Company Quick10K Filing
Aegon NV
20-F 2019-12-31 Filed 2020-03-18

AEB 20F Annual Report

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Aegon NV Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d837786d20f.htm FORM 20-F Form 20-F
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

-

FORM 20-F

-

(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF THE

SECURITIES EXCHANGE ACT OF 1934

OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                 to                                

OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10882

-

Aegon N.V.

(Exact name of Registrant as specified in its charter)

-

Not Applicable

(Translation of Registrant’s name into English)

The Netherlands

(Jurisdiction of incorporation or organization)

Aegonplein 50, PO Box 85, 2501 CB The Hague, The Netherlands

(Address of principal executive offices)

J.H.P.M. van Rossum

Executive Vice President and Head of Corporate Financial Center

Aegon N.V.

Aegonplein 50, 2501 CB The Hague, The Netherlands

+31-70-3445458

Jurgen.vanRossum@aegon.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common shares, par value EUR 0.12 per share   AEG   New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Not applicable

(Title of Class)

Not applicable

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not applicable

(Title of Class)


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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

2,105,138,885 common shares and 585,022,160 common shares B

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934. Yes No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the

preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past

90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to

Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the

registrant was required to submit such files).

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.

See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

Large accelerated filer Accelerated filer Non-accelerated filer Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check

mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial

                                 accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards

Board to its Accounting Standards Codification after April 5, 2012.

Indicate by checkmark which basis of accounting the registrant has used to prepare the financial statements included in this filing

U.S. GAAP International Financial Reporting Standards as issued by the International Accounting Standards Board Other

If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No


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LOGO

Annual Report
on Form 20-F
2019


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Cross reference table Form 20-F

 

1   Identity of Directors, Senior Management and Advisers   n/a  
2   Offer Statistics and Expected Timetable   n/a  
3   Key Information    
3A   Selected financial data   120-121  
3B   Capitalization and indebtedness   n/a  
3C   Reasons for the offer and use of proceeds   n/a  
3D   Risk factors   86-89; 109-115; 184-209; 365-385  
4   Information on the Company    
4A   History and development of the Company   10-35; 301-303; 429  
4B   Business overview   338-364  
4C   Organizational structure   10-12  
4D   Property, plants and equipment   387  
4A   Unresolved Staff Comments   n/a  
5   Operating and Financial Review and Prospects    
5A   Operating results   122-142  
5B   Liquidity and capital resources   96-104; 231-233; 266-267; 277-281  
5C   Research and development, patent and licenses etc.   n/a  
5D   Trend information   19-35; 122-142  
5E   Off-balance sheet arrangements   294-298  
5F   Tabular disclosure of contractual obligations   208-209; 294-298; 329  
5G   Safe harbor   n/a  
6   Directors, Senior Management and Employees    
6A   Directors and senior management   41-45  
6B   Compensation   54-85; 224-226; 305-306  
6C   Board practices   36-40  
6D   Employees   31-33; 217; 388  
6E   Share ownership   36-40; 324-326  
     
7   Major Shareholders and Related Party Transactions     
7A   Major shareholders   38; 324-326
7B   Related party transactions   305-306  
7C   Interest of experts and counsel   n/a  
8   Financial Information    
8A   Consolidated Statements and Other Financial Information   144-150; 327-333  
8B   Significant Changes   n/a  
9   The Offer and Listing    
9A   Offer and listing details   387  
9B   Plan of distribution   n/a  
9C   Markets   387  
9D   Selling shareholders   n/a  
9E   Dilution   n/a  
9F   Expenses of the issue   n/a  
10   Additional Information    
10A   Share capital   n/a  
10B   Memorandum and articles of association   390-391  
10C   Material contracts   387  
10D   Exchange controls   387  
10E   Taxation   392-399  
10F   Dividends and paying agents   n/a  
10G   Statement by experts   n/a  
10H   Documents on display   430  
10I   Subsidiary Information   n/a  
11   Quantitative and Qualitative Disclosures About Market Risk   109-115; 184-209  
12   Description of Securities Other than Equity Securities   n/a  
 

 

         Aegon Annual Report on Form 20-F 2019                


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13   Defaults, Dividend Arrearages and Delinquencies   n/a  
14   Material Modifications to the Rights of Security Holders and Use of Proceeds   n/a  
15   Controls and Procedures   116  
16A   Audit committee financial expert   49-50  
16B   Code of Ethics   89  
16C   Principal Accountant Fees and Services   400  
16D   Exemptions from the Listing Standards for Audit Committees   n/a  
16E   Purchases of Equity Securities by the Issuer and Affiliated Purchasers   399  
16F   Change in Registrant’s Certifying Accountant   n/a  
16G   Corporate Governance   36-40  
16H   Mine Safety Disclosure   n/a  
17   Financial Statements   n/a  
18   Financial Statements   144-322  
19   Exhibits   431  
 

 

            Aegon Annual Report on Form 20-F 2019                


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Welcome to Aegon’s 2019

Annual Report on Form 20-F

 

To prosper, we believe companies must create long-term value for the societies and communities in which they operate, their shareholders, customers, and communities and business partners.

Aegon makes economic and social contributions through returns to shareholders, tax and support for local communities, as well as through investments both for our own account and on behalf of our customers. Our aim is to be a responsible corporate citizen, fully aware of the impact we have on our stakeholders, society as a whole, and environment.

This is Aegon’s Annual Report on Form 20-F for the year ended December 31, 2019. Aegon’s aim in producing this report is to provide a clear, balanced overview of the Company’s operations, strategy and performance. In this report, we look at the trends and challenges our business is facing, at our strategy, at how we create and share value – and at how we safeguard this value through a responsible approach to our business. This report also contains the 2019 consolidated financial statements and Company financial statements for Aegon N.V. (from page 144).

This document contains Aegon’s Annual Report as filed on Form 20-F (also referred to in this document as ‘Annual Report’) with the United States Securities and Exchange Commission (SEC).

We have prepared this report in accordance with the International Financial Reporting Standards, as issued by the IASB, as well as the International Integrated Reporting Council (IIRC) framework. This report also conforms to relevant reporting requirements under the Dutch Corporate Governance Code and Dutch Civil Code (Part 9, Book 2).

Aegon prepares its consolidated financial statements in accordance with IFRS and with Part 9 of Book 2 of the Netherlands Civil Code for purposes of reporting with the U.S. SEC, including financial information contained in this Annual Report on Form 20-F. Aegon’s accounting policies and its use of various options under IFRS are described in note 2 to the consolidated financial statements.

Other than for SEC reporting, Aegon prepared its Annual Accounts under International Financial Reporting Standards as adopted by the European Union, including the decisions Aegon made with regard to the options available under International Financial Reporting Standards as adopted by the EU (IFRS-EU). IFRS-EU differs from IFRS in respect of certain paragraphs

in IAS 39 ‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk. Under IFRS-EU, Aegon applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU ‘carve out’ version of IAS 39. Under IFRS, hedge accounting for fair value macro hedges cannot be applied to mortgage loans and ineffectiveness arises whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less than the original designated amount of that bucket.

This information is prepared by revising the hedge accounting impacts that are applied under the EU ‘carve out’ version of IAS 39. Financial information under IFRS accordingly does not take account of the possibility that had Aegon applied IFRS as its primary accounting framework it might have applied alternative hedge strategies where those alternative hedge strategies could have qualified for IFRS compliant hedge accounting. These decisions could have resulted in different shareholders’ equity and net income amounts compared to those indicated in this Annual Report on Form 20-F.

A reconciliation between IFRS-EU and IFRS is included in note 2.1 to the consolidated financial statements

If you have comments or suggestions about this report, please contact our offices in The Hague. Contact details may be found on page 429.

References

Throughout this document, Aegon N.V. is referred to as either ‘Aegon’ or ‘the Company’. Along with its member companies, Aegon N.V. may be referred to as ‘Aegon Group’ or ‘the Group’. 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.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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         Aegon Annual Report on Form 20-F 2019  


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Financial information  
120   Selected financial data  
122   Results of operations  
123  

  Results 2019 worldwide

 
129  

  Results 2019 Americas

 
133  

  Results 2019 Europe

 
138  

  Results 2019 Asia

 
141  

  Results 2019 Aegon Asset Management

 
Consolidated financial statements of Aegon N.V.  
143   Exchange rates  
144   Consolidated income statement of Aegon N.V.  
145   Consolidated statement of comprehensive income of Aegon N.V.  
146   Consolidated statement of financial position of Aegon N.V.  
147   Consolidated statement of changes in equity of Aegon N.V.  
150   Consolidated cash flow statement of Aegon N.V.  
151   Notes to the consolidated financial statements  
Financial statements of Aegon N.V.  
310   Income statement of Aegon N.V.  
311   Statement of financial position of Aegon N.V.  
312   Notes to the financial statements  
Other information  
323   Profit appropriation  
324   Major shareholders  
Other financial information  
327   Schedule I  
328   Schedule II  
330   Schedule III  
332   Schedule IV  
333   Schedule V  

 

334

 

 

Auditor’s report on the Annual Report on Form 20-F

 
Additional information  
338   Overview of Americas  
346   Overview of the Netherlands  
352   Overview of United Kingdom  
356   Overview of Southern and Eastern Europe  
360   Overview of Asia  
363   Overview of Aegon Asset Management  
365   Risk factors Aegon N.V.  
386   Compliance with regulations  
387   Property, plant and equipment  
387   The offer and listing  
387   Material contracts  
387   Exchange controls  
388   Employees and labor relations  
389   Dividend policy  
390   Memorandum and Articles of Association  
392   Taxation  
399   Purchases of equity securities by the issuer and affiliated purchasers  
400   Principal accountant fees and services  
 
 

 

         Aegon Annual Report on Form 20-F 2019  

 


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4     2019 At a glance
        
        

 

    

2019: A year of progress

In 2019, Aegon continued its realignment for growth, launched new propositions, further improved customer service, and made important executive management appointments to guide us into our next phase of development. We set ambitious 3-year financial targets. Milestone moments included:

 

LOGO

February

Aegon set new financial targets for 2019-2021 focused on growing capital generation and dividends.

March

Transamerica announced agreement with LTCG for administration of long-term care insurance.

Transamerica designated as a Best Place to Work for LGBTQ equality and received perfect score from Human Rights Campaign.

April

Transamerica launched fifth Deltashares Managed Risk ETF.

Aegon issued EUR 500 million of Solvency II Restricted Tier 1 Perpetual Contingent Convertible Securities to replace USD 500 million of grandfathered Restricted Tier 1.

LOGO

Transamerica organized itself for further growth by establishing two dedicated business lines – Workplace Solutions and Individual Solutions.

May

Aegon signed a deal to divest its stake in its Japan-based joint ventures with Sony Life.

Bas NieuweWeme appointed CEO of Aegon Asset Management, succeeding Sarah Russell.

August

Announcement that Lard Friese will succeed Alex Wynaendts as Aegon’s CEO at the AGM in May 2020.

Transamerica reduced fees for multiple investments, helping to maximize overall value for customers.

September

Announcement that Mike Holliday-Williams will succeed Adrian Grace as CEO of Aegon UK.

LOGO

Aegon announced it will establish an International division encompassing its Asian and Southern and Eastern European businesses as of January 1, 2020.

Maarten Edixhoven appointed to the Management Board as of October 2019.

Transamerica named one of the best 100 companies in the US for working mothers and enters Diversity Best Practices Inclusion Index.

October

Aegon the Netherlands reorganized itself to become a more agile company to improve effectiveness and efficiency of service delivery.

Announcement that Thomas Wellauer will be proposed to join Aegon’s Supervisory Board at the AGM in May 2020.

Aegon issued USD 925 million of Solvency II Tier 2 Subordinated Notes to replace USD 1 billion of grandfathered Restricted Tier 1.

LOGO

November

Aegon celebrated its 175th anniversary.

December

Aegon Asset Management announced realignment of its organization as a truly global asset manager set up for future growth.

Aegon reinsured about one quarter of its longevity exposure in the Netherlands with Canada Life Reinsurance.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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         Aegon Annual Report on Form 20-F 2019  


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LOGO

 

2019 was a special year in which we marked Aegon’s 175th anniversary. Throughout all of these years, and despite many changes inside and outside our organization, we have remained strongly committed to our purpose of helping people achieve a lifetime of financial security.

The need for solidarity and financial security has only grown. This is particularly true in recent years as increasing longevity and lower birth rates, combined with other trends in society, have added to the strain on social security and other government benefits. The responsibility for financial security up to and into retirement is increasingly shifting to the individual, who is often not prepared for the task.

These trends are global and Aegon is proud that we use our long years of expertise to help 29.9 million customers in over 20 countries to secure their financial futures. Our contribution to our customers’ lives can clearly be seen as Aegon paid over EUR 59 billion in claims, benefits and plan withdrawals globally in 2019 alone. While our local businesses have their own unique cultures and business models, we all share the same purpose.

Looking back at 2019

Aegon operated in a challenging environment in 2019, with persistent low interest rates in our key markets negatively impacting underlying earnings. We also experienced net outflows in our US retirement and annuity businesses. As a result we achieved a return on equity1 of 9.5%, below our target of 10%. However, we increased our normalized capital generation which, combined with a number of management actions we have taken, enabled us to maintain a strong capital position.

At the same time, we continued to execute on our strategy and we reached a number of important milestones, by simplifying Aegon’s structure and adopting an even more proactive approach to managing our portfolio of businesses.

We announced in February 2019 that we were grouping our businesses into three strategic categories – Manage for Value,

Drive for Growth, and Scale-up for Future. The categories recognize the different maturities, varying growth dynamics and capital generation patterns of our businesses – and the need to manage them in distinct ways.

Manage for Value

Manage for Value consists of our at-scale, mostly spread-based businesses, which we manage by optimizing capital generation. In this category, we have, for instance, accelerated the release of capital from our mature businesses in the Netherlands by reinsuring a quarter of our longevity risk. In the Netherlands we also moved from a defined benefit plan to a defined contribution plan for new pension accruals of Aegon’s own employees. This switch reduces volatility in Aegon’s pension expenses and helps to protect our capital position.

Drive for Growth

The Drive for Growth businesses are the cornerstone of our growth strategy as they have the highest potential for future capital generation growth. Therefore we direct the vast majority of our investments into these businesses. I am pleased to see positive momentum in the second half of 2019 in Life and Accident & Health sales, as well as gross deposits. We also continued to make investments to improve our customer experience and increase retention rates, in particular in our Transamerica Workplace Solutions business.

Aegon Asset Management continued to grow in 2019 and recorded its eighth consecutive year of positive net inflows from third parties. Under new leadership, this business has been realigned as a fully global asset management organization and is set up for future growth.

And finally in the UK, in the Drive for Growth category, we completed the Cofunds integration, thereby achieving the targeted expense savings and confirming our position as the largest player in the UK platform market.

Scale-up for Future

The Scale-up for Future category brings new platforms, technology and business models to capture meaningful new growth opportunities.

 

 

1   Return on equity is calculated using shareholders’ equity based on IFRS as adopted by the EU.

 

 

         Aegon Annual Report on Form 20-F 2019  


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7     Letter from our CEO
        
        

 

    

In 2019, we announced the creation of Aegon International, which brings together our businesses in Asia and Southern and Eastern Europe. This new division is designed to accelerate growth and further leverage cross-border synergies by developing new business models and realizing operational efficiencies. We are also reaching out to customers directly as we continue expanding our digital platforms. In this regard I would like to point out an interesting development in China, where our insurance joint venture is partnering with a major e-commerce player to offer term life products on its platforms. The first product launch in October 2019 led to the sale of 150,000 new term life policies in the fourth quarter of 2019, indicating the strong potential of the e-commerce model.

If a Scale-up for Future business does not fulfil our expectations, we review the position in order to optimize our capital allocation. As a result, we decided to sell our stake in the partnership with Sony Life in Japan.

Investing in the future

Looking ahead, the macroeconomic environment as a whole remains uncertain. And, at the time of writing this letter in March 2020, the full impact from the coronavirus outbreak is not yet clear. We are, however, seeing disruption to the global economy as both stock markets and interest rates have declined significantly. We have taken the necessary measures aiming to provide for the safety and the wellbeing of our colleagues and customers around the world.

In order to keep Aegon future ready and be able to quickly adjust to changing circumstances, we keep transforming our organization and make investments to become increasingly innovative, customer-centric and data-driven. These investments contribute towards more of our employees becoming aware of digital opportunities, with training programs geared towards knowledge building in data and analytics. Over a thousand Aegon leaders participated in the Analytics for Leaders program. This is in addition to other data and analytics programs available for all our employees.

We are also running a number of projects at business-unit level to further streamline our operations. These projects create opportunities to inspire new business ideas, leading to better service for our existing customers and opening of new markets.

Responsible business

We take our responsibility to society seriously and it is a good sign that Aegon’s voice is increasingly being heard on issues subject to public debate. During 2019, we re-examined our approach to sustainability, and important social, environmental and economic aspects of our operations.

Investments

As a major institutional investor entrusted with the management and servicing of almost EUR 900 billion in customer assets, we strive to deliver on our promise of a secure and healthy financial

future while caring about the environment in which we all live. We are proud to contribute to the UN Sustainable Development Goals and continue acting in the spirit of Principles for Responsible Investment, to which Aegon Asset Management is a signatory. For example, our updated Responsible Investment Policy – finalized in December 2019 – expands the criteria for excluding companies with coal-related activities from our investments.

Longevity research

Healthy aging is at the heart of our business, and Aegon has developed insights into longevity and retirement. These insights are crucial, as government-supported retirement schemes are coming under increasing strain as individuals face more responsibility to safeguard their financial futures. We believe that the solution is a combination of collective action and empowerment. I was honored to deliver this message to the Organization for Economic Co-operation and Development Forum in May 2019 when presenting our annual Retirement Readiness report, The New Social Contract: Empowering individuals in a transitioning world.

Supporting our communities

We also take steps to help improve the communities in which we operate. During 2019, Aegon and Transamerica contributed over EUR 9 million in support of local communities through cash donations and employee volunteering. For instance, colleagues built affordable houses in Denver with Habitat for Humanity, and helped people address the problem of excessive debt in the Netherlands with a financial coaching program.

Conclusion

This is my last contribution to the annual report after twelve years as CEO of Aegon. Looking back over this period, I am proud of what we have achieved together. We have transformed the company and ensured that we can continue to make good on our purpose of helping people achieve a lifetime of financial security long into the future.

Like other companies operating around the world, Aegon is exposed to the challenges resulting from the coronavirus pandemic. We are taking measures aimed at safeguarding the interests of all our stakeholders in this difficult time.

I recognize that Aegon’s long-term transformation has at times asked a lot of our investors, as well as our employees. Mindful of everything we have experienced together over the last 12 years, I want to express sincere thanks, also on behalf of the Management Board, to everyone who has contributed to Aegon’s journey, serving millions of customers around the globe. Together, we impact people’s lives in the moments that matter.

 

Alex Wynaendts

Chief Executive Officer and Chairman

of the Executive Board of Aegon N.V.

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         Aegon Annual Report on Form 20-F 2019  


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Aegon made significant progress in its transformation in 2019 and the Supervisory Board is committed to supporting the focus on accelerating sustainable growth to benefit all of Aegon’s stakeholders.

 

Societal trends

The insurance and pensions industry is being changed fundamentally due to the societal trends and rapid-paced digital innovation impacting our daily lives. People are living longer and face challenges in maintaining their financial security at a time when national social security systems are under increasing strain. Long-held expectations about well-funded retirement for all are under threat. At the same time, much of our daily transactions and activities now occur in digital form and in the cloud, and innovation is accelerating.

Now, more than ever, people need the right solutions and tools, coupled with an understanding of how to use them, to ensure their financial security.

This makes Aegon – with roots stretching back 175 years – and its expertise in pensions, life insurance, asset management and other financial services more relevant than ever before for customers. We are proud to provide important insights to policymakers on shaping retirement systems fit for the 21st Century. Aegon can fulfill these important functions due to our mutually beneficial relationships with a wide range of stakeholders. For instance, our 23,757 employees received EUR 2.1 billion in salaries and other benefits in 2019 and we delivered approximately EUR 899 million to investors in dividends and interest payments.

Long-term view

As we are entrusted with overseeing the Company strategy, the Supervisory Board plays an important role in helping Aegon remain relevant to all our stakeholders and wider society, while growing sustainably. We perform this task by taking

the long-term view. The members of the Supervisory Board, who come from a range of industries and disciplines, keep a close eye on today and tomorrow’s trends and have been engaging in productive and insightful dialogues with Aegon’s management.

We did not see the expected growth in earnings and sales in 2019. Yet, the Supervisory Board was pleased to note that Aegon realized key elements of its transformation strategy to position the Company for long-term value creation. It is encouraging to see how Aegon is bringing innovative solutions to customers in large developing markets such as Turkey, India and China. The activities in Southern and Eastern Europe and Asia have been brought together in a new division called Aegon International. This organizational change is designed to accelerate growth, foster new business models and enable operational efficiencies.

The full Supervisory Board held a meeting in New York with the Management Board in June to further discuss the grouping of Aegon’s portfolio of businesses into three distinct categories: Manage for Value, Drive for Growth, and Scale-up for Future. Supervisory Board members also visited offices of our US business, Transamerica, during the year to connect with the business and staff. We were particularly interested in talking to people directly involved in partnerships with third-party administrators to administer our US annuity, insurance and long-term care business lines. These partnerships enable Transamerica to accelerate the enhancement of its digital capabilities and the modernization of its platforms to serve all customers. Similarly, the Supervisory Board went to Spain and the Netherlands to evaluate how transformation processes are being implemented in our businesses there and how they impact employees.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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9     Letter from our Supervisory Board Chairman
        
        

 

    

The coronavirus outbreak has introduced new uncertainty, and the Supervisory Board is being kept informed of the measures Aegon is taking to prioritize the health and wellbeing of its employees and customers.

Corporate governance

The Supervisory Board, supported by its four committees – covering the topics of Audit, Risk, Remuneration and Nomination – had a busy agenda in 2019. Key topics included corporate governance, compliance, reputation, human capital, as well as overseeing and advising on the Company strategy. The Audit and Risk Committees evaluated internal reports and engaged with Aegon’s senior management and regulators to ensure the integrity of Aegon’s financial statements, internal control systems and processes to deal with risks as diverse as how Aegon does business, the security of our IT systems and how we comply with existing and planned regulations.

Remuneration at publicly owned companies has been the subject of much discussion in recent years. The EU’s new Shareholder Rights Directive has mandated some changes to remuneration policies, and at Aegon we value the opinions of our various stakeholders on this important subject. Therefore, the Remuneration Committee was involved in a major consultation process with shareholders, proxy advisors and employee representatives in 2019 in regard to amending our remuneration policies for the Executive Board and the Supervisory Board. The amended policies, reflecting both the new Directive and the dialogue with our stakeholders, will be presented for approval at the Annual General Meeting of Shareholders (AGM) in May 2020.

The Remuneration Committee also oversaw the update of Aegon’s Group Global Remuneration Framework and the Remuneration Policy for Material Risk Takers which is designed to limit excessive risk-taking by key employees.

CEO succession

An important responsibility for the Supervisory Board is CEO succession. Finding the right candidate is essential when a CEO is to set hand over the baton to a successor tasked with leading the Company to the next stage of development. The Supervisory Board as a whole, and the Nomination Committee in particular, therefore devoted significant attention to managing the succession process, which was first announced in late 2018. After thorough assessments of a strong bench of internal and external candidates, we announced in August that Lard Friese will be proposed for appointment as CEO at the AGM in May 2020.

With shareholder approval, Lard will build on the hard work done by Alex Wynaendts and his team. Alex has led the successful strategic and financial transformation of Aegon over the last 12 years. As a result, Aegon is now well-positioned for the next phase of development and to realize its full potential. Both Alex and the Supervisory Board agreed this to be the natural moment for him to hand over to a new CEO. I would like to express, also on behalf of the entire Supervisory Board, our sincere gratitude and appreciation to Alex for guiding Aegon through its major transformation and the great dedication he has shown to the Company, its employees and all its stakeholders.

The Supervisory Board was also involved in discussions in 2019 concerning important appointments of Management Board members, including for Aegon Asset Management, Aegon International and Aegon UK.

Nominations and appointments

The Supervisory Board continually evaluates its own composition and effectiveness, and mindful of Aegon’s commitment to diversity, we will over time propose the appointment of new members. We are delighted to propose the appointment of Caroline Ramsay to the Supervisory Board at the AGM in May 2020. Caroline has substantial experience in finance and auditing, as well as extensive managerial expertise acquired in executive roles with several large insurance companies. We have also proposed that Thomas Wellauer, who has an in-depth knowledge of the insurance industry, will be appointed to the Supervisory Board at the AGM in May 2020. At the AGM in 2019, shareholders approved the reappointment of Ben Noteboom, currently chair of the Remuneration Committee, for an additional four-year term. In October 2019, Robert Dineen announced that he was stepping down in light of his appointment as Non-Executive Chairman of a US investment manager. I would like to thank Robert for his contribution since 2014. In conclusion, I would like to compliment all Aegon staff for the commitment they have shown during 2019. I am also grateful to my Supervisory Board colleagues for their ongoing contributions and support. Finally, I invite you all to turn to page 46 of this Integrated Annual Report for a comprehensive report of the Supervisory Board’s priorities and activities during 2019.

In conclusion, I would like to compliment all Aegon staff for the commitment they have shown during 2019. I am also grateful to my Supervisory Board colleagues for their ongoing contributions and support. Finally, I invite you all to turn to page 46 of this Integrated Annual Report for a comprehensive report of the Supervisory Board’s priorities and activities during 2019.

 

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William Connelly
Supervisory Board Chairman
 
 

 

         Aegon Annual Report on Form 20-F 2019  


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10

   
        
        

 

    

Aegon: A global provider

of financial solutions

Aegon today

Aegon is an integrated, diversified financial services group that offers innovative and effective savings and protection solutions for customers worldwide. Aegon traces its roots back to the 19th century. We now serve more than 20 countries, with 29.9 million customers and EUR 898 billion of revenue-generating investments. Our holding company, Aegon N.V., is headquartered in The Hague, the Netherlands.

 

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Main brands

 

Aegon

 

Australia, China, Hong Kong, Hungary, Indonesia, Japan, the Netherlands, Poland, Romania, Spain, Thailand, Turkey, UK

 

Transamerica

 

Bermuda, Hong Kong, Singapore, US

 

Aegon Asset Management

 

Germany, Hong Kong, Hungary, Japan, the Netherlands,

Spain, UK, US

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Joint ventures and associates

 

Brazil, China, France, Hong Kong, India, Indonesia, Japan1, Malaysia, Mexico, the Netherlands, Philippines, Portugal, Singapore, Spain, Thailand, Vietnam

 

 

    The Aegon brand operates as Aegon Insights in Australia, China, Indonesia, Japan, Thailand and Hong Kong.
    The Transamerica brand operates as Transamerica Life Bermuda in Hong Kong, Singapore and Bermuda.
    Aegon Asset Management operates in the US, the Netherlands, Hungary, Spain, Germany, Hong Kong and Japan, Kames Capital brand in the UK and TKP Investments in the Netherlands will be re-branded to Aegon Asset Management in 2020.
    We also operate under several other brands, including: Knab, TKP, Robidus, Cappital and Nedasco (Netherlands); World Financial Group (US, Canada); Origen Financial Services (UK); Futuready (Indonesia); Transamerica Ventures and Blue Square Re (Global).

 

  

                                             

 

1  Business divested in January 2020.

 

 

         Aegon Annual Report on Form 20-F 2019  

 


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11     Aegon: A global provider of financial solutions
        
        

 

Aegon’s markets

For 2019, we are continuing to report Aegon’s business by the following reporting segments:

  Americas
  Europe
  Asia
  Asset Management (Global)

As of January 1, 2020, a new reporting segment, Aegon International has been established to bring together our activities in Southern and Eastern Europe (SEE), and all our Asian businesses to focus on growth. Aegon the Netherlands and Aegon UK, currently reported under Europe, will become separate reporting segments.

 

As a global financial services group, we are equipped to share capital, talent, knowledge, processes and technologies across geographies and business lines. To this end, at the beginning of 2019, we grouped our businesses into three distinct strategic categories:

  Drive for Growth
  Manage for Value
  Scale-up for Future

These categories support our systematic and proactive approach of reallocating capital towards attractive and profitable market opportunities.

 

 

Aegon’s products and services

Aegon’s services and products include:

 

   Insurance   Long-term savings related    Banking    Asset Management

Products and

services

  

  Life (universal, whole and term)

  Accident and health

  Property and casualty

 

  Retirement plan services

  Annuities

  Mutual funds

  Stable value solutions

  

  Digital banking services

  Residential mortgages

  

  Retail and institutional investment management solutions

  Retirement savings vehicles and strategies

 

 

Diversified distribution channels

Aegon offers both direct and intermediary-assisted access to products throughout all its divisions. This allows us to both benefit from direct relationships with our customers while continuing to offer our customers more sophisticated solutions which require financial advice.

Aegon distributes its products and services through brokers, agents, banks, employee benefit consultants and independent financial advisors. Our multi-channel approach to intermediary distribution serves a diverse customer universe and allows us to build tailored solutions requiring advice based on input we receive from our network of informed business partners.

 

 

 

  Growth businesses in China and India

 

In 2008, Aegon formed Aegon Industrial Fund Management Company (AIFMC), an asset management joint venture based in Shanghai. We own 49% of the partnership. AIFMC now has more than EUR 45 billion (at 100%) assets under management (AuM) in mutual funds, separately managed accounts and advisory accounts. Between 2012 and 2019, AuM increased at a 36% compound annual growth rate (CAGR) and earnings before tax have grown at a 20% CAGR.

 

Aegon also owns a 50% share of a life insurance JV with Chinese conglomerate THTF. We serve more than 730,000 individual customers and approximately 270,000 group life clients, across 11 provinces in China. We make use of traditional distribution through intermediaries as well as direct online channels. New premium production has grown at a 34% CAGR since a change in JV partner at the end of 2014.

 

   

Internet sales are also driving positive momentum in India where we own 49% of Aegon Life. We were amongst the first in the market to launch online term insurance sales and are now expanding our e-commerce capabilities and offerings through partnerships with payments platforms PAYtm, Mobikwik, firstcry.com and Flipkart that combined give us access to approximately 600 million users.

 

Our network of partnerships in China and India positions us for growth in markets where financial protection and investment management are fast-growing markets.

 

 

         Aegon Annual Report on Form 20-F 2019  


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12     Aegon: A global provider of financial solutions
        
        

 

Some of the distribution channels are owned by Aegon: we serve customers through Origen Financial Services in the UK and World Financial Group in the US and Canada. We also develop e-commerce partnerships, for example in India and China.

We have also developed and are growing our direct distribution capabilities for simpler types of solutions where we can engage with customers directly – e.g., in our Dutch digital bank, Knab.

Sources of revenues and earnings

Aegon derives revenues and earnings from insurance premiums, investment returns, fees and commissions. Aegon is well-diversified across these sources of revenues and earnings which positively contributes to our ability to both pay attractive dividends and to invest in future growth.

Ownership

Aegon N.V. is a Dutch public limited liability company. Its shares are listed in both Amsterdam (Euronext) and New York (NYSE). Around three-quarters of our shareholders are from our three main markets: the US, the Netherlands and the UK. Shareholders meet at least once a year at our offices in The Hague. Aegon’s largest shareholder is Vereniging Aegon, which holds 14.1% of the common shares.

Capital position

We carefully manage our capital position to protect Aegon and its customers against fluctuations in global financial markets and changing business conditions. At the end of 2019, our Solvency II ratio – a measure of our capital strength – stood at 201%, above our 150%-200% target range. Meeting our capital targets increases our ability to deploy capital to pay attractive dividends and to invest in future-ready business opportunities.

 

 

Where our customers are

(total number of customers by location, in millions, end-2019)

 

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Where our earnings come from

(underlying earnings before tax, in EUR millions)

 

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1 

Total number includes Holding and others (not shown in chart).

2 

Figures relate to Aegon Asset Management only.

Where our employees work

(by reporting segment, end-2019)

 

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How we invest

(assets under management by asset class2, end-2019)

 

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         Aegon Annual Report on Form 20-F 2019  


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13     Value creation
        
        

 

Value creation

 

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Value created and shared with stakeholders

 

 

Explanatory note

This chart is based on the International Integrated Reporting Council’s IR framework. Each capital represents a store of value, which companies use and transform through their business activities. In this process, value may be created or depleted. For the purposes of this value chain, we have chosen the capitals most relevant to our business (financial, human and intellectual, and social and relationship). In the chart, the process is shown from the perspective of Aegon’s business. Both natural and manufactured capital are also part of the IR framework. Neither, however, is directly relevant to Aegon’s core businesses (as a services company, we do not use natural or manufactured products in our business, though of course we may affect the value of both through our investments). For more information on the IR framework, see www.integratedreporting.org.

Definitions

Financial capital represents the funds to which Aegon has access. This includes debt and equity capital. Human and intellectual capital refers to individual knowledge, skills and capacities in Aegon’s workforce, as well as the company’s institutional knowledge, processes and expertise. Social and relationship capital covers relationships both within and outside the company. These include relationships with customers, employees, suppliers and other business partners.

 
 

 

         Aegon Annual Report on Form 20-F 2019  

 


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14     Aegon’s business environment
        
        

 

Aegon’s business environment

 

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A detailed and practical understanding of our operating environment is essential to successfully running our business. Our ecosystem is shaped by complex demographics, socioeconomic, macro-financial, regulatory, and technological trends, which we capture and systematically analyze in a formal Business Environment Scan process.

 

Global macroeconomic climate

2019 was another strong year for the global economy, where continued growth was driven by strong momentum in services, partially offset by selective weakness in manufacturing. However, political uncertainty remained elevated with Sino-US trade conflicts, uncertainties around Iran, and the outbreak of a novel coronavirus towards the end of the year.

While stock markets hit new highs, interest rates reached new lows in Europe and declined to 2016 levels in the US. Low interest rates make savings fundamentally less attractive and represent a major headwind to our businesses, particulary in the US and Europe. Low expectations of inflation persist, which, combined with an abundance of savings, means that ‘lower for longer’ interest rates are more likely and will shape our business strategies going forward.

Wealth and health

Demographic trends support Aegon’s continued efforts to build its business based on the concept of providing long-term solutions related to wealth and health to its customers.

As the worldwide population ages, individuals and societies contend with the need to fund longer lifespans. This challenge can be addressed through a number of coherent measures which Aegon calls a ‘New Social Contract’. This requires solidarity between generations and sustainable solutions for retirement provisions that are highly adaptable to the rapid pace of change.

Individuals may delay retirement and/or engage in part time or flexible contract work after reaching traditional retirement age. If well designed, this improves both the retirement outcome for individuals and improves the sustainability of governments’ budgets. It will also support health and happiness by keeping people more closely engaged with society as they age.

To achieve this, the parties involved should tap into innovation and technology. They should promote healthy lifestyles, financial literacy, lifelong learning and age-friendly communities.

The goals of the New Social Contract can only be achieved through a collaboration among all social partners including governments, employers, and individuals along with a broader group of stakeholders such as nonprofit organizations, academia, communities, and for-profit companies that share Aegon’s ambitions in this respect.

As part of the New Social Contract, individuals may delay retirement and/or engage in part time or flexible contract work after reaching traditional retirement age. This will have financial benefits, but will also support health and happiness by keeping people more closely engaged with society as they age. Our research has shown that physical and psychological well-

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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15     Aegon’s business environment
        
        

 

    

being and personal financial security exist symbiotically and are mutually supportive.

We can help to support comfortable and healthier retirements by providing effective long-term investment and protection solutions, including financial solutions that can augment the income promised by public pension plans.

On wealth

The world’s aging population requires asset accumulation solutions that pursue stable asset growth, and insurance solutions to protect that capital. We seek to serve our customers from the accumulation phase of life up and through retirement. During the accumulation phase, we provide well-managed, competitively priced investment solutions that seek long-term capital appreciation. We also provide vital services to public and corporate pension funds, and retirement programs that people contribute to throughout their working lives.

In retirement, we offer decumulation solutions like annuities and other services that contribute to lifetime income and security. We see development of the new-age decumulation and older-age healthcare solutions as key priorities for society as a whole and the financial services industry in particular.

On health

The United Nations reports that the 2019 global population of people aged over 65 will more than double to 1.5 billion by 2050. It is our societal obligation to prepare our customers for longer lifespans and longer and healthier retirements.

As a provider of financial security, we understand that health spend is the the largest cost category in people’s later years. We therefore have a vested interest in the health and well-being of our customers. If we can encourage customers to adopt healthy lifestyles and behaviors, we can alleviate some of this future financial burden.

Working with regulators, worldwide

Evolving regulatory landscape

Over the past decade, financial services regulation has become increasingly sophisticated. After the financial crisis, financial regulators focused on increasing financial stability, both of individual companies and of the financial system as a whole. More recently, regulatory focus has shifted to the role the financial sector can play in supporting the real economy (through initiatives such as European Capital Markets Union), or transition to a more sustainable world (e.g. through the European Sustainable Finance Action Plan).

In addition, the increased expectations for the financial sector with respect to protection of data, data privacy, the use of data

by the financial sector and the gatekeeper role of the financial sector with respect to anti-money laundering and combating terrorism financing have resulted in a significant increase in regulation in these areas.

Changes in regulation can have a profound effect on the way we manage our business, our profitability and the products and services that we offer. We work with regulators around the world to understand what changes are coming, to have a voice in what those changes will be, and to learn how to benefit from upcoming opportunities.

Key regulations for Aegon

A significant change for our business was the introduction of new capital rules in Europe in 2016 with Solvency II, which is currently already subject to a fundamental review (so-called Solvency II 2020 review). This review may potentially lead to some important changes in the way Aegon calculates its regulatory capital. At the international level, reference can be made to the initiatives of the International Association of Insurance Supervisors (IAIS), such as the initiative that may lead to International Capital Standards for Insurers, the Common Framework for the Supervision of Internationally Active Insurance Groups and the Holistic Framework for Systemic Risk in the Insurance Sector. These three initiatives were recently adopted by the IAIS.

In May 2018, the European Union’s General Data Protection Regulation (GDPR) became effective. In 2017, new cyber security regulations went into effect in the US state of New York; and in 2020, new privacy legislation went into effect in the US state of California. In 2018 the fifth European Anti-Money Laundering Directive was adopted, and recently the European Banking Authority was given a prominent coordinating role in Europe in the supervision in this area. As a result of the European Market Infrastructure Regulation on derivatives, central counterparties and trade repositories (EMIR), additional requirements were introduced to improve transparency and reduce the risks associated with the derivatives markets. In this context, recently additional collateral/margin requirements came into effect.

In the area of market conduct regulation, the EU Insurance Distribution Directive – the IDD – became effective in the fourth quarter of 2018 replacing the Insurance Mediation Directive (IMD). IDD provides for enhanced consumer protection in the purchasing of insurance products, as well as facilitating competition between distributors. We are also seeing further efforts to open Europe’s financial services market via MiFID II. IFRS 17, which is expected to become effective per 2023, will significantly change the accounting for insurance contracts in financial statements, and this is expected to impact Aegon.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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16     Aegon’s business environment
        
        

 

    

Business Environment Scan

Aegon conducts a biennial Business Environment Scan (BES) to identify material topics and issues for our business. This scan brings together the expert-driven emerging risk identification process and the materiality assessment as described in Aegon’s Integrated Annual Report 2018.

 

The aim of BES is to identify topics, including new and developing opportunities and risks, that could significantly impact Aegon’s value creation, financial strength, competitive position or reputation. We conduct this scan by engaging with relevant internal and external experts, as well as selected stakeholders

like NGOs, business partners and customers. While we see many opportunities for our business, we are also mindful of potential challenges ahead. The BES was last completed in the third quarter of 2019, and since then a pandemic has been declared as a result of the coronavirus outbreak.

 

 

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         Aegon Annual Report on Form 20-F 2019  


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17     Aegon’s business environment
        
        

 

    

Through BES, we seek to better understand the material opportunities and risks that affect our worldwide operations, including, but not limited to, these high impact themes:

 

 

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Evolving regulations

 

   Opportunity     Risk   

We pro-actively identify regulation-driven opportunities for the benefit of our customers, business partners and shareholders. We engage with regulators in our markets to prepare us for upcoming changes, and to gather insights from our businesses for regulators to help them shape a legislative landscape conducive to our ability to serve society. For example, Transamerica, our US subsidiary, strongly advocated the adoption of the SECURE Act. This Act among other things, will make it easier for small business owners to establish retirement plans through multi-employer plans (MEPs). MEPs are less expensive and easier to administer. Furthermore, the SECURE Act pushes back the age at which plan participants must take required minimum distributions, and remove the age limit at which the contributions to traditional individual retirement accounts can be made.

 

    If we are not well prepared for new regulations, we may miss on commercial opportunities or will need to invest substantial additional resources into regulatory-driven internal changes. This diverts limited resources from identifying and satisfying customer needs, and may also increase our cost-of-service.
                
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Changing competitive landscape

 

   Opportunity     Risk   

Not only do we face competition from established companies, but also increasingly from technology-driven and digitally-enabled start-ups, fintechs and insurtechs. As a global business, we are increasingly learning from these innovative start-ups, investing in them, and collaborating with them. We have established two venture arms – Aegon Growth Capital and Transamerica Ventures – to capture this opportunity. Also, the competition amongst established companies remains intense. Industry consolidation might provide an opportunity for Aegon, particularly in mature markets. This could add up to economies of scale that allow for more profitable operations at less cost to customers.

 

    New technologies may arise quickly and disrupt our markets by making our offerings less competitive or relevant to customers. Furthermore, intense competition in individual markets or segments can lead to the decisions to downsize or exit our operations, or to close them for new business.
                

 

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Data protection and

information security

 

   Opportunity     Risk   

Information security, data privacy and protection, and fraud prevention are essential for building customer trust and for delivering services that customers value and rely upon. We are subject to multiple regulations pertaining to data protection and stewardship within each geography in which we operate. These include, for example, the GDPR in the EU, the New York DFS Cybersecurity Rule, and new privacy legislation in California in the US. As Aegon, we are bringing values and practices learned from the implementation of these regulations to other jurisdictions where we have activities: e.g., to our e-commerce partnerships in Asia.

 

    These and other relevant laws and regulations, as well as our responsibility to safeguard client and employee data from malicious actors worldwide are our priorities and require our focus. We aim to uphold security standards to protect the confidentially, integrity and availability of data, and to avoid the risk of business disruptions and reputational damage.
                
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Technological developments

 

   Opportunity     Risk   

Aegon aims to stay abreast of changes in technologies so that we can offer improved solutions and better, more efficient service to our customers. We continuously optimize our IT architecture, modernize the technologies in use, and work with suppliers of state-of-the-art technological solutions. For example, in our workplace-related businesses we have focused on enhancing the transparency for, and experience of, pension plan participants by creating simple technology-driven solutions, and by systematically enhancing their customer journeys across online and offline spaces.

 

   

If we are not deploying the latest technologies, we risk trailing our competitors in efficiency and may disappoint our business partners and customers, who increasingly expect a seamless digital experience for their financial matters. Since fragmented and complicated ‘legacy’ IT systems are costly and often do not provide required services, we seek strategic partnerships with technology firms like TCS and Atos to consolidate and update our systems where relevant.

 

 

 

         Aegon Annual Report on Form 20-F 2019  


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18     Aegon’s business environment
        
        

 

    

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Data analytics

 

   Opportunity     Risk   

Our ability to gather and analyze data to translate it into better customer offerings and improved service levels is an essential component of building our competitive edge. As part of our commitment to investing in technology, we are increasingly incorporating AI (including big data analysis and machine learning) into our businesses. To foster the use of AI, we are rapidly building our internal data analytics capabilities through our Analytics for All and Analytics for Leaders programs.

 

    Use of data is highly regulated across a number of different regulatory regimes, and so at Aegon we are carefully considering which data can be used, and to what purpose we may use that data. As our competitors also invest substantially in advanced data analytics capabilities, we risk falling behind if we invest too slowly or in the wrong projects. Furthermore, data-related projects can be complex, and therefore can be subject to execution risk.
                

 

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Trade wars, de-globalization and

protectionism

 

   Opportunity     Risk   

Though the forces behind trade wars and the slow rollback of globalization are beyond our control, our geographic diversity is an asset. It allows us to better access capital markets, diversify our earning streams geographically and across different types of business, and realize skill synergies and global economies of scope. At Aegon we invest in strong local management teams, business models that are geared towards local markets, and we act quickly and decisively as local situations change – for example, as demonstrated last year by the sale of our stake in the Japanese JVs to our partner, Sony Life.

 

    Protectionism makes cross-border capital flows inherently more difficult, potentially restricting our ability to reallocate capital – either by impediments to investing in profitable opportunities or by restrictions on repatriating dividends from our business units. Our influence over the global political processes is limited, and so we could find our access to markets curtailed or made more expensive. For example, we are active in both the US and China markets which makes us potentially more vulnerable if trade disputes between both countries will escalate.
                
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Reputation

 

   Opportunity     Risk   

Aegon’s business is reliant on the trust of its customers and regulators. We earn that trust by conducting our business ethically and by fulfilling our financial obligations. In today’s world, our customers increasingly rely on peer references – for example, in social media – which continuously increases the importance of customer experience and Net Promoter Score (NPS). 88% of our businesses by customer count have adopted NPS as one of the main steering metrics.

 

    In a networked world, reputations can be easily and quickly damaged. To mitigate this risk, Aegon must vigilantly and proactively protect its reputation. For example our Dutch business unit has established a dedicated task force, the Reputational Board, to safeguard our brand value and to swiftly address challenges.
                
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Genomics and underwriting

 

   Opportunity     Risk   

As our data analytic and AI capabilities grow, we may benefit from more accurate underwriting of risk, but will need to be mindful of our obligation to make financial and insurance services widely available. Genome mapping (genomics) creates opportunities to offer more individualized insurance solutions and offer more targeted pricing of the underlying risk. Ethical discussions, however, are taking place worldwide about what data to share and how. The development of these discussions will influence insurance solutions and access to them. In many markets, lifestyle is increasingly intertwined with insurance products; as an insurer, we have an opportunity to inform and engage customers about lifestyle choices, and consider how we can also reflect those in our underwriting and pricing.

 

   

Wide availability and the rapidly declining cost of genomic testing increases the ‘information gap’ in underwriting: consumers may know more about their health than their insurers. This potentially could lead to adverse risk selection in our insurance portfolios. Therefore, we aim to use new technologies and knowledge to strengthen our underwriting without materially reducing the availability of our solutions for customers. WinSocial, the solution for diabetes patients piloted by our Brazilian join venture, is a vivid example of our attempts.

 

                
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People skills

 

   Opportunity     Risk   

Talent is a scarce and valuable resource for Aegon, especially as global cross-industry competition for rare skill sets intensifies. Our diversity and inclusion initiatives seek to make Aegon an attractive employer that can recruit employees with diverse backgrounds and career goals. To stay competitive, we need to continuously develop and train our employees. For example, we maintain ongoing internal and external programs, including worldwide efforts such as PULSE leadership development initiative and Digital Marketing Academy as well as local programs.

   

Failure to properly train and motivate our employees can result in high attrition of valuable talent and thereby materially affect Aegon’s competitiveness. Failure to embrace and practice inclusion and diversity can limit creativity, quality of decision making, and hurt our attractiveness as an employer of choice.

 

Further risk factors are discussed on pages 365-385.

 

 

         Aegon Annual Report on Form 20-F 2019  


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19     Aegon’s strategy
        
        

 

    

Aegon’s strategy

 

 

Aegon’s purpose

Aegon is a diversified financial services group that focuses on helping people achieve a lifetime of financial security by providing insurance, asset management, banking and pension services. We are highly attuned to the needs of a world where lifespans are increasing, careers and retirement are lengthening and becoming more flexible. Although healthcare is becoming more effective, it is also becoming expensive as public and corporate sources of lifelong pension and care are transferring risk to individuals in the face of financial pressure.

Active portfolio management

Our strategy is to reallocate capital towards attractive and profitable business opportunities by building on a number of global societal, macroeconomic and technological trends, and evolving our operating model in order to achieve substantial growth. Aegon’s businesses are grouped into three distinct strategic categories – Manage for Value, Drive for Growth, and Scale-up for Future. The first category consists of at-scale businesses, which are mostly spread-based, and we manage these for value, optimizing capital generation. Most of our new investments will be directed to Drive for Growth businesses which are at the core of our strategy as they have the highest potential for future capital generation growth. The third part of our portfolio – Scale-up for Future businesses – is aimed at capturing meaningful new growth opportunities.

If businesses do not fulfil our expectations, we may close them down, put them in runoff, or divest from them. In 2019, we sold our stake in the partnership with Sony Life in Japan. This allows us to fully focus on the most promising businesses, customer segments and opportunities in Asia.

Drive for Growth

Drive for Growth businesses are at-scale enterprises with leading market positions, deriving mostly fee-based revenues from products that offer strong elements of protection to our customers. Generally, they have multi-product relationships with customers and are digitally-enabled (e.g. platform-based).

The largest part of our US businesses, operated under the Transamerica brand, is part of this category, next to UK Digital Solutions, Aegon Asset Management, and our High-Net-Worth Asian business, Transamerica Life Bermuda (TLB). Across these businesses, we continue working with partners to simultaneously improve the customer experience and to modernize our operations.

Within Transamerica, we made further strides in transferring the administration of its life and annuity business to a third-party, TCS. In 2019, we also announced that the administration and

claims management for the long-term care insurance business line would be transferred to LTCG.

Similarly, we successfully completed the migration of the Nationwide portfolio onto our digital platform in the UK. This makes us nimbler and allows for investments in customer propositions in order to drive future growth.

Scale-up for Future

This is a portfolio of businesses that aims to capture meaningful new growth opportunities. Our joint ventures in India, China and Brazil, digital banking and services business in the Netherlands, as well as the US Mutual Funds business all belong to this category.

These enterprises bring new business models into Aegon and allow us to increase our presence in rapidly growing markets and niches. We are reaching out to end-customers directly as we continue expanding the digital platforms that allow our customers to take more control in managing their investments and insurance coverages. For simpler products, we develop direct to-consumer access; in India and China, for instance, we provide multiple offerings through major e-commerce platforms.

Manage for Value

Manage for Value businesses are at-scale enterprises that generally derive spread-based revenues from a single product. Our goal is to optimize capital generation for each business. In line with our strategy to accelerate the release of capital from the Manage for Value businesses, we entered into a transaction to reinsure approximately one quarter of our longevity exposure in the Netherlands.

In these businesses, it is also important to maintain a low and variable cost base. In 2019, we began the process of moving the administration of Aegon UK’s Existing Business to an external partner. In the Netherlands, we are transferring administration of the pension book from our life insurance company to our in-house administrator, TKP.

Focused on profitable growth

We have sought to emphasize fee-based and capital efficient spread-based businesses. As an example, we are offering tailored advice and solutions to corporate and individual retirement and pension plan customers in the US, the UK, the Netherlands. We also continue expanding our Aegon Asset Management business globally. Asset management is both highly scalable and complementary to Aegon’s worldwide life insurance and pension offerings.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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20     Aegon’s strategy
        
        

 

    

We are accessing individuals both through our technology platforms and relationships with business partners in markets around the world. We are also designing new investment capabilities, building on our long-established responsible investment capabilities to serve our customers’ long-term needs.

Investing in the future

In 2019, we continued to make investments intended to make us a more data-driven, innovative, customer-centric, and agile company.

Last year, we invested in training programs to ensure that our employees are developing to become knowledgeable analysts and skilled stewards of Aegon’s data. Over a thousand Aegon employees have already participated in the Analytics for Leaders program and we believe their skills will drive our future growth.

We are also running initiatives at business unit level to streamline our operations. We are building a work environment that inspires and values new business ideas that can lead to better service for existing customers while opening new markets for Aegon. This approach enhances our processes, cuts costs, and benefits our customers in areas such as sales & distribution, pricing, claims management, fraud detection, risk analysis and service. We have built analytical teams in all major country units to ensure close alignment of this competency with the local businesses.

We have also ramped up the Aegon Analytical Academy and are inspiring our leaders of the future with the PULSE program.

Seeking meaningful customer relationships

We seek to forge lifelong, multi-product relationships with our customers. We believe that we can best help our customers achieve a lifetime of financial security if they are willing and eager to work with us through each phase of their personal and professional lives. We believe that the way to achieve this is by creating trust. We are hence committed to improving customer experience by nurturing a stronger emotional connection with our customers, and making it simple and convenient for them to work with us.

We measure our performance in terms of the experience we offer to our customers through the Net Promoter Score (NPS). Our comprehensive NPS program covers the majority of our customers in all relevant geographies in which we operate, and is embedded in our internal processes and remuneration targets.

In our key markets, we benchmark NPS scores against peers. In 2019, in two out of three of our main markets, the Netherlands and the UK, our businesses saw an increase in both the absolute NPS scores as well as in the relative position in the market. In the US, however, despite the stable absolute score, our relative position in the market has somewhat deteriorated. On a positive note we were pleased to see improved relative NPS scores in several of our businesses which previously significantly trailed their peer groups (i.e. were in the fourth quartile).

Looking forward

Because we have built a diverse and efficient financial services business, we believe that we are able to utilize our capital efficiently, which allows us to invest back in the business in pursuit of sustainable growth:

  Reach new customers: We utilize both intermediaries and our direct-to-customer distribution channels, where applicable, worldwide. We strive to expand every relationship so that Aegon can continue to serve its customers with appropriate solutions during all phases of working and retired life. We seek to introduce our products and solutions to new users and to make every customer a life-long customer. We also seek to reach new customers through our thought leadership in the areas of financial planning and insurance issues, particularly our annual deep dive into retirement readiness around the world, and our advocacy for new ways of thinking about retirement and later life entrepreneurship.
  Continue to realize efficiency gains: Our technology investments create lasting benefits for Aegon. Automation and artificial intelligence also create better and safer experiences for our customers, which aids in asset gathering and retention.
  Foster innovation: We continue to invest in Scale-up for Future businesses, and we also have two venture capital arms, Transamerica Ventures Fund and Aegon Growth Capital, that enable us to benefit from the opportunities to invest in and collaborate with fintechs and insurtechs.

The goal of these investments is to increase return on equity through our sustainable, organic growth strategy. Such higher earnings could be returned to shareholders through higher dividend payments going forward. We have increased dividends for shareholders in each of the past eight years, while reducing company leverage and further strengthening our financial position. Also going forward our ability to continue to pay an increasing dividend is tied closely to our ability to maintain a solid capital position and grow our capital generation, but also depends on the macroeconomic environment.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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21     Aegon’s strategy
        
        

 

    

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Across the markets where Aegon operates in the area of retirement and workplace solutions, Aegon has pursued a consistent workplace strategy based on retirement thought leadership and the ability to offer tailored solutions to large, medium and small enterprises.

We have strong relationships with global and local employee benefit consultants serving our target markets, and we offer attractive fee-based defined contribution and savings solutions. As individuals have needed to take more responsibility for their financial well-being, Aegon has expanded its pension offerings with additional options for voluntary savings, additional life coverages, and personal or automated advice.

We are connecting where possible with individual retirement and pension plan participants through digital workplace platforms so that we can provide them with transparency,

convenience, and enhanced service in order to help them achieve financial security.

As shown in the graphic below, the drivers of change in retirement differ by country. Nevertheless, the direction of travel is the same in all our main markets. We benefit from our global approach in dealing with these trends.

We administer USD 216 billion in retirement plan assets in the US making us a top ten defined benefit and defined contribution provider. In the UK we administer GBP 179 billion in long-term savings of which GBP 33 billion unit-linked business, and GBP 146 billion assets under administration on the UK’s largest digital retail platform. We are one of the largest insurers in the Netherlands, where we administer EUR 71 billion of assets of which EUR 3.5 billion in the new-style PPI retirement solution, and EUR 67 billion on the life insurance balance sheet.

 

 

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Selected trends in retirement

                               Somewhat developed   

Strongly developed

 

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  1 

Move away from traditional family models to more flexible, complex life journeys requiring more flexibility in financial models and provisions.

  2 

Shift away from state and employer funded pension models towards individual models (in NL: 3rd and 4th pillar).

    

 

 

         Aegon Annual Report on Form 20-F 2019  


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22     Performance in 2019
        
        

 

    

Performance in 2019

Financial markets were turbulent during the year. Interest rates dropped considerably worldwide, whereas equity markets rose and credit spreads were volatile, in particular in the Netherlands. We sought to execute on our return to growth strategy, having reorganized much of the company in recent years. Efficiencies and lower one-time charges led to a rise in net income, while our return on equity1 was impacted by the lower interest rate environment. Our normalized capital generation was strong and our Solvency II ratio demonstrated resilience.

 

During the year, we paid more to investors – combined, our dividends and interest payments increased by over 4%. Our employee engagement score – at 67 – increased from 65 the previous year. In relation to customers, we welcomed 4.3 million new customers in 2019, a rate 13% higher than the previous year.

Our aim is to maintain very strong financial strength ratings in our main operating units (for our current ratings, see page 99).

Financial targets and performance

In 2019 Aegon introduced new three-year financial targets, covering the period 2019-2021. These targets focus on sustainable growth, capital generation and ensuring attractive returns for the Company’s shareholders. The Company is continuously monitoring the market and economic turbulence that has arisen as a consequence of the COVID-19 outbreak, and its impact on Aegon. It remains too early to quantify the potential impact on Aegon’s financial performance arising from COVID-19. The effect on Aegon’s financial results will depend on a range of factors, including financial markets and underwriting results.

 

 

Metric

   Target    2019    Performance    2018

Normalized capital generation after holding expenses (cumulative, 2019-2021)

   EUR 4.1 billion            EUR 1.6 billion    Normalized capital generation was strong and increased by 12% in 2019. This was in part due to positive experience variance and higher release of required capital.    EUR 1.4 billion

Dividend pay-out ratio (% of normalized capital generation)

   45%-55%    41%    The pay-out ratio was below target despite the 2 cents increase in dividend per share, compared to 2018. This was driven by the strong normalized capital generation.    43%

Return on equity (annual target)1

   >10%    9.5%    Return on equity (RoE) was below target, mainly as a consequence of the impact of lower interest rates on net underlying earnings.    10.2%

 

Aegon remained within or above its key target ranges

as described by its capital framework.

 

Metric

   Target    2019    Performance    2018

Solvency II ratio

   150-200%    201%    The Solvency II ratio remained above the target range, supported by strong normalized capital generation and management actions lowering risks.    211%

Holding excess cash

   EUR 1.0 billion – EUR 1.5 billion    EUR 1.2 billion    Holding excess cash is in the middle of the target range per year end 2019, which provides financial flexibility.    EUR 1.3 billion

Gross financial leverage ratio

   26%-30%    28.5%    The Gross financial leveragae ratio is within the target range and has improved over the year due to higher retained earnings and debt deleveraging.    29.2%

 

 

1 

Return on equity is calculated using shareholders’ equity based on IFRS as adopted by the EU.

 

 

         Aegon Annual Report on Form 20-F 2019  


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23     Performance in 2019
        
        

 

    

Financial results

 

  In EUR million    2019    2018    % change    Performance

Underlying earnings before tax

   1,973    2,074    (4.9%)    During the year, we had higher earnings from the Netherlands, the UK, Asia and Asset Management. This was offset, however, by the effects of lower interest rates, investments to support business growth in the US, and by a change in the recognition of interest expenses related to debt refinancing.
 

Net income

   1,239    711    74.3%   

Net income increased mainly as a result of high one-time charges in 2018 and realized gains on investments in 2019:

   Other charges in 2018 were high and driven by restructuring charges, book losses on divestments and a litigation settlement in the US

   Realized gains were driven by capital optimization of the asset portfolio in the Netherlands

 

For further details on 2019 results, refer to Results 2019 worldwide starting from page 123.

 

Gross deposits

    144,660         121,700    18.9%    Gross deposits increased primarily because of the successful asset management joint venture in China which was supported by a new mandate, the launch of new equity funds and increased inflows in money market funds.
 

Net deposits

   (25,130)    (4,656)    NM    Net deposits were negative mainly because of outflows in the US Retirement Plans business, following contract discontinuances and higher participant withdrawals.

New life sales

   861    820    5.0%    New life sales were up mainly driven by The Netherlands on the back of a pension buy-outs and purchase of additional yearly pension increases by existing customers.

pp – percentage points

NM – not measured

 

Non-financial performance

Aegon has six global non-financial indicators; which are tied directly to specific aspects of our strategy. They also

help us address material topics and measure progress toward our objectives as both an employer and a provider of financial services.

 

 

Metric

   2019    2018    % change       

Aspect of strategy

supported by indicator

Net Promoter Score (NPS) coverage1

   88%    89%    -1 pp    Customer centricity

Number of customers

   29.9 million            29.3 million          2.1%    Growth/customer centricity

Number of new customers

   4.3 million    3.8 million    13.4%    Growth/customer centricity

Percentage of customers with two or more products2

   19%    18%    1 pp    Lifecyle approach

Percentage of digitally connected customers

   29%    27%    2 pp    Digitization/customer centricity

Employee engagement score

   67    65    2 pp    Customer centricity (‘winning outside starts inside’)

 

1 

NPS coverage includes businesses which use relation NPS (rNPS) for steering.

 

2 

Percentage of total number of customers with two or more products for 2019 and 2018 does not include Aegon’s operations in UK.

pp – percentage points

For more information on these indicators, please refer to pages 31 (Customers) and 31 (Employees).

 

 

         Aegon Annual Report on Form 20-F 2019  


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24     Responsible business
        
        

 

    

Responsible business

 

Our approach

Everybody deserves a healthy and financially secure future. Aegon’s commitment to helping its customers achieve this requires a sustainable, long-term-oriented business that can fulfil our purpose and considers our obligations to individuals, society, and the environment. We believe that doing business in a responsible way will create sustainable positive financial, social and environmental results that serve all stakeholders.

In August 2019, we established the Responsible Business and Investment Committee (RBIC), which succeeds the Responsible Business Committee and the Responsible Investment Strategy

Committee. The RBIC consists of selected Management Board members, Chief Investment Officers and other senior managers, who discuss matters related to responsible business, including responsible investing, on a quarterly basis. They review the progress Aegon is making against its responsible business vision and commitments, and provide advice to Aegon’s Executive Board and Management Board.

The way we do business is underpinned by a comprehensive responsible business approach, i.e. our environmental, social and governance (ESG) commitments that provide for our license to operate:

 

 

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Individual

Responsible products

Aegon engages with stakeholders through polls and surveys, conferences, perception studies, workshops and face-to-face meetings so that we can learn about their lives, aspirations and unmet needs. These engagements, alongside panels with our customers and employees, help us to improve our products and services, to price our offerings appropriately and to reach untapped or underserved customer needs around the world.

In this way Aegon serves individuals with specific needs in markets around the world. Aegon seeks to serve a wide array of customers, which includes the traditional middle- and upper-class clients worldwide, while making efforts to bring financial services and products to under-served lower-income ones.

Aegon offers specific financial solutions for vulnerable groups. In several countries, we sell products for customers on low incomes – for example: our ‘My Family’ micro-insurance product

in Brazil and low-cost life insurance in Romania. We also provide support to those facing chronic illness. In China, for example, our critical illness coverage offers protection against both diabetes and cancer; we also have products that help customers suffering from cervical and breast cancer.

Smart financial planning

In addition to our products, we also support financial education programs for individuals – especially as people are taking more personal responsibility for their finances. In the Netherlands, for example, we partnered with the Van Schulden naar Kansen Foundation to administer their ‘From Debt to Opportunities’ program, where Aegon employees volunteer as budget coaches to help customers in financial difficulty. In the US, we work closely with the National Foundation for Credit Counseling. We also offer lessons and online seminars for public.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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25     Responsible business
        
        

 

    

LOGO

Lack of access to financial services, including banking, investment management and insurance, is a cause of wealth inequality and day-to-day stress for millions around the world. Within life insurance, certain populations have been deemed practically uninsurable by traditional underwriting standards. With new technology, however, we can gain clarity that can allow us to offer insurance to formerly uninsurable populations at a fair price.

 

Mongeral Aegon’s WinSocial bundles the power of innovative technology, global underwriting skills, reinsurance and social media influencers to offer life insurance for the first time to people with diabetes in Brazil. In 2019, Brazil’s population topped 210 million but its insurance industry remains constrained by traditional underwriting techniques and technologies. Fewer than 10% of Brazilians have life insurance and Brazilians with diabetes – estimated to number 16-17 million – are regularly refused coverage.

 

WinSocial, which operates as a start-up within Aegon’s Brazilian business Mongeral Aegon, draws on our global digital underwriting platform – highlighting the benefits of bringing a global knowledge network to bear on a local issue. “We validated the assumption after a few months that people with diabetes understand that it’s important to look after your health and to have life insurance for the benefit of family members should the worst happen,” says WinSocial director Rafael Rosas.

 

Through an app and website interface, WinSocial builds an underwriting framework around the applicant’s responses to questions about health, fitness, lifestyle and well-being, and then validates those responses using resting and active heart rate recordings and a simple glucose test. While we are in the early stages of a pilot program in one market, we do see potential here for data analytics and digital technology to be employed jointly to improve the underwriting process for people who need insurance while living with chronic diseases.

 

 

 

 

Society

Retirement research

Healthy aging and financial security are at the heart of our business, as longer lifespans are transforming societies around the world. Aegon serves society by engaging in deep yet practical research on financial planning, retirement, health and insurance issues so that society at large can effectively plan for longer and more active retirement.

The Aegon Center for Longevity and Retirement (ACLR) was established to increase awareness and stimulate dialogue on trends, issues and opportunities around longevity, population aging and retirement security. Our ambition is to bring these themes on the agenda of policymakers across the globe. ACLR works in collaboration with nonprofits Transamerica Center for Retirement Studies and Instituto de Longevidade Mongeral Aegon to conduct an annual survey of retirement readiness in 15 countries around the world. The survey is currently in its ninth year.

Policy advocacy

Supported by findings from our multi-year research, we advocate worldwide for people to have access to insurance and financial services, for people to be aware of opportunities for flexible employment in old age and for governments to plan and provide for their citizens in an age of increasing longevity.

Aegon also encourages financial literacy around the world and engages with individuals, non-profit organizations, and policymakers in charge. This includes, for example, partnerships with the World Economic Forum, the American Association of Retired Persons, the Milken Institute, the Global Coalition on Aging and the Organization for Economic Co-operation and Development.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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26     Responsible business
        
        

 

    

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In 2019, we launched an effort called Start-up Plus. This is an 8-week online learning and coaching program developed by Aegon and the Leyden Academy on Vitality and Ageing in the Netherlands. In 2019, we invited participants older than 50 to learn principles of entrepreneurship. Aegon’s commitment to ‘olderpreneurship’ is part of our drive to help people achieve a lifetime of financial security.

 

In December, Han van Doorn secured funding from Aegon to continue to build his venture, the ‘Are you OK today’ app. The 82-year-old Dutchman received a check for EUR 10,000 as winner of Start-up Plus.

 

 

Han developed a self-learning app that connects to the electricity meter box and tracks user behavior. If the app detects a change from normal behavior which could indicate a fall or other emergency, it asks the user to check in. If there is no reply, the app sends a signal to a caregiver.

 

In Poland, Aegon has become a partner of Silver Starters, a program similar to Start-up Plus. The Silver Starters final took place on November 28. The winning idea was ‘Virtual Experts’, a cooperative that would bring together seniors who, as freelancers, can provide services and assistance to businesses with some activities that can be outsourced, such as document organization, data entry, concierge services.

 

 

 

 

Environment

We take our responsibility towards society also by caring about the environment. Back in 2015, Aegon signed the Paris Pledge for Action which affirms our commitment to taking actions supportive of keeping global warming well below 2 degrees Celsius. We are a supporter of the Taskforce on Climate-related Financial Disclosures (TCFD). Our Dutch subsidiaries have also supported local climate-related initiatives like the Dutch National Climate Agreement and Spitsbergen Ambition.

Green investing

Environmentally-friendly investments are at the core of our responsible investing philosophy discussed separately in this report (see page 28). We promote active ownership by engaging on topics of climate risk. For example, we encourage the companies in which we invest to report following TCFD guidelines. We look into climate-related risk as part of the investment process for our general account, where our customers have delegated investment decisions to Aegon.

 

Throughout 2019, we refreshed our group-wide Responsible Investment Policy which we put into force as of January 2020. In this policy, next to reiterating all our previous environmental commitments, we further limit any new coal-related investments.

We strongly support impact investing. In 2019, for example our own and managed investments in green bonds reached the new high of EUR 709 million, and our own and managed investments into renewables amounted to EUR 718 million.

Carbon neutrality of own operations

Aegon’s operations in the Netherlands, the UK and the US have been carbon neutral since 2016 through a combination of reductions in facility-level emissions and the supporting of offset projects. For 2019, we extended the scope of our carbon offsetting to cover all our wholly-owned operations.

We further detail our activities related to Responsible Business in the section ‘Aegon: A partner to the world’ (see page 30).

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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27     Responsible business
        
        

 

    

 

 

Contribution to the UN Sustainable Development Goals

Aegon is committed to supporting the UN Sustainable Development Goals (SDGs) where we can, 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, and that genuine

               

 

sustainable development will not be possible without cooperation between the private and public sectors, worldwide.

 

We focus on the SDGs most relevant to our business. Within these SDGs, we have selected specific goals and targets linked to our strategy. This is where we believe we can make a significant contribution to the international development agenda.

 

 Sustainable Development Goal (selected)      Aegon contribution to relevant SDG targets (examples)

 

  LOGO

 

 

No poverty

End poverty in all its forms everywhere

 

 

                

  

 

Contribution to target 1.2

 Products for low-income customers, including micro-insurance in Brazil and low-cost life insurance in Romania.

 Working with customers in financial difficulty – budget coaches in the Netherlands / cooperation with National Foundation for Credit Counseling in the US.

 Strengthening financial literacy and empowerment through local initiatives and programs, e.g., Start-up Plus.

 

 

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Good health and well-being

Ensure healthy lives and promote well-being for all at all ages

      

 

Contribution to target 3.4

 Cover for customers facing chronic illnesses, including diabetes and cancer.

• Investment in care homes for the elderly in UK and the Netherlands.

 Support for research into chronic illnesses, including cancer, heart diseases and Alzheimer’s.

 Exclusion of tobacco from investments to help address health concerns over smoking.

 

 

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Affordable and clean energy

Ensure access to affordable, reliable, sustainable and modern energy for all

      

 

Contribution to target 7.2/7.3/7.a

 Investments in renewable energy.

 Investments in green bonds.

 

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Decent work and economic growth

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

      

 

Contribution to target 8.10

 Support for economic growth and job creation through our businesses and investments.

 Providing a long-term source of employment for communities in which we operate.

 Inclusion of minimum labor standards in Aegon’s responsible investment and procurement policies.

 Inclusion & Diversity-related commitments and actions.

 Equal pay.

 

 

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Climate action

Take urgent action to combat climate change and its impacts

      

 

Contribution to target 13.2

 Support for Paris Pledge for Action and Dutch National Climate Agreement, working to reduce carbon emissions.

 Engagement with investee companies on climate-related topic including encouragement to report following TCFD guidelines.

 Exclusion of oil sands extraction and transportation from new investment in the updated Responsible Investment Policy.

 Exclusion of thermal coal production from investment, and further limit coal-related new investment.

 Aegon’s major operation in the Netherlands, UK and US have been carbon neutral since 2016 through a combination of reductions in facility-level emissions and the supporting of offset projects.

 

 

 

         Aegon Annual Report on Form 20-F 2019  


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28     Responsible investment
        
        

 

    

Responsible investment

Through our investments, we aim to contribute to general economic growth and a sustainable future for the world. We apply this ethos to our own proprietary investments and use our influence to encourage similar standards in accounts that we manage for customers. By taking an active approach to responsible investment, we seek to minimize risks and explore new opportunities to serve our customers’ interests and society at large.

 

We recognize several recurring topics that prompt questions from clients, employees and other stakeholders where we feel compelled to take a company position: climate change, biodiversity, human rights, labor rights, good health & well-being, corporate governance, weapons & arms trade, financial institutions, and animal welfare. In developing our company position on these topics we follow internationally recognized standards and norms where possible.

To support our responsible business objectives, Aegon via its subsidiary Aegon Asset Management actively applies a global set of responsible investment principles that define and guide our approach. These principles act as a set of building blocks that account for local differences while reflecting market-leading standards. They are arranged in a way that mirrors our policy:

  ESG integration – The integration of material environmental, social and governance (ESG) factors in investment decision-making across all portfolios.
  Active ownership – Active engagement with investees to improve their ESG profile and address sustainability issues.
  SolutionsESG-focused strategies and products, ranging from exclusions and best-in-class approaches to sustainability-themed and impact investments.

Aegon Asset Management is a signatory of the UN Principles for Responsible Investment (PRI). In 2019, Aegon Asset Management scored the highest possible rating (A+) for strategy and governance of responsible investment activities for the third consecutive year.

ESG integration

We believe responsible investing creates value and helps contribute to long-term outperformance. As a result, our investment process integrates material ESG factors into the bottom-up research and decision making.

By integrating ESG considerations in traditional financial analysis, the research team arrives at an independent view of an issuer’s fundamentals. Our ESG-integrated fundamental research is a critical element of all our investment decisions.

Active ownership

Our responsible investment framework encourages engagement with companies in an effort to advocate for positive change, mitigate ESG risks and promote best practices. Aegon Asset Management’s responsible investment team works with issuers to deepen their understanding of ESG issues and improve corporate responsibility performance.

We focus primarily on three main types of engagement with issuers: those based on minimum standards outlined in our Responsible Investment Policy, thematic engagements driven by our view of long-term ESG risks and opportunities, and product support engagements targeted at driving change according to specific investment strategies. When possible, we work with other investors to maximize our influence. In 2019, we engaged with 564 companies in 37 countries. We engaged on several issues, including climate risk and reporting, critical health issues and corporate governance. When engaging, our aim is to improve companies’ business practices, and reduce investment risk for ourselves and our customers.

Aegon regards engagement as increasingly important. We expect sound behavior, strategies and actions from companies in which we invest, and emphasize investments in companies and countries who are making better choices and continuous improvement with respect to sustainability.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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29     Responsible investment
        
        

 

    

Solutions

ESG integration and active ownership are principles we follow across all investments and portfolios. Furthermore, Aegon Asset Management provides a range of responsible investment solutions to pursue ESG objectives alongside financial returns. These solutions are categorized into four types:

  Exclusion-based strategies – Exclusion-based strategies utilize negative screening to avoid certain sectors, companies or practices based on specific criteria. Exclusions can also be applied in combination with the other types of responsible investment solutions.
  ‘Best-in-class’ methodology – A best-in-class methodology seeks outperformance by emphasizing positive selection of issuers with better or improving ESG profiles, based primarily on the sustainability of their operations. One example of this is our US High-Yield ESG strategy, which incorporates positive screening based on our proprietary ESG rating alongside traditional financial analysis to tilt the portfolio toward issuers with more favorable ESG profiles.
  Sustainability-themed strategies – Sustainability-themed strategies focus on selecting issuers or sectors which contribute to solving sustainability issues while maintaining the primary objective to generate long-term financial returns. One example of this is our Sustainable Fixed Income strategy, which uses our proprietary sustainability assessment to identify issuers with products, services and assets that aim to contribute to the long-term sustainability of the global economy, environment and society.
  Impact investments – Impact investments focus on targeted investment themes to pursue financial returns alongside positive social and/or environmental impact. Examples include affordable housing, care homes, and renewable energy.

Responsible investment solutions by type, AuM

As of December 31, 2019 (in EUR)

 

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         Aegon Annual Report on Form 20-F 2019  


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30     Aegon: A partner to the world
        
        

 

    

Aegon: A partner to the world

We strive to create long-term value for multiple stakeholders, including customers, business partners, employees, equity and debt investors, and society as a whole. Our core belief is that our business is beneficial to society and that the value we create is widely shared.

 

To meet the expectations of our stakeholders, we are committed to building a strong ESG foundation which we see as a license to operate. For us, this foundation encompasses, amongst others, investing and paying taxes in a responsible way, safeguarding data privacy and information security, respecting human rights, living up to the principles of sustainable procurement, and promoting inclusion and diversity.

Aegon defines its stakeholders as any individual or organization affected, or likely to be affected, by its business or that may, in turn, affect the environment in which the Company operates. We recognize five main stakeholder groups:

 

 

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By delivering reliable insurance solutions and effective investment management services, we help our customers protect their lives, legacies and property.

As our business progresses and grows, we are better able to provide our employees with fulfilling careers, advancement opportunities, and educational support.

Our business partners, including brokers and financial advisors, reinsurance companies, as well as service providers throughout our supply chain, can sustain their own businesses by working with Aegon. We support them not only through creating revenue streams but by sharing intelligence and perspective from markets around the world. In turn, we learn from our partners and optimize our business so that we can work together better.

Our investors similarly benefit. Our bondholders have received timely coupon payments and principal repayment at maturity. Our equity holders have enjoyed years of rising dividends and can potentially benefit from capital appreciation.

Society is supported by dependable insurance solutions that help individuals protect their assets and aspirations. When we enable people to save for their own retirements, we also help reducing future burdens on public pension systems. We also support the communities where we do business through our tax payments, charitable donations, and volunteer work.

In 2019, the value we have delivered includes:

  EUR 59.4 billion to our customers in claims, benefits and plan withdrawals
  EUR 6.4 billion in commision, fees and other payments to intermediaries, suppliers and reinsurers
  EUR 2.1 billion to our employees in salaries, benefits and training
  EUR 899 million to our investors in dividends and interest payments
  EUR 615 million in tax payments across the globe
  EUR 9.0 million in support for local communities
  19,500 hours of volunteer work
  EUR 235 billion of investments in responsible investment solutions.
 
 

 

         Aegon Annual Report on Form 20-F 2019  


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31     Aegon: A partner to the world
        
        

 

    

Customers

Customer-centric solutions

Customer needs and preferences are continuously evolving, and we at Aegon seek to respond to this by working in an agile and customer-centric way. We strive to provide faster and simpler digitally-enabled solutions and experiences to meet those needs. However, most of our propositions are low-engagement and high-complexity, and so we believe in also providing the valuable human touch around the moments that really matter to our customers.

The solutions we offer to our customers are about providing peace of mind, as well as protecting what’s important to them – their loved ones, their health, savings, and property. We help customers plan and build for the future by providing financial benefits such as pensions, (mortgage) loans, insurance claims, and returns on savings and investments. In 2019, we administered EUR 898 billion on behalf of our customers and paid out EUR 59 billion in claims, benefits, and plan withdrawals.

Effective and empathetic interactions

Customers make use of our services at the most important moments of their lives. Therefore, effective and empathetic communication with our customers is essential to us, and we continuously improve the quality of interactions with our customers to build real connections, and, as a result, trust.

For example, we have designed and rolled out a program to improve the quality and relevance of our customer interactions in our contact centers across the globe. We incorporate customer feedback to improve how we communicate with our customers. Most recently, the implementation of an ‘Extreme Makeover’ initiative in Transamerica (covering process optimization in US call centers) has led to significantly improved customer feedback.

Where relevant, we use technology and artificial intelligence to make customer interactions more flexible and effective. As an example, the virtual assistant on our web portal in the Netherlands offers the maximum level of convenience to customers for simple inquiries. Our efforts to improve customer service have been recognized by several external organizations. For example, Aegon UK has won Contact Center Awards for the second consecutive year in 2019.

Satisfaction and loyalty

Customer retention and extension of customer relationships to multiple services are indispensable for our commercial success, and so continuously improving customer satisfaction and loyalty is our clear priority. To measure our performance, we use Net Promoter Score (NPS). NPS is measured following selected interactions (‘touchpoint NPS’), aggregated in the logic of customer journeys (‘journey NPS’), and complemented by more in-depth surveys focusing on the overall quality of customers experience with Aegon (‘relational NPS’). All of the above measurements are used for steering, improving

quality of our internal processes and the customer experience we deliver. NPS measurements are included in targets at different management levels.

In 2019, relational NPS increased further in many of our markets including the Netherlands, UK, Brazil, India, and Turkey. It remained stable in the US, and somewhat decreased in Hungary and Spain (yet staying at historically high levels). In our key markets, we benchmark relational NPS scores against peers through systematic consumer surveys conducted by an independent third party. In 2019, in the Netherlands and the UK our businesses saw an increase in their relative positions in the market. In the US, however our relative position has deteriorated.

Employees

Salaries and benefits

While we have emphasized the need to improve efficiency gains throughout Aegon’s organization, we are aware that we must pay competitive salaries if we are to attract and retain talented staff in a highly competitive industry. Aegon’s Global Remuneration Framework stresses ‘pay for performance,’ where compensation is tied directly to regular performance appraisals. To assess performance, we use both financial and non-financial metrics, with the mix between the two depending on an individual’s position and seniority.

We have provisions ensuring that incentives and variable pay do not compromise integrity, and do not encourage excessive risk-taking. In 2019, we paid out EUR 2.1 billion in salaries and benefits to our 23,757 employees.

We offer benefits, including flexible working arrangements, regular health checks, parental leave and company retirement plans. We also provide paid time-off for employees who wish to volunteer on local community projects. We work to keep absenteeism to a minimum. Most of our businesses have health programs; these include fitness programs and screening for serious illnesses like cancer and heart disease, as well as programs to reduce workplace stress.

Culture and values

Aegon aims to create an environment where employees can bring their authentic selves to work to realize their full potential. We believe that to truly serve our customers and achieve our purpose – to help people achieve a lifetime of financial security – we must be agile, and continuously evolve and adapt to the changing needs of our people and our customers. Aegon recognizes that this promise can only be delivered in an environment where our employees and other stakeholders share personal accountability for building an inclusive and diverse organization.

The vitality of our mission feeds our culture. Aegon’s employees know that they are performing important work that can improve lives around the world. To help our employees accomplish

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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these aims in a fast-changing world, we adopted a Future Fit program back in 2016. This is based on four principles that stress cooperation, intellectual flexibility, focus and responsibility:

  Acting as One
  Agility
  Customer Centricity
  Accountability

These principles, integrated across the Company and administered at the local level, help us evaluate employees and determine compensation. They are also essential to our recruitment and retention programs for all employees.

We have also long fostered a culture of ethical compliance. Aegon’s Code of Conduct sets out rules and guidelines that provide a mandatory framework to shape and govern the actions of all our employees. The aim is to ingrain the principles of the protection of personal data and fair, non-discriminatory treatment of our employees, customers and other stakeholders in everything we do. The Code of Conduct also commits us to comply with all legal and regulatory requirements and the prevention of insider dealing, corruption and bribery. Aegon has a 24-hour Global Ethics Line to enable employees and other stakeholders to report in confidence suspected violations of the Code of Conduct.

 

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Our employees are critical stakeholders as their labor, insight and innovation is central to Aegon’s overall value proposition. As such, we invest in their personal and professional development, and seek to encourage a spirit of lifelong learning.

 

Aegon has administered its Analytics for Leaders training to more than 1,000 senior employees around the world. The program combines analytics and leadership training so that our senior leaders gain fluency in analytic techniques and, most importantly, have guidance about how to apply data analytics in the day-to-day management of their teams. We are especially interested in helping executives understand the ways in which leveraging data can create new options for better decision-making.

       

Employee engagement

Our goal is that all Aegon employees will form a worldwide community of talented and driven individuals who are deeply engaged with our purpose to help people achieve a lifetime of financial security. We measure employee engagement annually, and our latest survey was carried out in the fourth quarter of 2019 with the company-wide employee engagement score being 67, slightly up from 2018.

An engaged workforce can only be effective if it is a healthy and happy community. To promote health and welfare of our employees we:

  Seek opportunities for their career development;
  Use a new performance management process that has a stronger focus on development;
  Promote greater diversity within an inclusive workplace; and
  Foster training and development to equip our employees with future-ready capabilities.

We offer extensive training and career development. Our programs include online courses, seminars and lectures. We provide specialized training in areas including products and sales, new regulations, risk management, responsible investment, and information security and data privacy. We also offer leadership training and awareness programs in diversity, health and safety. All employees have access to our Global Learning Catalogues and are encouraged to use it to help shape their development journeys. In 2019, we spent a total of EUR 17 million on training and development, equivalent to over EUR 700 for each employee.

In 2019, our employee turnover rate improved to 32%, down from 33% in 2018. Elevated turnover rates include the transfer of selected operational activities to our strategic partners TCS, LTCG and Atos.

Inclusion and diversity

As Aegon is a global company, we understand the importance of embedding inclusion and diversity in who we are and everything we do. In July 2019, Aegon updated its Statement on Inclusion & Diversity to create a truly safe and inclusive working environment.

Inclusion and diversity, and non-discrimination are built into our Code of Conduct. In the Netherlands, our latest collective labor agreement stipulates equal pay for men and women performing the same functions. We monitor our business for potential pay disparities and found that so far, we have achieved parity among employees with identical job functions. Similarly, a pay equality analysis was undertaken in 2019 by Transamerica which did not identify any significant areas of concern.

We have initiatives to support gender diversity. In the Netherlands, for example, we are signatories to the Talent to the Top program, which works to increase the number of women in senior management. Two of our current six Supervisory Board

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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members are women – in line with Dutch government objectives. We seek to identify one or more women candidates for each open position.

In February 2019, Aegon UK signed the UK’s HM Treasury Women in Finance Charter, wherein we committed to a gender target of 33% female representation in our CEO-2 population by the end of 2021. On top of this, we made an additional commitment that all candidate shortlists for appointments to the Board and CEO-2 population will contain at least 33% from each gender.

In the US, we have a dedicated team focusing on creating more diversity in terms of both ethnic backgrounds and genders. In August 2019, Transamerica was named to the Diversity Best Practices Inclusion Index by Diversity Best Practices. Transamerica was one of only 80 organizations that earned a score of 60% or higher.

Aegon has mentoring programs and supports company-wide groups like Aegon Proud and Young Aegon. We are also members of external organizations, like Women in Financial Services and Workplace Pride. Aegon was awarded the Workplace Pride ‘Ambassador’ certificate in November 2019 for our ongoing efforts to set the tone for the financial services industry. The certificate also recognizes how Aegon shows a positive and direct impact on the lives of LGBT people through policies and practices both within the organization and the communities we work in. In the latest US Corporate Equality Index, we were ranked as one of the best places to work for LGBT employees. In 2019, we rolled out unconscious bias training for all employees worldwide.

Aegon is also a member of the Agora Network, a foundation that convenes talents with roots from all over the world. Agora facilitates the exchange of knowledge, experiences and networks. In this way, the foundation inspires organizations to benefit from the power of all their constituent backgrounds and perspectives.

To ensure that action on inclusion and diversity ambitions continues to gain momentum, targets have been included in the global CEO’s objectives and this approach has been replicated in other markets; for example, Aegon UK has included Inclusion & Diversity targets in the objectives of all senior leaders for 2020.

Partners and suppliers

Aegon enables the businesses of its partners and suppliers. Brokers and financial advisors who work in partnership with Aegon can build sustainable financial services practices of their own as they draw on our insights and products to serve their customers. The relationship is symbiotic as this network of independent financial intermediaries brings insurance and investment assets to Aegon, along with market intelligence that helps us to create and distribute targeted offerings to the end customer.

We seek long-term strategic supplier partnerships where we believe a third-party possesses superior capabilities or can deliver better quality of service to our customers at a lower cost. Across our major business units, we recently entered a number of multi-year strategic partnership agreements with TCS, Atos, LTCG and a number of other trusted partners.

We also seek to develop strong business relationships with suppliers and aim to use suppliers that serve our communities well. We currently have over 650 suppliers who are subject to our minimum supplier standards; as such, they have agreed to our Supplier Sustainability Declaration. We monitor our key partners regularly using a state-of-the-art procurement risk management system, and our procurement function measures the value we create via long-term relationships with our suppliers.

Investors

In 2019, we delivered a total of EUR 899 million to Aegon investors. Of this, EUR 611 million was in dividends to shareholders and the remaining EUR 288 million was delivered to Aegon bondholders.

Our shareholders receive regular dividends, subject to customary approvals. An interim dividend is generally paid following half-year results. Final dividends are generally paid after approval by Aegon’s General Meeting of Shareholders in May, where shareholders are asked to approve the total dividends for the preceding financial year. Shareholders can opt for payment of dividends in cash or stock and we generally engage in share buyback programs to neutralize the effects of stock elections on the total outstanding shares, if our capital position allows.

 

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Last year, Aegon was the first company in the Netherlands to make agreements with the trade unions in its collective labor agreement on equal pay for men and women.

 

Through AnalitiQs, we conducted a study of gender pay disparity with Aegon the Netherlands and the Group Corporate Center and found zero divergence in pay for men and women performing the same jobs, when accounting for age, work experience, and length of service. We are committed to improving on that result worldwide and recognize that for some women, having a shorter tenure or work history is the direct result of unaddressed inequalities throughout history.

       
 
 

 

         Aegon Annual Report on Form 20-F 2019  


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Payment of dividends depends ultimately on the Company’s capital position and capital generation. Before deciding on dividends, management will also assess prospects for financial performance. Our goal is to deliver sustainable dividend growth for our shareholders over time. Since 2012, we have increased dividends every year by either one or two cents – equivalent to a 48% increase over seven years.

Shareholders may also derive (or lose) value from the performance of our shares. In 2019, Aegon’s stock price increased by 0.3%. The European insurance sector in general performed better with the Stoxx Europe 600 Insurance index ending the year up by 24.4%. We believe the reasons for the relative underperformance include the lower interest rates in the US – to which we are more exposed than other European insurers - and the regulatory overhang from the upcoming Solvency II 2020 review, potentially impacting insurers with longer dated liabilities. Our total shareholder return for the year came to 8% (this measure considers payment of dividends as well as share price performance).

Society

Community investment

We support local communities through charitable donations and volunteer work. The goals of our charitable and community investment programs are to:

  Serve and strengthen the communities where we do business;
  Engage and motivate employees;
  Promote Aegon’s Responsible Business vision to all stakeholders.

We have created a thematically driven community program and donations framework that reflects Aegon’s purpose and values.

We support two keys themes:

  Financial security and education, which includes promoting financial literacy and later life employment solutions;
  Well-being and longevity, which includes promotion of physical fitness, mental vitality, disease prevention and support for livable communities.

This brings us closer to our customers and gives our employees an opportunity to share their knowledge and expertise. In 2019, we donated a total of EUR 9.0 million mostly covering our key themes of financial security and education, and well-being and longevity. In the Netherlands for instance, we are part of a From debt to opportunity program; that works with 7,000 in-debt families across the country.

In the US, our donations are channeled through the Aegon Transamerica Foundation. This foundation donates at least 5% of its assets each year. In the UK, local donation decisions are taken by our employee Charity Committee.

Volunteer work

We also encourage our employees to volunteer, and the vast majority of our staff worldwide can claim paid time-off to work on local community projects. In 2019, Aegon employees volunteered approximately 19,500 hours – equivalent of EUR 0.9 million, based on their average salaries.

Through our businesses, we support more than 500 local charities and good causes. Among the largest recipients in 2019 were United Way and Habitat for Humanity in the US, the VUMC Alzheimer Center in the Netherlands, and Sick Kids Friends Foundation and the Teenage Cancer Trust in the UK.

Human rights

Aegon is committed to the UN Universal Declaration of Human Rights and the core standards of the International Labor Organization. This is explicitly incorporated in numerous policies, such as the Code of Conduct (applicable to all Aegon employees across the globe), the Statement on Inclusion & Diversity, the Human Rights Policy and the Aegon Operational Risk Taxonomy. Aegon faces the most potential risks in indirect business relationships, which is why human rights are core to the Responsible Investment and Sustainable Procurement policies.

Responsible tax

We are firmly committed to making a valuable economic and social contribution to the communities in which we operate, both through our own tax payments and through collection and payments of third-party taxes. We seek to pay ‘fair taxes’, which for us means paying the right amounts of tax in the right places.

It is our policy to allocate profits where value is created through our commercial business activities. For us, tax follows business, which means that our decisions are taken for business reasons and not for tax advantages.

Following discussion with stakeholders, we published our Global Tax Policy online. This policy outlines Aegon’s approach to responsible tax, which seeks to align the long-term interests of all our customers, employees, business partners, investors, and wider society. We also hold regular meetings with NGOs to discuss Aegon’s tax strategy and policy.

We strive to work together with tax authorities in a constructive and transparent manner. Our Horizontal Monitoring Agreement with the Dutch tax authorities shows our commitment to this principle. This includes public discussion and disclosure of policies and principles, as well as the overall governance and oversight of our tax position.

Aegon Global Tax focusses on tax technology in setting its strategic targets. We believe that technology could be an effective means of achieving process efficiency and automated control. In the Netherlands, a proof of concept for a tax data management system and automated tax reporting is in

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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Taxes borne by Aegon, 2019

(in EUR million)

 

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1 

Includes state and withholding tax

2 

Related to company’s own personnel (including social security tax)

Taxes collected on behalf of others, 2019

(in EUR million)

 

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3 

Includes dividends, interest, royalties and others

4 

Policyholders (including social security tax)

 

 

For a breakdown of corporate income tax by country/region, please see page 404. Some numbers may not add up due to rounding.

 

the process of being built. We strive for this technology to make tax compliance such as preparation of Dutch corporate income tax and value added tax returns more automatic.

Disclosures are provided in our financial statements and cover tax payments in our main markets. We provide country-by-country tax reporting in a transparent and accurate manner to the tax authorities. We also provide details of our total tax contribution company-wide and by region in the charts above. Taxes borne are a cost of business and affect our financial results. Taxes collected are not a direct cost of business but are collected on behalf of governments from others. The reported numbers are on cash payment or accrual basis.

Aegon’s tax function maintains an adequate staff of qualified and trained tax professionals to provide timely and high-quality tax support to our commercial decision-makers. In this regard, proper governance and procedures are in place to ensure that:

  the tax team understands and is engaged in the tax effects of day-to-day business operations and involved in all significant business developments, investments and transactions;
  the tax consequences are considered as part of every major business decision; and
  Aegon’s tax control framework is constantly evolving to a higher maturity level.

The Aegon Global Tax team is continuously trained on tax law, jurisprudence and/or other relevant developments. To ensure that tax dilemmas are dealt with in accordance with our Global Tax Policy, compliance with the Global Tax Policy is part of a quarterly attestation and our Global Tax training program. The Tax Risk Oversight Committee has been established to have a final say on dilemmas that have been escalated to it.

Aegon’s tax function reports regularly to the Executive Board and Management Board on day-to-day operations and the status and effectiveness of the function. At least once a year, the tax function reports to the Supervisory Board’s Audit Committee.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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Corporate governance

Aegon is incorporated and based in the Netherlands. As a company established and listed in the Netherlands, Aegon must comply with Dutch law and is subject to the Dutch Corporate Governance Code.

 

Aegon is governed by three corporate bodies:

  General Meeting of Shareholders
  Supervisory Board
  Executive Board

Aegon also has a Management Board. This works in unison with the Executive Board, and helps to oversee operational issues and the implementation of Aegon’s strategy. Aegon’s corporate governance structure is the responsibility of both the Supervisory Board and the Executive Board. Any substantive change to this structure is submitted to the General Meeting of Shareholders for discussion.

The shareholders

Listing and shareholder base

Aegon’s common shares are listed on Euronext Amsterdam and the New York Stock Exchange. Aegon has institutional and retail shareholders around the world. More than three-quarters of shareholders are located in Aegon’s three main markets, the Netherlands, United States and the United Kingdom. Aegon’s largest shareholder is Vereniging Aegon, a Dutch association with a special 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 a year and, if deemed necessary, the Supervisory or Executive Board of the Company is able to 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 a written proxy. Those shareholders who alone or jointly represent at least 1% of Aegon’s issued capital or a block of shares worth at least EUR 100 million may request items be added to the agenda of a General Meeting of Shareholders. In accordance with Aegon’s Articles of Association, such a request will be granted if it is received in writing at least 60 days before the meeting,

and if there are no important interests of the Company that dictate otherwise.

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 a Special 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 a four-year term, and may then be reappointed for another four-year period. Subsequently, a Supervisory Board member can be reappointed again for a period of two years, and then extended by two

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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years at the most. Supervisory Board members are no longer eligible for (re)appointment after reaching the age of 70, unless the Supervisory Board decides to make an exception. Remuneration of the Supervisory Board members is determined by the General Meeting of Shareholders. In 2019, no transactions were concluded between the Company and any of the Supervisory Board members. Furthermore, the Company did not provide loans or issue guarantees to any members of the Supervisory Board. At present, Aegon’s Supervisory Board consists of six members, all of whom qualify as independent in accordance with the Dutch Corporate Governance Code. During the Annual General Meeting of Shareholders on May 15, 2020, it will be proposed to the shareholders to appoint Thomas Wellauer and Caroline Ramsay as members of the Supervisory Board.

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 achieving Aegon’s aims and developing the strategy and its associated risk profile, in addition to overseeing any relevant sustainability issues and the development of the Company’s earnings. Each member has duties related to his or her specific area of expertise.

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 Alexander R. Wynaendts, who is Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matthew J. Rider, who is Chief Financial Officer (CFO), and member of the Executive Board. During the Annual General Meeting of Shareholders on May 15, 2020, it will be proposed to the shareholders to appoint Lard Friese as member to the Executive Board and succeed Alex Wynaendts as CEO. Following his appointment, Mr. Wynaendts will resign as member of the Executive Board and Mr. Friese will succeed Mr. Wynaendts as Chief Executive Officer of the Company.

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 a four-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 a maximum of one year of the fixed component of the salary.

In 2019, no transactions were concluded between the Company and either member of the Executive Board. Furthermore, the Company did not provide any loans to or issue guarantees in favor of either of the members of the Executive Board.

Management Board

Aegon’s Executive Board is assisted in its work by the Company’s Management Board, which has 11 members, including the members of the Executive Board. Aegon’s Management Board is composed of Alex Wynaendts, Matthew Rider, Mark Bloom, Maarten Edixhoven, Adrian Grace, Allegra van Hövell-Patrizi, Marco Keim, Onno van Klinken, Carla Mahieu, Mark Mullin and Bas NieuweWeme. Mike Holliday-Williams will be appointed to the Management Board, and succeed Adrian Grace who will retire from the company on March 31, 2020.

Aegon’s Management Board works in unison with the Executive Board, and helps oversee operational issues and the implementation of Aegon’s strategy. Members are drawn from Aegon’s business units and from Aegon’s global functions. The members have both regional and global responsibilities. This ensures that Aegon is managed as an integrated international business. While the Executive Board is Aegon’s sole statutory executive body, the Management Board provides vital support and expertise in pursuit of the Company’s strategic objectives.

In the relationship between the Supervisory Board and the Management Board, the CEO shall be the first contact for the Supervisory Board and its Chairman. Further, the members of the Boards will act in accordance with the provisions provided therefore in the Management Board Charter, the Executive Board Charter and the Supervisory Board Charter.

Capital, significant shareholders and exercise of control

As a publicly-listed company, Aegon is required to provide the following detailed information regarding any structures or measures that may hinder or prevent a third party from acquiring the Company or exercising effective control over it.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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The capital of the Company

Aegon has an authorized capital of EUR 1,080 million, divided into 6 billion common shares and 3 billion common shares B, each with a nominal value of EUR 0.12. As of December 31, 2019, a total of 2,105,138,885 common shares and 585,022,160 common shares B had been issued.

Depository receipts for Aegon shares are not issued with the Company’s cooperation.

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 a common share. This means that common shares B also carry one vote per share. However, the voting rights attached to common shares B are subject to restrictions as laid down in the Voting Rights Agreement, under which Vereniging Aegon may cast one vote for every 40 common shares B it holds in the absence of a Special Cause.

The financial rights attached to a common share B are one-fortieth (1/40th) of the financial rights attached to a common share. The rights attached to the shares of both classes are otherwise identical. For the purpose of the issuance of shares, reduction of issued capital, the sale and transfer of common shares B or otherwise, the value or the price of a common share B is determined as one-fortieth (1/40th ) of the value of a common share. For such purposes, no account is taken of the difference between common shares and common shares B in terms of the proportion between financial rights and voting rights.

Significant shareholdings

On December 31, 2019, Vereniging Aegon, Aegon’s largest shareholder, held a total of 288,702,769 common shares and 559,712,240 common shares B.

Under the terms of the 1983 Merger Agreement as amended in May 2013, Vereniging Aegon has the option to acquire additional common shares B. Vereniging Aegon may exercise its call option to keep or restore its total stake to 32.6% of the voting rights, irrespective of the circumstances that caused the total shareholding to be or become lower than 32.6%.

During 2019, two transactions were concluded between Aegon N.V. and Vereniging Aegon. All requirements determined by Best Practice 2.7.5 of the Dutch Corporate Governance Code were complied with in the execution of these transactions.

On December 23, 2019, Aegon N.V. repurchased 13,227,120 common shares B from Vereniging Aegon for the amount of EUR 1,384,046 based on 1/40th of the Value Weight

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 N.V. with its special cause voting rights of 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 (1/40th of the market value of a common share in the capital of the Company at the time of issuance) to mitigate dilution caused by Aegon’s issuance of shares on May 17, 2019 in connection with the Long Term Incentive Plans for senior management.

In this section below where reference is made to any filings with the Dutch Autoriteit Financiële Markten or the SEC the terms ‘capital issued’ and ‘votes’ 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, Dodge & Cox International Stock Fund, BlackRock, Inc. and Franklin Resources, Inc. each hold a capital or voting interest in Aegon of 3% or more.

Based on its last filing with the Dutch Autoriteit Financiële Markten as at June 20, 2018, Dodge & Cox International Stock Fund stated to hold 131,792,024 common shares, which represent 4.9% of the issued capital as at December 31, 2019.

On February 13, 2020, Dodge & Cox’s filing with the US Securities and Exchange Commission (SEC) shows that Dodge & Cox holds 235,569,910 common shares, representing 9.1% of the issued and outstanding capital as at December 31, 2019, and has voting rights for 230,578,490 shares, representing 8.9% of the votes as at December 31, 2019.

Based on its filing with the Dutch Autoriteit Financiële Markten as at November 14, 2019, BlackRock, Inc. stated to hold 116,325,180 shares, representing 4.3% of the issued capital as at December 31, 2019 and 136,885,389 voting rights, representing 5.1% of the issued capital as at December 31, 2019.

On February 5, 2020, BlackRock, Inc.’s filing with the US Securities and Exchange Commission (SEC) shows that BlackRock holds 149,073,955 common shares, representing 5.7% of the issued and outstanding capital as at December 31, 2019, and has voting rights for 129,834,767 shares, representing 5.0% of the votes as at December 31, 2019.

Based on its filing with the Dutch Autoriteit Financiële Markten as at June 10, 2015, Franklin Resources, Inc. (FRI), a US based investment management firm, stated to hold 81,510,408 shares, representing 3.0% of the issued capital as at December 31, 2019.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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39     Corporate governance
        
        

 

    

Special control rights

As a matter of Dutch corporate law, the common shares and the common shares B offer equal full voting rights, as they have equal nominal value (EUR 0.12). The Voting Rights Agreement entered into between Vereniging Aegon and Aegon provides that under normal circumstances, i.e. except in the event of a Special Cause, Vereniging Aegon is not allowed to exercise more votes than is proportionate to the financial rights represented by its shares. This means that in the absence of a Special Cause, 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 a Special 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 a third party of an interest in Aegon N.V. amounting to 15% or more;
  A tender offer for Aegon N.V. shares; or
  A proposed business combination by any person or group of persons, whether acting individually or as a group, other than in a transaction approved by the Company’s Executive and Supervisory Boards.

If Vereniging Aegon, acting at its sole discretion, determines that a Special 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 a period limited to six months. Vereniging Aegon would, for that limited period, command 32.6% of the votes at a General Meeting of Shareholders.

Issue and repurchase of shares

New shares may be issued up to the maximum of the Company’s authorized capital, following a resolution adopted by the General Meeting of Shareholders. Shares may also be issued following a resolution of the Executive Board, subject to approval by the Supervisory Board, providing, and to the extent that, the Board has been authorized to do so by the General Meeting of Shareholders. A resolution authorizing the Executive Board to issue new shares is usually presented at Aegon’s Annual General Meeting of Shareholders.

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 a change of control following a public offer for the outstanding shares of the Company, other than those customary in financial markets (for example, financial arrangements, loans and joint venture agreements).

Share plan

Senior executives at Aegon companies and some other employees are entitled to variable compensation of which part is granted in the form of shares. For further details, please see the Remuneration Report on page 54 and note 50 of the notes to Aegon’s consolidated financial statements of this Annual Report. Under the terms of existing share plans the vesting of granted rights is predefined. The shares shall vest as soon as possible in accordance with payroll requirements of the relevant subsidiary after the adoption of the Company’s Annual Report at the Annual General Meetings of Shareholders in the year of vesting of these shares.

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 a majority of two-thirds of votes cast, representing at least one half of Aegon’s issued capital. The General Meeting may, in addition, bring forward a resolution to appoint someone not nominated by the Supervisory Board. Such a resolution also requires a two-thirds majority of votes cast, representing at least one half of Aegon’s issued capital.

Members of Aegon’s Supervisory and Executive Boards may be suspended or dismissed by the General Meeting of Shareholders with a two-thirds majority of votes cast, representing at least one half of Aegon’s issued capital, unless the suspension or dismissal has first been proposed by the Company’s Supervisory Board. A member of the Executive Board may also be suspended by the Supervisory Board, although the General Meeting of Shareholders has the power to annul this suspension.

Amending the Articles of Association

The General Meeting of Shareholders may, with an absolute majority of votes cast, pass a resolution to amend Aegon’s Articles of Association or to dissolve the Company, in accordance with a proposal made by the Executive Board and approved by the Supervisory Board.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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40     Corporate governance
        
        

 

    

Dutch Corporate Governance Code

As a company based in the Netherlands, Aegon adheres to the Dutch Corporate Governance Code. The version of the code applicable to the financial year 2019 is the version that came into force on January 1, 2017. Aegon endorses the Code and strongly supports its principles for sound and responsible corporate governance and long-term value creation. Aegon regards the Code as an effective means to help ensure that the interests of all stakeholders are duly represented and taken into account. It is the responsibility of both the Supervisory Board and the Executive Board to oversee Aegon’s overall corporate governance structure.

In general, Aegon applies the best practice provisions set out in the Code. There is one best practice provision with which 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 a limited quorum.

Aegon’s position on Best Practice 4.3.3

Aegon’s Articles of Association provide for a larger majority and a higher quorum than those advocated by the Code. Given that the Company has no specific anti-takeover measures, the current system is deemed appropriate within the context of the 1983 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.

Differences between Dutch and US company laws

Dutch company law is different from US law in the following respects: Aegon, like most large Dutch public companies, has a two-tier governance system comprising an Executive Board and a Supervisory Board. The Executive Board is the executive body. Its members are not Aegon employees and have an engagement agreement with the Company. Members of the Executive Board are appointed and dismissed by the General Meeting of Shareholders, as inside directors are in the United States. The Remuneration Policy as regards the members of the Executive Board is adopted by the General Meeting of Shareholders. The number of the Executive Board members and the terms of their engagement are determined by the Supervisory Board within the scope of the adopted Remuneration Policy.

The Supervisory Board performs supervisory and advisory functions only, and its members are outsiders that are not employed by the Company. The Supervisory Board has the duty to supervise the performance of the Executive Board, the Company’s general course of affairs and the business connected with it. The Supervisory Board also assists the Executive Board by giving advice. Other powers of the Supervisory Board include the prior approval of certain important resolutions of the Executive Board. Members of the Supervisory Board are appointed for a four-year term and may be dismissed by the General Meeting of Shareholders. The remuneration of Supervisory Board members is fixed by the General Meeting of Shareholders. Resolutions entailing a significant change in the identity or character of the Company or its business require the approval of the General Meeting of Shareholders.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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41     Composition of the Boards
        
        

 

    

Composition of the Boards

Members of the Executive Board

 

Alexander R. Wynaendts (1960, Dutch)1

CEO and Chairman of the Executive and Management Boards of Aegon N.V.

Alex Wynaendts began his career in 1984 with ABN AMRO Bank, working in Amsterdam and London in the Dutch bank’s capital markets, asset management, corporate finance and private banking operations. In 1997, Mr. Wynaendts joined Aegon as Senior Vice President for Group Business Development.

He was appointed as a member of Aegon’s Executive Board in 2003, overseeing the Company’s international growth

 

strategy. In April 2007, Mr. Wynaendts was named Aegon’s Chief Operating Officer. A year later, he became CEO and Chairman of Aegon’s Executive Board and Management Board.

Mr. Wynaendts has been appointed as Independent Director of the Board of Air France-KLM S.A. since May 2016, as Independent Director of the Board of Citigroup Inc. since September 2019 and as Chairman of the Supervisory Board of Puissance B.V. (not listed) since May 2017.

 

 

 

Matthew J. Rider (1963, American)

CFO and member of the Executive and Management Boards of Aegon N.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 a member 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 Aegon N.V. of May 19, 2017.

 

 

Members of the Management Board

Alexander R. Wynaendts: see above

Matthew J. Rider: see above

 

 

 

Mark Bloom (1964, American)

Global Chief Technology Officer and member of the Management Board of Aegon N.V.

Mark Bloom has over 30 years’ experience in information technology. He joined Aegon from Citi in February 2016, where he served as Global Head of Consumer Digital and Operations Technology, responsible for digital, data and operations technology solutions and innovations. Prior to that, he held a number of technology leadership positions in financial services and the aerospace industry.

 

As Global Chief Technology Officer at Aegon, Mr. Bloom is responsible for leading the Company’s technology and innovation activities, including leveraging technology to drive efficiency and enhancing the customer experience. Mr. Bloom was appointed as a member of Aegon’s Management Board in August 2016. Mr. Bloom is a member of the Board of Directors of Freddie Mac since November 2019.

 

 

 

 

 

1 

On August 12, 2019, Aegon announced that its Supervisory Board intends to propose the appointment of Mr. Lard Friese as CEO to the Annual General Meeting in 2020.

 

 

         Aegon Annual Report on Form 20-F 2019  


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42     Composition of the Boards
        
        

 

    

Maarten Edixhoven (1971, Dutch)

CEO of Aegon the Netherlands and member of the Management Board of Aegon N.V.

Maarten Edixhoven has over 25 years of experience in the financial services industry. He was head of corporate compliance at ING Group N.V. from 1995 to 2010, and served as a director of ING the Netherlands and Nationale Nederlanden in the period 2004 to 2008.

Mr. Edixhoven was appointed CEO of Dutch life insurance company Zwitserleven in 2010 and held that position prior

to joining Aegon the Netherlands as a board member in 2014. He was appointed CEO of the Dutch business in January 2017. He is also a board member at both the Dutch Association of Insurers and the Confederation of Netherlands Industry and Employers.

Mr. Edixhoven was appointed member of Aegon N.V.’s Management Board in October 2019.

 

 

 

 

Adrian Grace (1963, British)1

CEO of Aegon UK and member of the Management Board of Aegon N.V.

Adrian Grace held various roles at GE Capital and Sage Group Inc. before joining Barclays Bank as Chief Executive of the Insurance Business in 2004, and HBOS as Managing Director of Commercial Businesses in 2007.

He joined Aegon UK in 2009, and was appointed CEO of Aegon UK in 2011 and as a member of the Management Board of Aegon in 2012. Mr. Grace is a non-executive Director at Clydesdale Bank and a member of the Financial Conduct Authority practitioners’ panel. He was member of the Board of Scottish Financial Enterprise until June 2013.

 

 

 

 

Allegra van Hövell-Patrizi (1974, Italian and Belgian)

Chief Risk Officer of Aegon N.V. and member of the Management Board of Aegon N.V.

Allegra van Hövell-Patrizi began her career in 1996 at McKinsey

& Company, specializing in financial institutions. After several years as a partner there, she joined F&C Asset Management in 2007 as a member of the Management Committee. In 2009, she joined Prudential plc where she was part of the CEO Office

and then later became Group Risk Director, and a member of the Group Executive Risk Committee, as well as the PUSL 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 a member of Aegon’s Management Board in January 2016. Ms. van Hövell-Patrizi is a member of the Supervisory Board of LeasePlan (not listed) since 2018.

 

 

 

 

Marco Keim (1962, Dutch)

CEO Aegon International and member of the Management Board of Aegon N.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 a Member 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 Southern and Eastern Europe as well as Asia. Mr. Keim is a member of the Supervisory Board of Eneco Holding N.V..

 

 

 

 

 

 

1 

On September 10, 2019, Aegon announced that Mr. Grace would retire from the company on March 31, 2020. Mr. Mike Holliday-Williams has been appointed as the successor of Mr. Grace.

 

 

         Aegon Annual Report on Form 20-F 2019  


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43     Composition of the Boards
        
        

 

    

Onno van Klinken (1969, Dutch)

General Counsel and member of the Management Board of Aegon N.V.

Onno van Klinken has over 25 years’ experience providing legal advice to a range of companies and leading Executive Board offices. Mr. Van Klinken started his career at Allen & Overy, and previously worked for Aegon between 2002 and 2006. He then served as Corporate Secretary for Royal Numico, before it was acquired by Groupe Danone. His next position was as General Counsel for the Dutch global mail and express

group TNT, where he served from 2008 until the legal demerger of the group in 2011. This was followed by General Counsel positions at D.E. Master Blenders 1753 and Corio N.V.. Mr. Van Klinken 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 a member of Aegon’s Management Board since August 2016. Mr. Van Klinken was appointed member of the Board of Stichting Continuïteit SBM Offshore in December 2016.

 

 

 

 

Carla Mahieu (1959, Dutch)

Global Head Human Resources and member of the Management Board of Aegon N.V.

Carla Mahieu started her career in 1984 at Royal Dutch Shell, where she held various management positions within Human Resources, Communications and Corporate Strategy.

Following several years as a consultant – during which time she worked for Spencer Stuart, among other companies – Ms. Mahieu was appointed Senior Vice President Corporate Human Resource

Management at Royal Philips Electronics in 2003. Ms. Mahieu joined Aegon in 2010 as Global Head Human Resources, and has been a member of Aegon’s Management Board since August 2016.

Ms. Mahieu has been a member of the Supervisory Board of the Royal BAM Group since 2011, and the Supervisory Board of VodafoneZiggo Group B.V. since 2017.

 

 

 

 

Mark Mullin (1963, American)

CEO of Aegon Americas and member of the Management Board of Aegon N.V.

Mark Mullin has spent more than 20 years with Aegon in various management positions in both the United States and Europe. Mr. Mullin served as President and CEO of one of Aegon’s US subsidiaries, Diversified Investment Advisors, and as head of the Company’s US annuity and mutual fund businesses.

He was named President of Aegon Americas in 2009, and became President and CEO of Aegon Americas and a member of Aegon’s Management Board in 2010. Mr. Mullin was appointed Chairman of the Board of Directors of the American Council of Life Insurers for the period October 2017-October 2018 and was a member of the Board of Directors and Executive Committee through October 2019.

 

 

 

 

Bas NieuweWeme (1972, Dutch)

Global CEO of Aegon Asset Management and member of the Management Board of Aegon N.V.

Bas NieuweWeme was appointed Global CEO of Aegon Asset Management and Member of the Aegon N.V. Management Board in June 2019. Having obtained a Master 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 Voya Investment Management. In 2016, he was named Global Head

of the Client Advisory Group and a member of the management team at PGIM Fixed Income and Global Head of the Institutional Relationship Group at PGIM, Prudential Financial’s global investment management business. He serves as vice-chairman of the supervisory board of La Banque Postal Asset Management.

He is also a member of the Board of Directors of The Netherlands-America Foundation (NAF) and a member of the Leadership Council of AmeriCares, a non-profit disaster relief and global health organization.

 

 

 

 

 

 

         Aegon Annual Report on Form 20-F 2019  


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44     Composition of the Boards
        
        

 

    

Members 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 2021.

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 non-executive director at the Board of Directors of Self Trade Bank SA (not listed) and an independent director at Amadeus IT Group S.A..

Robert W. Dineen (1949, American)

Member of the Remuneration Committee

Member of the Risk Committee

Robert W. Dineen was Vice Chairman of Lincoln Financial Network (LFN) and a member of the Senior Management Committee of Lincoln Financial Group (LFG), before retiring in 2013. Before joining Lincoln Financial Group, Mr. Dineen was Senior Vice President and head of Merrill Lynch’s Managed Asset Group. Mr. Dineen was the non-executive Chairman of the Board of Aretec Inc. (not listed, US-based) and was a member of Lincoln New York Life Company Board. He was appointed to Aegon’s Supervisory Board in May 2014, and stepped down as per October 11, 2019.

Mark A. Ellman (1957, American)

Member of the Audit Committee

Member of the Risk Committee

Mark A. Ellman is a former Vice Chairman Global Origination of Bank of America/Merrill Lynch. Before joining Bank of Amercia/ 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 a founding partner of Barrett Ellman Stoddard Capital Partners.

Mr. Ellman was appointed to Aegon’s Supervisory Board in 2017, and his current term ends in 2021. He is a member of the Supervisory Board Audit Committee and the Supervisory Board Risk Committee. Mr. Ellman was a non-executive director of Aegon USA from 2012 to 2017.

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 a member of the Supervisory Board Risk Committee.

Mr. Noteboom is also a member of the Supervisory Board of Royal Ahold Delhaize N.V. and Chairman of the Supervisory Board of Royal Vopak N.V. In addition, Mr. Noteboom is a member of the Board of Directors of VUmc Cancer Center Amsterdam and the Chairman of Stichting Prioriteit Ordina Groep. Mr. Noteboom is a former member of the Supervisory Board of Wolters Kluwer N.V..

Ben van der Veer (1951, Dutch)

Chairman of the Audit Committee

Member of the Nomination and Governance Committee

Ben van der Veer is former Chairman of the Board of Management of KPMG N.V. Mr. Van der Veer retired from KPMG on September 30, 2008, and was appointed to Aegon’s Supervisory Board in October 2008. Mr. Van der Veer was re-appointed as a member of the Supervisory Board during the 2016 Annual General Meeting of Shareholders, and his third and final term ends in 2020. He is Chairman of the Supervisory Board Audit Committee and a member of the Supervisory Board Nomination and Governance Committee.

Mr. Van der Veer is a member of the Supervisory Board of Royal Vopak N.V. and member of the Board of the Stichting Continuiteit Heijmans (not listed). Mr. Van der Veer is a former member of the Supervisory Board of Royal Imtech N.V., TomTom N.V., Siemens Nederland N.V. (not listed) and a former non-executive member of the Board of Directors of RELX PLC and a former member of the Supervisory Board of Royal FrieslandCampina N.V. (not listed).

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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45     Composition of the Boards
        
        

 

    

Corien M. Wortmann-Kool (1959, Dutch)

Vice Chairman of the Supervisory Board

Member of the Audit Committee

Member of the Nomination and Governance Committee

Corien M. Wortmann-Kool is Chairman of the Board of Stichting Pensioenfonds ABP, the Dutch public sector collective pension fund. Ms. Wortmann-Kool is a former Member of the European Parliament and Vice President on Financial, Economic and Environmental affairs for the EPP Group (European People’s Party). She was appointed to Aegon’s Supervisory Board in May 2014, and her current term ends in 2022.

She is Vice Chairman of the Supervisory Board, and a member of the Supervisory Board Audit Committee and the Supervisory Board Nomination and Governance Committee.

Ms. Wortmann-Kool is also a member of the Supervisory Board of Het Kadaster (not listed), Chairman of the Board of Trustees of Save the Children Netherlands and member of De Autoriteit Financiële Markten Capital Markets Advisory Committee. She was vice president of the European People’s Party until March 2018 and member of the Advisory Council of the Centraal Bureau voor de Statistiek until June 2018.

Dona D. Young (1954, American)

Member of the Audit Committee

Chairman 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 2021.

She is Chairman of the Supervisory Board Risk Committee, member of the Supervisory Board Audit 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.. Furthermore, Ms. Young is a member of the Audit Committee of the Board of Trustees of Save the Children US (not listed), and member of the Board of Save the Children International and Save the Children Association and serves as an independent member of the Advisory Board of Spahn and Rose (not listed). Ms. Young is a member of the Board of the National Association of Corporate Directors.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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46     Report of the Supervisory Board
        
        

 

    

Report of the

Supervisory Board

The Supervisory Board is entrusted with supervising and advising the Executive Board on management of the Company, and overseeing Aegon’s strategy and the general course of its businesses.

 

Oversight and advice

The Supervisory Board is a separate independent corporate body, consisting of six members on December 31, 2019. The Supervisory Board is 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 published 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 at the Company’s General Meeting of Shareholders. Overall accountability for Aegon’s remuneration governance also resides with the Supervisory Board, which is advised by its Remuneration Committee. This includes the responsibility for designing, approving and maintaining the Aegon Group Global Remuneration Framework, including the remuneration policies for the Executive Board and Heads of Group Control functions.

Corporate governance

Details of Aegon’s corporate governance structure and a summary of how the Company complies with the Dutch Corporate Governance Code can be found on pages 36-40 of this Annual Report and in the Corporate Governance Statement published on aegon.com.

Composition of the Supervisory Board and

Executive Board

Supervisory Board

The composition of the Supervisory Board is discussed regularly in Board meetings and in particular by the Nomination and Governance Committee. An overview of the composition of the Supervisory Board in 2019 can be found on pages 44-45. All members of the Supervisory Board are considered independent under the terms of best practice provisions 2.1.7, 2.1.8 and 2.1.9 of the Dutch Corporate Governance Code.

There was one change to the Supervisory Board in 2019: after having been a member of the Supervisory Board for five years, Mr. Robert Dineen stepped down as member of the Board on October 11, 2019, in light of his appointment as Non-Executive Chairman of a US investment manager. The Board benefitted from Mr. Dineen’s knowledge and contributions during his terms.

On May 17, 2019, shareholders reappointed Mr. Ben Noteboom for an additional four-year term. During the Annual General Meeting on May 15, 2020, the Supervisory Board will propose to the shareholder to appoint Mr. Thomas Wellauer and Ms. Caroline Ramsay as members to the Supervisory Board for a four-year term.

In compliance with the Dutch Corporate Governance Code, members of the Supervisory Board are appointed by shareholders for a term of four years. The option exists to reappoint members for one additional four-year term. A Supervisory Board member can then subsequently be reappointed again for a period of two years, which reappointment may be extended by at most two years. For a reappointment after an eight-year period, reasons will be provided in the report of the Supervisory Board. The retirement schedule and other information about members of the Supervisory Board are available on aegon.com.

Executive Board

The Executive Board consists of Alexander R. Wynaendts, Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matthew J. Rider, Chief Financial Officer (CFO).

Members of the Executive Board are appointed by shareholders for a term of four years, with the option of reappointment for additional four-year terms. The appointment schedule and other information about members of the Executive Board are available on aegon.com.

During the Annual General Meeting on May 15, 2020, it will be proposed to the shareholders to appoint Mr. Lard Friese as member to the Executive Board. Following his appointment, Mr Wynaendts will resign as member of the Executive Board and Mr Friese will succeed Mr. Wynaendts as Chief Executive Officer of the Company.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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Board meetings

Attendance

In 2019, the Supervisory Board had seven regular (face-to-face) meetings: four related to the quarterly results; one to the annual report; and two to strategy (including the budget and Medium Term Plan). Supervisory Board Committee meetings were usually held the day before the meetings of the full Supervisory Board. All Supervisory Board meetings were attended by all Board members. All committee meetings were attended

 

by all committee members, except for one Risk Committee meeting that Ben Noteboom was unable to attend. Next to the Supervisory Board and Supervisory Board Committee meetings, additional meetings have taken place in relation to the succession of Alex Wynaendts as member of the Executive Board and Chief Executive Officer. An overview of Supervisory Board members’ attendance by meeting is provided in the table below.

 

 

Name  

Regular SB

meeting

 

Audit

Committee

 

Risk

Committee

 

Combined

Audit & Risk

  Remuneration  

  Nomination &

Governance

 

Additional NGC

mtgs. / calls

 

  Additional SB

mtgs. / calls

 

William Connelly

  7/7   -   -   -   6/6   6/6   4/4     3/3  

Bob Dineen 1)

  5/5   -   3/3   -   4/4   -   -     2/2  

Mark Ellman

  7/7   5/5   4/4   1/1   -   -   -     3/3  

Ben Noteboom

  7/7   -   3/4   1/1   6/6   -   -     3/3  

Ben van der Veer

  7/7   5/5   -   1/1   -   6/6   4/4     3/3  

Corien Wortmann

  7/7   5/5   -   1/1   -   6/6   4/4     3/3  

Dona Young

  7/7   5/5   4/4   1/1   -   6/6   4/4     3/3  

 

1 

Where a Supervisory Board member retired from the SB, stepped down from a Committee or was appointed throughout the year, only meetings during his / her tenure are taken into account.

 

Based on the agenda topics, members of the Executive Board and Management Board attended the Supervisory Board meetings held in 2019. Also, at the request of the Supervisory Board, other Company executives attended the meetings to provide reports and updates on specific topics. Representatives from Aegon’s external auditor PwC attended the March 2019 Supervisory Board meeting on Aegon’s 2018 Annual Report. PwC also attended all 2019 Audit Committee meetings in full except for the combined Supervisory Board Audit and Risk Committee in December. Regular Board meetings were preceded or followed by meetings attended only by the members of the Supervisory Board and the Chief Executive Officer. Furthermore, the Supervisory Board held meetings without the presence of Executive Board or Management Board members.

Highlights and activities

Key topics discussed during the 2019 Supervisory Board meetings were Aegon’s quarterly results and semi-annual and annual reporting, Aegon’s strategy, the main business risks, IT, regulatory developments, acquisitions and divestments and human resources items.

Quarterly results were discussed on the basis of feedback from the Audit Committee. The full-year results reported in this Annual Report were discussed in the March 2020 meeting in the presence of the external auditor PwC. At the Supervisory Board meeting in December 2019, the budget for 2020 was approved and the Medium Term Plan was discussed.

The Supervisory Board regularly discussed the long-term value creation strategy 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 where necessary. Every year during the Supervisory

Board strategy meeting, the strategy is discussed as part of the annual strategy process. Plans and projects were discussed during executive sessions and in regular meetings, together with the strategic focus for all operating segments. Furthermore, the focus on execution and the modernization of the business were additional important strategic priorities that were discussed during the Supervisory Board meetings.

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 with add-on acquisitions, the sale of underperforming businesses and the disposals 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 sale of its 50% stake in the variable annuity joint ventures in Japan and the reinsurance of part of the longevity exposure in the Netherlands.

In 2019, Supervisory Board discussions included the following topics:

  Strategy, including Aegon’s long-term value creation, its responsible business strategy and business reviews;
  Acquisitions, divestments, the strategic direction of Aegon’s businesses and the focus on execution and modernization, which included strategic administration partnerships;
  Executive Board and senior management succession planning;
  Executive remuneration, including the risks of the remuneration framework;
  Corporate Governance;
  Composition of the Supervisory Board, including the Board’s effectiveness;
 
 

 

         Aegon Annual Report on Form 20-F 2019  


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48     Report of the Supervisory Board
        
        

 

    

  Human resources, including talent development, results of the global employee survey and cultural change and behavior;
  Annual and quarterly results, dividends and the Company’s Medium Term Plan, including the 2020 budget, capital and funding plan;
  Capital generation and Solvency II capital position, including regulatory capital reports and actions following the 2019 market and interest rate developments;
  Enterprise risk management, cybersecurity and information security risks, and the risks related to the execution of the strategy within the Company;
  Investor relations, including shareholder listing, market analysis and roadshow feedback;
  Legal, regulatory and compliance issues, including Aegon’s engagement with regulators;
  Highlighted topics by Supervisory Board Committees;
  Regulatory changes at both a regional and global level;
  Customer due diligence processes;
  Tax policy and tax developments; and
  Technology, including the technology strategy, technological developments and innovations.

Results and budget

In February 2019, the Supervisory Board convened to discuss the fourth quarter 2018 results. In March 2019, the Supervisory Board reviewed and adopted Aegon’s 2018 Annual Report, the Consolidated Financial Statements of Aegon N.V., and the Financial Statements of Aegon N.V.. In May, August and November, the Supervisory Board reviewed Aegon’s first, second and third quarter 2019 results respectively.

In December 2019, the Supervisory Board and Management Board reviewed the Company’s Medium Term Plan, including the budget and capital plan for 2020. The Boards took note of the uncertainties and challenges in the coming years as described in the Plan. These included, among others: increased regulatory requirements, lower interest rates and lower equity markets, market volatility, digital developments, and project risk. The Board discussed Aegon’s capital generation and capital projections, together with the continued focus on cost efficiency. The Supervisory Board supported the Medium Term Plan and approved the budget for 2020. The Board also approved the 2020 funding plan and authorized the Executive Board to execute on the funding plan in 2020.

Legal, compliance and regulatory affairs

In 2019, the Supervisory Board and the Audit Committee discussed a number of compliance, regulatory and legal topics relating to the Americas, Europe, Asia, and Asset Management with management, the Global Head of Group Legal & Regulatory Compliance and the Global Head of Operational and Conduct Risk Management. In particular, the Board discussed the state of the Legal and Compliance functions, General Data Protection

Regulation developments, Compliance risks, Fraud and Financial crime including know your customer and ultimate beneficial owner requirements, and whistle-blower reports. An overview of the topics discussed in the field of Risk Management can be found in the Audit Committee and Risk Committee sections below.

In 2019, the Chairs of the Supervisory Board, Audit Committee and Risk Committee visited the group supervisor, the Dutch Central Bank (DNB), for their regular annual meeting.

Educational sessions

The Board and its Committees received updates and presentations on topics including developments in acquisitions and divestments, corporate governance and regulatory compliance, roles and responsibilities of the Board and the management and remuneration regulations for the insurance sector, responsible business and information technology. In addition to these updates and presentations provided by the Company, the members of the Supervisory Board gathered general information on industry developments by participating in networks, reading independent reports and sharing knowledge with other Board members within and outside Aegon. The Board visited local offices and liaised with employees in Spain, the Netherlands and the US. In addition, the Board was updated on the IFRS 9 and IFRS 17 developments, the Solvency II landscape, including the EIOPA 2020 review of the Solvency II Directive, capital generation under Solvency II and on the IFRS margin analysis.

Board review

The Supervisory Board undertakes a Board effectiveness review on an annual basis and an external assessment takes place at least once every three years. In the first quarter of 2019, such external assessment of the Supervisory Board was conducted. The assessment was based on document analyses, a survey completed by Supervisory Board members, Management Board members and the Company Secretary and interviews with all these persons. The Board review assessed the functioning of the Board as a whole, the composition, processes and information, the functioning of the Committees and the interaction within the Board and with the Executive and Management Board. The results of the assessment were discussed in May 2019 and the Supervisory Board acted on the observations and recommendations that were then discussed and were listed in the assessment report.

Outside the presence of the Executive Board, the Supervisory Board reviewed the performance (results) of the individual members of the Executive and Management Boards over the preceding calendar year in February 2019. The performance of the members of the Executive and Management Boards was also discussed regularly during the year.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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49     Report of the Supervisory Board
        
        

 

    

Supervisory Board Committees

The Supervisory Board has four Committees that discuss specific issues in depth and prepare items about which the full Board makes decisions. The Committees report verbally about their discussions, and they are discussed in full at Supervisory Board meetings. Supervisory Board members receive all minutes of the Committee meetings. These meetings are open to all members of the Board, regardless of membership of the Committees. All Committee reports were prepared by the respective Committees and approved by the Supervisory Board. These reports provide an overview of the responsibilities and activities of 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 of, and advising the Supervisory Board’s Audit Committee with respect to, the Company’s enterprise risk management framework and internal control systems. The Audit Committee primarily relies on the Risk Committee for these topics, as stated in the Dutch Corporate Governance Code.

The Audit Committee

Composition

On December 31, 2019, the composition of the Audit Committee was as follows:

  Ben van der Veer (chair);
  Mark A. Ellman;
  Corien M. Wortmann-Kool; and
  Dona D. Young.

The members of the Audit Committee meet all relevant independence and experience requirements of financial administration and accounting for listed companies.

The Committee confirmed that all of its members qualified as independent according to Rule 10A-3 of the SEC, and it also confirmed that the Chairman of the Audit Committee, Ben van der Veer, qualified as a financial expert according to the Sarbanes-Oxley Act in the United States and his competence in accounting and auditing according to the Audit Committee Decree 2016 (‘Besluit instelling auditcommissie’), section 2(3).

Role and responsibilities

As Aegon has both an Audit Committee and a Risk Committee, the risk management responsibilities stated 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 as established by the Board. Certain Board members participate in both committees and a combined meeting of the Audit and Risk Committees is scheduled on an annual basis.

The main role and responsibilities of the Audit Committee are to assist and advise the Supervisory Board in fulfilling its oversight responsibilities regarding:

  The integrity of the consolidated interim and full-year financial statements and financial reporting processes;
  Internal control systems and the effectiveness of the internal audit process; and
  The performance of the external auditors and the effectiveness of the external audit process, including monitoring the independence and objectivity of PwC.

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 meetings

In 2019, the Audit Committee held six meetings, one of which was a combined meeting with the Risk Committee of the Supervisory Board in December 2019. Audit Committee meetings were attended by the members of the Audit Committee, 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 Regulatory 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, without members of the Executive Board or senior management present.

Financial Reporting

In discharging their responsibilities with regards to the 2019 interim and full year financial statements, the Audit Committee:

  Reviewed and discussed the management letter and follow up actions with the Executive and the Management Board, Internal Audit and PWC;
  Discussed PwC’s interim reports leading to a review opinion on the interim financial statements;
  Received presentations on various topics by local business unit managers and chief financial officers; and
  Reviewed and discussed areas of significant judgments in the preparation of the financial statements, including, in particular: Solvency II, investment valuation and impairments, economic and actuarial assumption setting, and model validations.
 
 

 

         Aegon Annual Report on Form 20-F 2019  


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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 2019 were Solvency II developments, controls, capital and liquidity, legal and compliance updates, and preparations for IFRS 9 and IFRS 17. Other items included the capital and funding plans and the performance review of the internal audit function.

Risk management and internal controls

With respect to their oversight of internal controls (provided they did not pertain to the work and responsibilities of the Risk Committee) the Audit Committee:

  Reviewed and approved the internal and external audit plans for 2019 and monitored execution, including progress in respect of recommendations made;
  Discussed quarterly updates on the activities of the internal audit function, together with details of progress on internal audits with the internal auditor. Areas of focus in 2019 included the Internal Audit strategy, audit planning process, Internal Audit charter, quality assurance reviews, issue tracking and resolution, control environment, Information Security, Solvency II, third party management and administration partnerships, General Data Protection Regulation, performance management and integrity;
  Reviewed the internal control framework, among others with respect to the Sarbanes-Oxley Act; and
  Discussed the internal control statement with the Executive Board.

In addition, the Committee reviewed quarterly legal and compliance updates.

External audit effectiveness

The Audit Committee discussed and approved the external auditor’s engagement letter for 2019. 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;
  Rotations of the external auditor and lead partner; and
  Discussions about planning and staffing of the external audit activities.

For more information about the policies relating to the effectiveness and independence of the external auditor, please see Annexes A, B and C of the Audit Committee Charter on aegon.com.

 

The Risk Committee

Composition

On December 31, 2019, the composition of the Risk Committee was as follows:

  Dona D. Young (chair);
  Mark A. Ellman; and
  Ben J. Noteboom.

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.

Furthermore, the Risk Committee regularly reviews risk exposures as they relate to capital, earnings, liquidity and compliance with risk policies. The Company’s risk management is an important topic for the Supervisory Board.

For more information about the functioning of the Risk Committee, please see the Risk Committee Charter on aegon.com.

Committee meetings

The Risk Committee works closely together with the Audit Committee and has an annual combined meeting, which in 2019 was held in December. This combined meeting focused on the Global Risk development plan, third party & affiliate management, model validations, Cloud developments and the market risk impact on the budget plan.

The Risk Committee convened five times in 2019, including the combined meeting with the Audit Committee. The Company’s Chief Executive Officer and Chief Risk Officer attend all the Committee meetings. The Chief Financial Officer had a standing invitation to attend the Committee meetings. Other Management Board members and senior managers attended the meetings when relevant for the discussion.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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Risk management and Internal controls

Recurring items on the Risk Committee agenda in 2019 were risk exposure information, risk policy compliance monitoring, IT security and data protection and risks associated with large modernization and change programs in the company. The Risk Committee assessed the effectiveness of the design and operation of the ERM framework and internal control systems in 2019 by:

  Discussing the quarterly risk dashboard, including all material group level risks, with the Executive Board, Chief Risk Officer and relevant senior managers. The material group level risks consisted of financial, actuarial and operational risks, including cybersecurity and information security risks and controls;
  Assessing a quarterly modernization dashboard that outlined risks with regards to the execution of the strategic change programs in each region, and how those risks were monitored and mitigated;
  Reviewing the Group Risk appetite, which consists of the risk strategy and risk limits and tolerances; and
  Reviewing the risk governance structure and risk competencies, including the skills necessary for the risk function.

The Risk Committee also discussed several regulatory topics on a regular basis, including the DNB Focus report and the consequences and actions in the context of Recovery and Resolution regulation. The Risk Committee furthermore spent time on an outside in risk perception of the Risk function, reinsurance developments, Model Risk management, the strategic human resources program Future Fit and on risks and approaches in dealing with third party relations of the Company. In addition, the Risk Committee dedicated time to wider developments in the geopolitical environment, including risks associated with Brexit and financial markets in 2019, and to a number of important asset and liability management and hedging topics across the Group.

The Nomination and Governance Committee

Composition

On December 31, 2019, the composition of the Nomination and Governance Committee was as follows:

  William L. Connelly (chair);
  Ben van der Veer;
  Corien M. Wortmann-Kool; and
  Dona D. Young.

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 Board members, together with supervising the selection criteria and procedures for senior management;
  Advising on and proposing nominations, appointments and reappointments;
  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; and
  Assessing and advising on the responsible business strategy as part of the corporate strategy, and overseeing the execution of the responsible business strategy.

Committee meetings

Aegon’s Nomination and Governance Committee held ten meetings, including four conference call meetings, in 2019. 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.

Further to the activities mentioned below, the Nomination and Governance Committee discussed senior management team developments and governance matters and structures. The Nomination and Governance Committee also reviewed the important outside board positions of the members of the Management and Supervisory Board, and discussed specific appointments to important outside board positions where applicable.

Supervisory Board related activities

The Nomination and Governance Committee discussed the composition of the Supervisory Board and its Committees. The profile of Supervisory Board members, as well as their capabilities in terms of working collectively with other members of the Supervisory Board, were debated by the Committee. Furthermore, the existing and impending vacancies in the Supervisory Board were discussed. A Supervisory Board competency overview is published on aegon.com.

Executive and Management Board related activities

During 2019, the Nomination and Governance Committee was actively involved in a thorough succession process to identify a successor during the final term of CEO Alex Wynaendts, resulting in the announcement that the Supervisory Board intends to propose the appointment of Mr. Lard Friese as CEO to the Annual General Meeting of Shareholders. Lard Friese joined the company as CEO-designate effective March 1, 2020 and will succeed Alex Wynaendts at the AGM to be held on May 15, 2020.

The Nomination and Governance Committee furthermore reviewed the composition of the Management Board and was informed - and consulted on - the succession of Management Board vacancies and on CEO appointments of certain business units.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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The Committee was also kept appraised of major organizational changes, developments in employee engagement, talent management and international mobility. The Supervisory Board was also informed about the annual Global Employee Survey, which was conducted at the end of 2019. The Supervisory Board discussed the outcome of this survey in detail in the first quarter of 2020.

Diversity

Enhancing diversity in the Executive, Management and

Supervisory Board is an important issue for Aegon. Selection and appointment is based on expertise, skills and relevant experience, and the Supervisory Board takes diversity into account with a view to achieving its aim of having a balanced Supervisory, Executive and Management Board composition.

In 2017, the Supervisory Board adopted a diversity policy for the Executive, Management and Supervisory Board. The purpose of the diversity policy is to have a more 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 or male representation in the Supervisory Board, the Executive Board and the Management Board.

In the current Supervisory Board composition, there are two female members out of six members in total (meeting the recent requirement under Dutch law that at least 30% of the positions should be filled by women and at least 30% by men). For the Executive Board and Management Board such balanced gender composition has not been met.

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

Composition

On December 31, 2019, the composition of the Remuneration Committee was as follows:

  Ben J. Noteboom (chair); and
  William L. Connelly.
  Up until October 11, 2019, Mr. Dineen was also a member of the Remuneration Committee.

Role and responsibilities

The main role and responsibilities of the Remuneration Committee are to advise the Supervisory Board and prepare decisions to be taken by the Board. The Committee is designated to safeguard sound remuneration policies and practices within the Company by overseeing the development and execution of these policies and practices. In order to ensure that the remuneration policies and practices take all types of risks properly into account, in addition to liquidity and capital levels, the Remuneration Committee assesses in particular the remuneration governance processes, procedures and methodologies adopted. Furthermore, the Committee ensures that the overall remuneration policy is consistent with the longer-term strategy of the Company and the longer-term interest of its shareholders, investors and other stakeholders. 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.

Committee meetings

The Remuneration Committee had six meetings in 2019. 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.

In 2019, the Remuneration Committee was actively involved in amending the remuneration policies for the Executive Board and the Supervisory Board, in order to implement the changes as required by the Shareholder Rights Directive implementation Act (and to be submitted for adoption by the shareholders to the Annual General Meeting on May 15, 2020). In this context, and to make further improvements to align the incentives of the Executive Board with those of Aegon’s shareholders, the Chair of the Remuneration Committee headed a consultation process involving major shareholders, shareholder representatives, proxy advisors and employee representatives, in order to receive feedback on the proposed changes to the remuneration policies.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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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). This included:

  Allocating variable compensation related to 2018;
  Setting the 2019 Individual Performance Indicators for Executive Board members;
  Setting the 2019 Group performance indicators and targets for remuneration purposes;
  Preparing the 2020 Group performance indicators for remuneration purposes;
  Overseeing the scenario analysis of pay-out levels under the Executive Board remuneration policy;
  Reviewing and/or approving the ex-ante risk assessments and ex-post assessments, any exemption requests under the remuneration policies and changes to the list of Material Risk Takers (Identified Staff); and
  Reviewing the related Remuneration Report.

In addition, the Remuneration Committee discussed (possible) developments with regards to regulations pertaining to remuneration.

Annual Accounts

This Annual Report includes the Annual Accounts for 2019, which were prepared by the Executive Board and discussed by both the Audit Committee and the Supervisory Board. The Annual Accounts are signed by the members of the Executive Board and the Supervisory Board, and will be placed on the agenda of the 2020 Annual General Meeting of Shareholders for adoption. The Supervisory Board recommends that shareholders adopt the annual accounts.

Acknowledgement

The members of the Supervisory Board are very grateful for the work undertaken by Executive and Management Boards in pursuit of Aegon’s purpose of helping people achieve a lifetime of financial security.

We would like to thank Aegon’s employees for all they do to serve Aegon’s millions of customers, and furthermore we would like to express our thanks to Aegon’s business partners and loyal customers for their continued confidence in the Company.

Finally, the Board wishes to thank all those who invest in Aegon for their continued trust and confidence.

The Hague, the Netherlands, March 18, 2020.

William L. Connelly

Chairman of the Supervisory Board of Aegon N.V.

 
 

 

         Aegon Annual Report on Form 20-F 2019  


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54     Remuneration Report
        
        

 

    

Remuneration Report

The 2019 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 Ben J. Noteboom and was approved by the Supervisory Board. The Remuneration Committee restructured this report for 2019 in order to further increase its transparency and to comply with the latest rules, regulations and guidance on the (standardized) presentation of the remuneration report, including the Shareholder Rights Directive and related Dutch implementation Act.

In the first chapter the Remuneration Committee presents an overview of the business and remuneration highlights in 2019 and what is expected in 2020 in relation to remuneration. This is followed by chapter two which contains a general introduction to Aegon’s Global Remuneration Framework, Human Resources Strategy, Remuneration Principles, the concepts of Total Compensation and Variable Compensation, Risk Management in relation to remuneration and remuneration of Material Risk Takers. The third chapter is the 2019 Supervisory Board Remuneration Report, which contains a summary of the Supervisory Board Remuneration Policy which applied to 2019 and the Supervisory Board remuneration over the recent years. The fourth chapter presents the proposed 2020 Supervisory Board Remuneration Policy. In chapter five, the 2019 Executive Board Remuneration Report provides a summary of the Executive Board Remuneration Policy which applied to 2019, the Executive Board remuneration over the recent years and the 2020 Executive Board performance indicators. The sixth and final chapter presents the proposed 2020 Executive Board Remuneration Policy.

1. Business and remuneration highlights

This chapter presents an overview of the business and remuneration highlights in 2019 and what is expected in 2020 in relation to remuneration.

 

2019 Business highlights

In 2019, Aegon continued its realignment for growth, launched new propositions, further improved customer service, and made important executive management appointments to guide Aegon into the next phase of development. Aegon operated in a challenging environment in 2019, with persistent low interest rates in our key markets. At the same time, we continued to execute on our strategy and we reached a number of important milestones, by simplifying Aegon’s structure and adopting an even more proactive approach to managing our portfolio of businesses. (For more detailed update, please see the ‘Letter from our CEO and the ‘Letter of Supervisory Board Chairman’ in this 2019 Integrated Annual Report.)

Aegon’s underlying earnings were impacted by low interest rates while Aegon experienced net outflows in the US retirement and annuity businesses. As a result the return on equity1 of 9.5% was below our target of 10%. However, Aegon increased the normalized capital generation which, combined with a number of management actions, enabled us to maintain a strong capital position. Commercial momentum has improved with an increase in new life sales. Net deposits were lower mainly due to contract discontinuances in Retirement Plans in the Americas, despite the fact that the gross deposits were higher compared to 2018. The market consistent value of new business has been lower due to Variable Annuities in the United States, reflecting the significant decline in interest rates, which led to negative margins. This was partially offset by higher margins on workplace business in the United Kingdom. Digitally connected customers increased strongly with more mobile application users in the United States and a continued increase of platform users in the Netherlands and UK. Lastly, the relational net promotor score (r-NPS) reached a record high as a result of our NPS improvement plans and better outsourcing agreements which increased service levels.

 

 

Business performance highlights                             2019                             2018  

Net Deposits (in EUR million)

     (25,130     (4,656

Normalized Capital Generation (in EUR million)

     1,567       1,398  

Solvency II ratio (in %)

     201%       211%  

Market Consistent Value of New Business (in EUR million)

     465       539  

Return on equity (in %)1

     9.5%       10.2%  

Underlying Earnings Before Tax (in EUR million)

     1,973       2,074  

New Life Sales (in EUR million)

     861       820  

Relational net promotor score

     12       7  

Digitally connected customers (in million)

     8.7       7.7  

 

1 

Return on equity is calculated using shareholder’s equity based on IFRS as adopted by the EU.

 

 

         Aegon Annual Report on Form 20-F 2019  


Table of Contents
55     Remuneration Report
        
        

 

    

In 2019 Aegon’s Supervisory Board consisted of seven members: William L. Connelly (Chairman), Corien M. Wortmann-Kool (Vice Chairman), Dona D. Young, Mark A. Ellman, Ben J. Noteboom, Ben van der Veer and Robert W. Dineen. At the Annual General Meeting of Shareholders on May 17, 2019 shareholders approved the re-appointment of Mr. Noteboom. On October 11, 2019 Aegon announced that Mr. Dineen stepped down from Supervisory Board. Aegon subsequently announced it would nominate Thomas Wellauer and Caroline Ramsay for appointment to the Supervisory Board at the at the Annual General Meeting of Shareholders on May 15, 2020.

Aegon’s Executive Board consisted of two members in 2019: Alexander R. Wynaendts (Chief Executive Officer and Chairman of the Executive Board) and Matthew J. Rider (Chief Financial Officer and member of the Executive Board). Mr. Wynaendts was appointed to the Executive Board in 2003 for four years. He was re-appointed at the Annual General Meeting of Shareholders in 2007, 2011, 2015 and most recently in 2019 for his last term. Mr. Rider was appointed as a member of the Executive Board for four years at the Annual General Meeting of Shareholders on May 19, 2017. Mr. Rider’s current term ends at the General Meeting of Shareholders 2021.

Aegon’s Executive Board is assisted in its work by the Company’s Management Board, which has 11 members, including the members of the Executive Board. In 2019 Aegon’s Management Board was composed of Alex Wynaendts, Matthew Rider, Mark Bloom, Maarten Edixhoven (per October 2019), Adrian Grace, Allegra van Hövell-Patrizi, Marco Keim, Onno van Klinken, Carla Mahieu, Mark Mullin, Sarah Russell (until June 2019) and Bas NieuweWeme (per June 2019). Mike Holliday-Williams will be appointed to the Management Board and succeeds Adrian Grace who will retire from the company on March 31, 2020.

On August 12, 2019 Aegon announced that it would nominate Lard Friese for appointment to the Executive Board at the Annual General Meeting of Shareholders on May 15, 2020, in order to succeed Mr. Wynaendts. If Mr. Friese is appointed by the shareholders to the Executive Board, the Supervisory Board will subsequently appoint Mr. Friese as Chief Executive Officer and Chairman of the Executive Board. In preparation of this appointment Mr. Friese joined Aegon as CEO-designate per March 1, 2020. Mr. Wynaendts is working closely together with Mr. Friese to ensure a seamless leadership transition and remains available to Aegon until September 30, 2020. Mr. Wynaendts will not be eligible for a severance payment.

2019 Remuneration highlights

On November 14, 2018, the Supervisory Board approved the change to the Solvency II remuneration principles as regulatory framework for remuneration per 2019. Up to 2019, Aegon applied the Dutch Regulation on Sound Remuneration Policies which was based on banking rules from the European Capital Requirements Directive. However, Solvency II is an European Directive for insurance companies. Therefore the Dutch regulator allowed insurance companies the option to switch from Dutch Regulation on Sound Remuneration Policies to the Solvency II remuneration rules from December 8, 2017 onwards. Aegon preferred this switch as the Solvency II remuneration rules are sector specific. However, as this regulatory change was too close to the start of 2018, Aegon delayed this switch to 2019.

As a result, Aegon selected positions in which employees could have a material impact on the company, based on the Solvency II selection criteria in 2019. The selection of these type of positions is mandatory for most financial companies based in Europe, as a result of their sector specific European Directives (each having their own selection criteria). Under Solvency II these positions are called Material Risk Takers and are defined as ‘the administrative, management or supervisory body, persons who effectively run the undertaking or have other key functions and other categories of staff whose professional activities have a material impact on the undertaking’s risk profile’. Up to 2019 Aegon selected these type of positions under the Capital Requirements Directive (