
of Aegon’s insurance products;
Aegon Integrated Annual Report
2021
394
Disclaimer
About Aegon Governance and risk management Financial information
Non-financial information
Disclaimer
Disclaimer
•
Aegon’s projected results are highly sensitive to complex
mathematical models of financial markets, mortality,
longevity, and other dynamic systems subject to shocks and
unpredictable volatility. Should assumptions to these models
later prove incorrect, or should errors in those models escape
the controls in place to detect them, future performance will
vary from projected results;
•
Reinsurers to whom Aegon has ceded significant underwriting
risks may fail to meet their obligations;
•
Changes in customer behavior and public opinion in general
related to, among other things, the type of products Aegon
sells, including legal, regulatory or commercial necessity
to meet changing customer expectations;
•
Customer responsiveness to both new products and
distribution channels;
•
As Aegon’s operations support complex transactions and are
highly dependent on the proper functioning of information
technology, operational risks such as system disruptions
or failures, security or data privacy breaches, cyberattacks,
human error, failure to safeguard personally identifiable
information, changes in operational practices or inadequate
controls including with respect to third parties with which
we do business may disrupt Aegon’s business, damage its
reputation and adversely affect its results of operations,
financial condition and cash flows;
•
The impact of acquisitions and divestitures, restructurings,
product withdrawals and other unusual items, including
Aegon’s ability to integrate acquisitions and to obtain the
anticipated results and synergies from acquisitions;
•
Aegon’s failure to achieve anticipated levels of earnings
or operational efficiencies,as well as other management
initiatives related to cost savings, Cash Capital at Holding,
gross financial leverage and free cash flow;
•
Changes in the policies of central banks and/or governments;
•
Litigation or regulatory action that could require Aegon to pay
significant damages or change the way Aegon does business;
•
Competitive, legal, regulatory, or tax changes that affect
profitability, the distribution cost of or demand for
Aegon’s products;
•
Consequences of an actual or potential break-up of the
European monetary union in whole or in part, or the exit of the
United Kingdom from the European Union and potential
consequences if other European Union countries leave the
European Union;
•
Changes in laws and regulations, particularly those affecting
Aegon’s operations’ ability to hire and retain key personnel,
taxation of Aegon companies, the products Aegon sells, and
the attractiveness of certain products to its consumers;
•
Regulatory changes relating to the pensions, investment, and
insurance industries in the jurisdictions in which
Aegon operates;
•
Standard setting initiatives of supranational standard setting
bodies such as the Financial Stability Board and the
International Association of Insurance Supervisors or changes
to such standards that may have an impact on regional (such
as EU), national or US federal or state level financial
regulation or the application thereof to Aegon, including the
designation of Aegon by the Financial Stability Board as a
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.
This document contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
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.
Aegon Integrated Annual Report
2021
About Aegon Governance and risk management Financial information
Non-financial information
About Aegon Governance and risk management Financial information
Non-financial information
395
Disclaimer
Contact
Head office
AegonN.V.
Aegonplein 50
2591 TV The Hague
The Netherlands
Telephone: +31 (0) 70 344 32 10
www.aegon.com
Investor relations
Telephone: +31 (0) 70 344 83 05
E-mail: [email protected]
Media relations
Telephone: +31 (0) 70 344 89 56
E-mail: [email protected]
Agent for service in the United States of America
Karyn Polak
Telephone: +1 443 475 3480
E-mail: Kar[email protected]
Colophon
Consultancy and design DartGroup, Amsterdam (NL)
Editing and production Aegon Corporate Communications (NL)
Typesetting DartGroup, Amsterdam (NL)
Aegon Integrated Annual Report
2021
396
Contact
About Aegon Governance and risk management Financial information
Non-financial information
Contact
Contact
aegon.com