20-F 1 d42694d20f.htm 20-F 20-F

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, 2020

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

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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)


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:

2,098,114,300 common shares and 571,795,040 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 requirements 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 check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))

by the registered public accounting firm that prepared or issued its audit report.    

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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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

  122-123  

  3B

 

Capitalization and indebtedness

 

n/a

 

  3C

 

Reasons for the offer and use of proceeds

 

n/a

 

  3D

 

Risk factors

  87-92,  111-117, 189-215, 370-392    

  4

 

Information on the Company

       

  4A

 

History and development of the Company

  11-45, 307-309, 435  

  4B

 

Business overview

  343-369  

  4C

 

Organizational structure

  11-12  

  4D

 

Property, plants and equipment

  394  

  4A

 

Unresolved Staff Comments

 

n/a

   

  5

 

Operating and Financial Review and Prospects

       

  5A

 

Operating results

  124-146  

  5B

 

Liquidity and capital resources

  99-106, 237-239, 272-273,  283-288  

  5C

 

Research and development, patent and licenses etc.

 

n/a

 

  5D

 

Trend information

  19-45, 124-146  

  5E

 

Off-balance sheet arrangements

  300-304  

  5F

 

Tabular disclosure of contractual obligations

 

214-215, 300-304, 333

 

  5G

 

Safe harbor

 

n/a

   

  6

 

Directors, Senior Management and Employees

       

  6A

 

Directors and senior management

  53-57  

  6B

 

Compensation

  66-86, 230-232, 310-312  

  6C

 

Board practices

  48-52  

  6D

 

Employees

  38-41, 223, 394  

  6E

 

Share ownership

  48-52, 328-330  
       

  7

 

Major Shareholders and Related Party Transactions

       

  7A

 

Major shareholders

  50, 328-330  

  7B

 

Related party transactions

  310-312  

  7C

 

Interest of experts and counsel

 

n/a

 
       

  8

 

Financial Information

       

  8A

 

Consolidated Statements and Other Financial Information

  148-154, 331-337  

  8B

 

Significant Changes

 

n/a

 
       

  9

 

The Offer and Listing

       

  9A

 

Offer and listing details

  395  

  9B

 

Plan of distribution

 

n/a

 

  9C

 

Markets

  395  

  9D

 

Selling shareholders

 

n/a

 

  9E

 

Dilution

 

n/a

 

  9F

 

Expenses of the issue

 

n/a

   
     
     

 

Aegon Annual Report on Form 20-F 2020


 

     
       

  10

 

Additional Information

       

  10A

 

Share capital

 

n/a

 

  10B

 

Memorandum and articles of association

  396-397  

  10C

 

Material contracts

  398  

  10D

 

Exchange controls

  398  

  10E

 

Taxation

  399-402  

  10F

 

Dividends and paying agents

 

n/a

 

  10G

 

Statement by experts

 

n/a

 

  10H

 

Documents on display

  436  

  10I

 

Subsidiary Information

 

n/a

   

  11

 

Quantitative and Qualitative Disclosures About Market Risk

  111-117, 189-215    

  12

 

Description of Securities Other than Equity Securities

 

n/a

   

  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

  118    

  16A

 

Audit committee financial expert

  61-62    

  16B

 

Code of Ethics

  92    

  16C

 

Principal Accountant Fees and Services

  403    

  16D

 

Exemptions from the Listing Standards for Audit Committees

 

n/a

   

  16E

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

  404    

  16F

 

Change in Registrant’s Certifying Accountant

 

n/a

   

  16G

 

Corporate Governance

  48-52    

  16H

 

Mine Safety Disclosure

 

n/a

   

  17

 

Financial Statements

 

n/a

   

  18

 

Financial Statements

  148-326, 338-341    

  19

 

Exhibits

  437    
     
     

 

Aegon Annual Report on Form 20-F 2020


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Help people achieve a lifetime of financial security This Annual Report on Form 20-F aims to provide you with a comprehensive and detailed overview of Aegon’s governance, strategy, and performance in 2020. Read how we are creating sustainable value in pursuit of our purpose of helping people achieve a lifetime of financial security.

 


                     1
       
       
       

 

Welcome to Aegon’s 2020

Annual Report on Form 20-F

 

This is Aegon’s Annual Report on Form 20-F for the year ended December 31, 2020. Aegon’s aim in producing this report is to provide a comprehensive and detailed 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, and at how we share and create value through a responsible approach to our business. This report also contains the 2020 consolidated financial statements and Company financial statements for Aegon N.V. (from page 148).

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 the 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 435.

 

 

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 2020             


                     2

 

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Aegon Annual Report on Form 20-F 2020             


                     3

 

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Financial information
122    Selected financial data
124    Results of operations
125   

  Results 2020 worldwide

130   

  Results 2020 Americas

134   

  Results 2020 The Netherlands

138   

  Results 2020 United Kingdom

141   

  Results 2020 International

145   

  Results 2020 Aegon Asset Management

  
Consolidated financial statements of Aegon N.V.
147    Exchange rates
148    Consolidated income statement of Aegon N.V.
149    Consolidated statement of comprehensive income of Aegon N.V.
150    Consolidated statement of financial position of Aegon N.V.
151    Consolidated statement of changes in equity of Aegon N.V.
154    Consolidated cash flow statement of Aegon N.V.
155    Notes to the consolidated financial statements
  
Financial statements of Aegon N.V.
314    Income statement of Aegon N.V.
315    Statement of financial position of Aegon N.V.
316    Notes to the financial statements of Aegon N.V.
  
Other information
327    Profit appropriation
328    Major shareholders
Other financial information
331    Schedule I
332    Schedule II
334    Schedule III
336    Schedule IV
337    Schedule V
  
338    Auditor’s report on the Annual Report on Form 20-F
  
Additional information
343    Overview of Americas
351    Overview of the Netherlands
357    Overview of United Kingdom
362    Overview of International
368    Overview of Aegon Asset Management
370    Risk factors Aegon N.V.
393    Compliance with regulations
394    Property, plant and equipment
394    Employees and labor relations
395    Dividend policy
395    The offer and listing
396    Memorandum and Articles of Association
398    Material contracts
398    Exchange controls
399    Taxation
403    Principal accountant fees and services
404    Purchases of equity securities by the issuer and affiliated purchasers
  
 

 

    

 

Aegon Annual Report on Form 20-F 2020             


            2020: A foundation for change         4

 

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In 2020, Aegon introduced its new strategy, and put in place a set of measures based on an ambitious operating plan and new financial targets aimed at increasing value for all our stakeholders. This approach seeks to change Aegon’s performance trajectory by reducing costs, expanding margins and growing profitably.

 

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  Aegon completes the sale of its 50% stake in its Japanese variable annuity joint ventures to partner Sony Life.

 

 

  Transamerica scores 100% in the Human Rights Campaign Foundation’s Corporate Equality Index for the third consecutive year.

  Aegon UK employees raise more than GBP 106,000 for its charity partners and other good causes following a series of fundraising initiatives.

 

  COVID-19 lockdowns are introduced in Europe and the United States; Aegon moves to working from home.

 

 

  Transamerica settles Universal Life litigation for approximately USD 88 million.

  Transamerica announces comprehensive CARES Act customer support initiatives, including distribution fee waiver for COVID-19-impacted retirement plan participants.

  Aegon Transamerica Foundation makes USD 500,000 contribution to Direct Relief to support ongoing COVID-19 relief efforts.

 

 

  Lard Friese succeeds Alex Wynaendts as CEO of Aegon.

  Caroline Ramsay and Thomas Wellauer are appointed to Aegon’s Supervisory Board.

  Appointments of Blake Bostwick as CEO of Transamerica’s Individual Solutions Division and Kent Callahan as CEO of Transamerica’s Workplace Solutions Division.

 

  Aegon the Netherlands agrees partnership with IBM for the management of 800,000 individual life insurance policies.

  Following the death of George Floyd in the United States, employees at Transamerica form Black Professionals for Change, a new employee resource group (ERG).

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            2020: A foundation for change         5
       
       
       

 

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  Aegon and Banco Santander complete the expansion of their life and non-life insurance partnership in Spain.

 

  Aegon achieves its highest score yet in the Workplace Pride Benchmark.

  Transamerica is included in the Diversity Best Practices Inclusion Index for the third year in a row.

  Principles for Responsible Investment (PRI) awards Aegon Asset Management its top rating of A+ for the strategy and governance of its responsible investment activities.

  Aegon sponsors Pension Awareness Week 2020 in the United Kingdom.

  Aegon Transamerica Foundation donates USD 250,000 to relief efforts following a severe storm in Iowa, the United States.

 

  Aegon announces that Jack McGarry will be nominated for appointment to the Supervisory Board at the 2021 Annual General Meeting (AGM).

  Aegon the Netherlands joins 25 financial institutions to launch the Finance for Biodiversity Pledge, calling on world leaders to commit to reverse biodiversity loss this decade.

  Aegon Asset Management moves to a single global brand.

  Transamerica features on Working Mother 100 Best Companies list for the second consecutive year.

  Duncan Russell joins Aegon as Chief Transformation Officer.

 

  Aegon announces the sale of Stonebridge, a UK-based provider of accident insurance products, for approximately GBP 60 million.

  Aegon announces that Frans Blom will be nominated for appointment to the Supervisory Board at the 2021 AGM.

  Transamerica completes the sale of the iconic Pyramid building complex in San Francisco, California, for USD 650 million, while retaining the naming rights.

  Transamerica Premier Life Insurance Company merges with Transamerica Life Insurance Company.

  Aegon makes a financial contribution to a campaign to help individuals in the Netherlands experiencing financial difficulties during the COVID-19 pandemic.

 

  Aegon agrees to sell its insurance, pension, and asset management businesses in Hungary, Poland, Romania, and Turkey for EUR 830 million to Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG).

  Aegon Asset Management joins other members of the International Investors Group on Climate Change (IIGCC) in asking 36 major European CO2-emitting companies to explicitly include climate risks in their financial reports, or face possible investment withdrawal.

  Announcement that the Aegon-backed Silver Starters learning program for entrepreneurs aged 50+ will be extended to Italy and Portugal in 2021.

  Aegon signs the Race at Work Charter in the United Kingdom.

  Transamerica and Aegon Asset Management introduce Transamerica DB Complete, a new defined benefit plan management service that brings together all the services typically outsourced to unrelated third-party vendors, including plan administration, asset management, and actuarial support.

 

 

  At Capital Markets Day, Aegon announces its new strategy and financial targets, including an expense savings program aimed at reducing addressable expenses by EUR 400 million in 2023 compared with 2019.

  Aegon the Netherlands signs the Diversity Charter as part of its commitment to promoting diversity and inclusion in the workplace.

  Aegon Asset Management’s equity platform selected for a USD 1.1 billion sub-advisory responsible investment mandate under the US Sustainable Equity Income strategy.

  Aegon donates GBP 20,000 to Aegon Breakfast Clubs in Edinburgh.

  Aegon surpasses its goal of 30% gender diversity at management level worldwide in 2020, reaching 32% female representation.

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Letter from our CEO         6
       

 

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The past year was particularly challenging for everyone in terms of how we work and live. When I joined Aegon in March I was deeply impressed by how quickly our employees adapted to the new situation and maintained high levels of service to our customers and engagement with our business partners.

We took proactive steps to guide and support our customers during the difficulties they faced. For instance, we introduced the ‘Blue Heart’ program in the Netherlands that enabled people facing financial difficulties to postpone their payments. In China, we included COVID-19 coverage as part of our critical illness product range. Following the introduction of the CARES Act in the US, Transamerica helped customers navigate the complex regulations to access retirement savings in a penalty-free manner.

Our employees’ commitment was further illustrated by our US colleagues in Cedar Rapids, Iowa when a devastating storm hit the state in August. Everyone worked tirelessly to ensure uninterrupted service to customers, while supporting each other and their local communities during this extraordinarily difficult time.

Prior to 2020, the idea of an international organization of over 22,000 people working from home was difficult to imagine. Yet, faced with the pandemic and a host of other challenges, our colleagues across the Group adapted swiftly to a different way of working, stayed focused and began executing on our plans to transform Aegon.

Our employees still face challenges, ranging from working from home while caring for children, to being isolated from older family members, to coping with the mental strain of the drawn-out pandemic. Aside from providing the IT tools and equipment needed to create a safe home-working environment, we have developed the ‘Working from Home’ framework, which sets vitality and engagement as priorities to support employees. By delivering on our key aims of keeping fit, connected, and motivated, we have been able to improve our overall engagement as shown by the results of the 2020 Global Employee Survey.

New strategy

After my appointment as CEO, we launched a detailed review of the Group. Aegon has not been performing up to its full potential for some time, and we are determined to take action to address this. The review established that we needed to sharpen our strategic focus, improve the way we allocate capital, build a true, high-performance culture, improve our operating discipline, and reduce our risk profile - all against the backdrop of a low interest rate environment and an uncertain economic outlook.

We announced Aegon’s new strategy at our Capital Markets Day on December 10, 2020. Going forward, we are focusing on three core markets, three growth markets and one global asset manager. Our three core markets - the United States, the Netherlands, and the United Kingdom - are among the largest investment, protection, and retirement markets in the world. Our ambition is to play a leading role in each of them. In markets where we have sub-scale or niche positions, we will manage capital tightly and have a bias to exit. Additionally, we have decided to separate our businesses in our core markets into Financial Assets and Strategic Assets. Financial Assets are blocks of business which we have closed for new sales. They are capital intensive with relatively low returns on capital employed. Strategic Assets are businesses with a greater potential for an attractive return on capital, and where we are well-positioned for growth. We aim to release capital from Financial Assets over time and re-allocate capital to Strategic Assets and growth markets.

Growth markets

We aim to increase market share in attractive growth markets through our successful partnerships in Spain, China, and Brazil. Together with our partners, we will develop these businesses and capture the growth potential they provide by leveraging our global expertise and capabilities.

Success in all our businesses will be underpinned by a global asset manager that has strong investment capabilities, thereby allowing our customers to make attractive returns on their investments. Similarly, our asset manager benefits from the links with our other businesses. For instance, the retirement platforms

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Letter from our CEO         7
       
       
       

 

 

we operate in our core markets provide an opportunity to offer asset management solutions. Where appropriate we aim to increase the penetration of our own competitive, proprietary investment solutions across our retirement platforms over time.

Delivering on our plans

In the second half of 2020, we took the first concrete steps to deliver on our plans. We announced the divestments of Stonebridge and our operations in Central & Eastern Europe, restructured our businesses in India, Hong Kong, and Singapore and decided to cease funding of GoBear.

Measures taken to strengthen our balance sheet ensured that the capital ratios of our three main business units ended 2020 above their respective operating levels. Examples of the measures taken include the reinsurance of disability risk in our Dutch non-life business and the sale of the Transamerica Pyramid in San Francisco. We also took the first steps towards our deleveraging target by repaying USD 500 million of senior debt.

The aim of rebasing the dividend – announced at the first half-year results – is that dividend payments will be sustainable and well covered by the Free Cash Flows that we generate, even in reasonable stress scenarios. Our aim is to grow the dividend per share in line with recurring Free Cash Flows to around EUR 0.25 per share over 2023.

Granular operating plan

To ensure we deliver on our objectives, we have developed a rigorous and granular operating plan. The plan draws on input by over 1,500 employees to develop 1,100 initiatives aimed at reducing costs, expanding margins, and growing profitably. It includes an expense savings program targeting a EUR 400 million reduction in addressable expenses by 2023, representing a 13% savings over the addressable expense base of 2019. In 2020, we delivered on 260 initiatives, which puts us on track to deliver half of our expense savings 2023 target by the end of 2021. Of these savings, we intend to re-invest EUR 150 million in initiatives designed to deliver future growth in earnings.

There is still a lot of work ahead of us. We are building a high-performance culture within Aegon, investing in talent development, and focusing on delivery. We will operate with discipline and maintain an intense organizational rhythm to deliver on the transformation.

Responsible business

We believe that a solid environmental, social and governance (ESG) foundation is essential to long-term value creation. Further integration of ESG objectives into the overall strategy is a priority for Aegon. On January 1, 2020, we implemented a revised Group-wide Responsible Investment Policy and expanded the measurement of the carbon emissions

associated with our investments. We are committed to strengthening Aegon’s vision on sustainability and integrating it into our new business strategy. To drive this forward, I have appointed a Global Head of Corporate Sustainability, reporting directly to me, starting on January 1, 2021.

We are also making progress on inclusion and diversity across the Group. Aegon’s 2020 Global Employee Survey shows that 79% of employees believe they can be their authentic selves at work and have equal opportunity to succeed. We also met our objective to have at least 30% women in senior management positions across Aegon by the end of 2020.

We see our progress on inclusion and diversity as steps along our pathway to create a workplace that reflects the diversity of the customers we serve and where the views and perceptions of our people encourages diversity of thought and innovation.

While we are not there yet, we have a strong foundation to build upon. We are now including a gender diversity target into the remuneration for all Executive Board and Management Board members.

Aegon and the future

Our purpose is to help people achieve a lifetime of financial security. We are making progress to become a leader in investment, protection, and retirement solutions, with trusted brands and leading retirement platforms in attractive markets. In our core markets, the shift away from defined benefit pension plans, together with low interest rates, mean our customers need to save more, not less. In addition, traditional government-based retirement systems are increasingly strained, and customers in our markets must take on greater individual responsibility for retirement planning. Aegon will draw on its long years of experience and extensive distribution reach to support them with the right solutions. By serving our customers’ evolving needs in a changing world, Aegon creates long-term value that is shared with all its stakeholders.

Thank you

Looking back on a challenging year, I am pleased that we have supported our customers and taken the first steps to transform Aegon into a more enduring, high-performance company. I am very grateful to everyone who has contributed to this and I look forward to continuing with you on this exciting journey.

The Hague, the Netherlands, March 17, 2021

 

LOGO

Lard Friese

CEO of Aegon

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            COVID-19         8

 

LOGO

Since the first outbreak of COVID-19 in early 2020, Aegon has been directly affected by the pandemic. We recognize it has had a significant impact and created challenges for our employees, our customers, and the communities in which we operate. Throughout the pandemic, we have taken proactive steps to support our stakeholders as we navigate through this challenging period together.

 

Impact on Aegon’s financial performance

Earnings and capital

In terms of underlying earnings before tax, the greatest impact of the pandemic has been on Aegon Americas’ life insurance business. In 2020, higher mortality led to higher life insurance claims, adversely impacting earnings. In the second half of the year, increased mortality claims were offset by stronger performance of certain product groups. In particular, claims activity within Aegon’s long-term care (LTC) insurance business fell, leading to favorable morbidity experience as a result of the pandemic. Lower interest rates – resulting from more muted economic growth expectations and central bank stimulus – also had a negative impact on Aegon’s earnings in the Americas. The earnings repercussions for Aegon’s other major country units have been limited, although the Netherlands experienced a rise in travel and disability insurance claims when the pandemic first struck.

On the basis of the first half 2020 results - which reflected the impact of COVID-19 and lower interest rates - and in light of the uncertain economic outlook, Aegon withdrew its 2019-2021 financial targets in August 2020. Throughout the year, we took steps to strengthen our balance sheet and improve the Company’s risk profile. In this context, we decided to retain the final dividend for 2019 and rebase the interim dividend from a level of 15 cents per share for 2019 to 6 cents per common share for 2020. Rebasing of the dividend ensures that it is sustainable and well-covered by the free cash flows that we generate, even in reasonable stress scenarios. Furthermore, several actions were taken to increase the capital position of Aegon and its main units. As a result, the capital positions of the main units ended the year above their respective operating levels.

Expenses and sales

A series of lockdown measures and travel restrictions in Aegon’s key operating markets throughout 2020 caused disruption to our normal ways of engaging with our customers and one another. This significantly reduced our expenses, in part due to restrictions on employee travel, as well as the scaling back of sales and marketing activities. While generating savings, the pandemic also triggered additional expenditures, such as information technology (IT) costs associated with switching to a working-from-home set-up. Some of these savings will dissipate as normal business practices resume. However, others will become permanent, as Aegon has taken the lessons learned from working from home into account when developing a program to reduce addressable expenses by EUR 400 million by 2023.

Aegon’s sales teams have been resourceful in adapting to this new landscape, though restrictions on our sales and marketing activities have had a negative impact on sales in certain cases. In Spain and Portugal, sales of property and casualty insurance products fell in 2020 due to the temporary closure of retail banks, which provide an essential distribution channel. Meanwhile, a challenging economic and employment environment, coupled with government measures to combat the pandemic, has dampened customer demand, and hence sales, within specific product lines. US sales of retirement plan products fell during 2020, while travel restrictions and challenging market conditions severely affected sales within Transamerica Life Bermuda (Aegon’s high-net-worth business operating in Hong Kong, Singapore, and Bermuda).

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            COVID-19         9
       
       
       

 

 

Helping our stakeholders navigate the crisis

As events unfolded around COVID-19, Aegon’s customers, employees, and other stakeholder groups began to see their lives disrupted in a number of ways. Since the very start of the pandemic, we have taken proactive measures to help our colleagues and other partners navigate this intensely challenging period.

A stable environment for our employees

In early 2020, our first priority was to ensure the safety and well-being of our employees around the world. Swift, decisive action by our IT staff allowed our teams to transition smoothly to home-based working. As well as IT tools and hardware, we also provided colleagues with desk furniture to make the switch as practical and comfortable as possible. Alongside this, we have worked hard to give our employees the tools and day-to-day support they need to feel happy and motivated while working outside the office. To formalize this approach, we introduced a ‘Working from Home’ framework to help staff sustain good levels of well-being, engagement, and productivity during lockdown.

Guiding our customers and partners through the pandemic

We are acutely aware of the difficulties and disruption that the pandemic has caused for our customers, suppliers, and other partners. Our smooth transition to working from home and fast adoption of virtual conferencing tools such as Microsoft Teams, have enabled us to maintain an uninterrupted service for Aegon customers worldwide. We have also gone one step further, by exploring innovative ways to remain closely connected to our customers and provide additional support during this challenging time. As a result, Aegon’s customer-facing teams in the Netherlands recorded their best-ever relational NPS (rNPS) scores during the pandemic. rNPS is an important gauge of customer satisfaction. New digital solutions have played an important role: in Spain, we have launched a new tele-health service for local customers, providing free medical advice on a 24-hour basis. Meanwhile, we have remained sensitive to our customers’ evolving concerns. Aegon the Netherlands, for instance, has launched the ‘Blue Heart’ campaign to provide customers with flexibility around their insurance, pension, and mortgage payments. In China, we have included

COVID-19 coverage as part of our critical illness product range to help give people peace of mind.

Just as we have gone the extra mile for our customers, we have also reached out to our suppliers to provide additional support during the pandemic. In early 2020, Aegon worked with its outsourced IT teams in India to help them transition to working from home and ensure continuity of critical IT services.

Supporting Aegon’s communities

As a company that strives to be a good corporate citizen, we recognize the importance of offering immediate COVID-19-related support to the communities in which we operate. In 2020, our initial focus was on providing direct relief to local charities and supporting key workers on the front lines. In the United States, Aegon worked with its partners to provide personal protective equipment (PPE) to healthcare professionals. Our teams in Asia donated money to World Vision, a Hong Kong-based relief and development organization, for the purchase of face masks, as well as health education programs. Aegon the Netherlands also contributed EUR 250,000 for healthcare workers’ insurance through the Dutch Insurance Association.

Away from the frontlines, Aegon donated food and medical supplies to elderly people across Europe who have been affected by the pandemic. In the Netherlands, we gave our support to educational charities that are helping disadvantaged children with home-schooling by providing free laptops.

Around the world, Aegon employees have been closely involved in fundraising efforts to boost our community support initiatives. Many have also donated their time and expertise in other ways. Aegon the Netherlands, helped to spearhead a program led by Nibud (the Dutch National Institute for Family Finance Information) to train financial services workers to offer support and advice to people on managing their personal finances during the pandemic. Aegon employees have responded enthusiastically to this initiative, which aligns with our purpose of helping people achieve a lifetime of financial security.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Performance highlights         10

 

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Aegon Annual Report on Form 20-F 2020             


            Aegon: A leading provider of financial solutions         11

 

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Aegon today

Aegon is an integrated, diversified financial services group that offers innovative and effective investment, protection, and retirement solutions to customers. Our purpose is to help people achieve a lifetime of financial security. From our roots in the 19th century, we have grown to serve 30.4 million customers globally with EUR 921 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

The Netherlands, UK, Spain, China, Hong Kong, Indonesia, Japan,

Thailand, Hungary, Poland, Romania, and Turkey1

Transamerica

US

Transamerica Life Bermuda Ltd.

Bermuda, Hong Kong, Singapore

Aegon Asset Management

Germany, Hong Kong, Hungary,1 Japan, the Netherlands,

Spain, UK, US

Joint ventures and associates

Brazil, China, France, Hong Kong, India, Indonesia, Malaysia,2 the Netherlands, Philippines,2 Portugal, Singapore, Spain, Thailand, and Vietnam2

 

  The Aegon brand operates as Aegon Insights in Australia, China, Indonesia, Thailand, and Hong Kong.

 

  The Kames Capital brand in the UK and TKP Investments in the Netherlands were re-branded to Aegon Asset Management in 2020.

 

  We also operate under several other brands, including: Knab, TKP, Robidus, Aegon Cappital, and Nedasco (the Netherlands); World Financial Group (US, Canada); Origen Financial Services (UK); Futuready (Indonesia), and Transamerica Ventures.
 

 

 

 

1 

In November 2020, Aegon agreed to sell its insurance, pension, and asset management businesses in Hungary, Poland, Romania, and Turkey to Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG).

2 

In early 2021, Aegon ceased funding of its GoBear joint venture, an independent insurance and banking comparison website.

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Aegon: A leading provider of financial solutions         12
       
       
       

 

Aegon’s products and services

Aegon’s products and services include:

 

  Insurance    Long-term savings related    Banking & mortgages    Asset management
   

  Life (indexed universal life, whole life, 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

 

 

Aegon’s markets

In 2020, we brought together our activities in Southern and Eastern Europe (SEE) and Asia, creating a new reporting segment, Aegon International. The five reporting segments are as follows:

 

  Americas

 

  Aegon the Netherlands

 

  Aegon UK

 

  Aegon International

 

  Aegon Asset Management (AAM)

As a global financial services group, Aegon is well equipped to share capital, talent, knowledge, processes, and technologies across geographies and business lines. In our three core markets (the United States, the United Kingdom, and the Netherlands), our three growth markets (Spain and Portugal, Brazil, and China) and AAM, we take a systematic approach to allocating capital toward profitable opportunities. Full details on our strategy can be found on page 19.

Ownership

Aegon N.V. is a Dutch public limited liability company. Our shares are listed on both Amsterdam (Euronext) and New York (NYSE) stock exchanges. Approximately three-quarters of our shareholders are from our three core markets: the United States, the Netherlands, and the United Kingdom. Shareholders meet at least once per year at our Annual General Meeting (AGM). In 2020, due to COVID-19 restrictions, the AGM was held virtually.

Sources of revenues and earnings

Aegon derives revenues and earnings from insurance premiums, investment returns, fees, and commissions received. We are well-diversified across these sources, which is important for our ability to pay attractive dividends and to invest in future growth.

Capital position

We carefully manage our capital position to protect Aegon and our customers against fluctuations in global financial markets and changing business conditions. At the end of 2020, our Solvency II ratio – measuring our capital strength – stood at 196%. The capital ratios of our three main units ended 2020 above their respective operating levels. We hold significant capital buffers, both within the operating entities and at group level, to safeguard the interests of our policyholders, pay attractive dividends to shareholders, and take advantage of future business opportunities.

Diversified distribution channels

Aegon offers both direct and intermediary-assisted access to our products and services throughout all our divisions. In this way, we bring our customers the very best of the solutions offered by Aegon and our partners.

We offer simple solutions as well as more sophisticated ones. For simpler types of solutions, we are growing our direct distribution capabilities so we can engage with customers directly – for example, via our Dutch digital bank, Knab.

For more complex services and products, we use our network of business partners, including brokers, agents, banks, employee benefit consultants, and independent financial advisors. Our multi-channel approach to intermediary distribution serves a diverse array of customers, allowing us to provide tailored advice and advanced solutions.

Some of our distribution channels are owned by Aegon. For example, we serve customers through Origen Financial Services in the United Kingdom and through World Financial Group in the United States and Canada. We also develop e-commerce partnerships, for example in China.

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).

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Our business environment         13

 

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Aegon operates in a complex environment. Our business is potentially sensitive to a wide range of social, economic, and environmental factors, all of which are constantly changing, and we are continuously adapting our business to this evolving environment. We capture these in our ‘Business Environment Scan’ process.

 

A challenging macroeconomic environment

Following relatively strong growth in 2019, global economic output in our markets contracted sharply during the first half of 2020 due to the COVID-19 pandemic. Full or partial lockdowns in many countries and regions played a significant part in curtailing economic activity. The subsequent easing of lockdown restrictions saw growth rebound in the second half of the year. However, the reintroduction of tougher measures to prevent the virus from spreading later in 2020 means that economic uncertainty – in many regions – will continue to persist into 2021.

The impact of the pandemic is being felt across the global economy. Public deficits and debt have been pushed up; meanwhile, temporary business closures and a disrupted value chain have created a range of challenges for parts of the private sector, with unemployment increasing accordingly. We also expect to see a rise in bankruptcies and non-performing loans; though, this threat has so far been mitigated by the proactive response of governments and central banks. These challenges are likely to persist, at least until vaccination programs against COVID-19 become widespread.

The overall economic fall-out will be far-reaching, and many forecasters expect the economic impact of the virus to be felt for several years to come. COVID-19-related government stimulus packages, on top of already relaxed monetary policies, could lead to delayed inflation. However, at the present time, low nominal interest rates make savings fundamentally less attractive and represent a major headwind to our businesses, particularly in the United States and Europe. While there is a risk of higher inflation in the longer term, we expect a ‘lower for longer’ interest rate environment to continue to shape our business strategies in the medium term.

The pandemic has aggravated other underlying economic trends, with disruptions to global supply chains forcing businesses

to revert to more localized ways of working. Meanwhile, we see a trend from globalization toward greater regionalization, as illustrated by strained China-US relations, as well as growing protectionist sentiment in Europe and other major economies.

Impact of COVID-19 on our customers

The past year has seen sharp increases in mortality rates worldwide, driven largely by COVID-19. Victims are mostly elderly or individuals who have underlying health conditions, including those in nursing homes. While governments worldwide have introduced measures to protect the most vulnerable, infections and deaths have remained consistently high in many regions. That said, COVID-19 induced mortality was lower amongst the insured population than in the wider population.

Another impact from COVID-19 on our Long-Term Care customers in the United States has been the concern with respect to nursing care. Transamerica has seen a reduction in the number of new Long-Term Care claims, which may be driven by hesitation of entering care facilities due to the higher presence of COVID-19.

Beside their physical health, people are also being impacted by the pandemic in other ways, with many individuals dealing with stress and poor mental health. Employment concerns are often part of this: 58% of US workers recently surveyed by the Transamerica Center for Retirement Studies® said COVID-19 has had an impact on their employment situation.

Governments have acted decisively to alleviate the pandemic’s impact on individuals. In many cases, and particularly in the United Kingdom and United States, measures have included allowing individuals to access their pension savings. While these actions reduce short-term financial stress for individuals, they leave people at an increased risk of poverty in old age.

At a time when many people are facing severe financial difficulties, there is an increased need for personalized solutions

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Our business environment         14
       
       
       

 

 

that can help individuals better manage their financial well-being. At Aegon, our focus throughout the COVID-19 pandemic has been on moving closer to our customers and finding new ways to meet their needs. This includes financial protection products that address the new challenges posed by the pandemic.

Increased pressure on retirement systems

Before the COVID-19 pandemic, retirement systems around the world had been undergoing severe financial strain as a result of increased longevity, population aging, and the prolonged low-interest rate environment. Government benefits, such as social security, have been facing severe funding shortages, and reforms are urgently needed. The traditional pension plans offered by employers have been replaced with employee-funded defined contribution plans, which may or may not be supplemented by employer contributions. Individuals are increasingly being expected to self-fund a greater portion of their retirement income, though relatively few are equipped to do so.

Although its long-term effects are still unclear, the pandemic has further exposed the fragility of retirement systems. Indeed, nearly one-quarter of US workers surveyed by the Transamerica Center for Retirement Studies® about the impact of the pandemic felt less confident about being able to retire comfortably.

There is an opportunity for social partners to resolve these pressing issues. Private retirement solutions have an increasingly important part to play, both in raising awareness and in educating the public on the need to save for retirement.

Employers also play a vital role in helping workers successfully prepare for retirement; a role that has become even more crucial and precarious amid the pandemic. They can support their employees by offering an employer-sponsored retirement plan and by encouraging workers to engage in retirement planning. However, employers must also be supported by public policy. The world’s response to COVID-19 illustrates the extent to which we – and our economic, health, and social security systems – are dependent on each other.

    

Retirement readiness

According to the results of Aegon’s Retirement Readiness Survey 2020, only one-quarter of workers feel they are on course to achieve the income they will need during their retirement (globally, this is an average of 67% of a worker’s current income). Around 44% of respondents say they are not on track, and the final one-third do not know whether they are on track.1

With individuals taking on increasing responsibility for funding their retirement, these responses demonstrate that more must be done to help people feel confident about the future. At Aegon, we endeavor to meet this need, which aligns with our purpose to help people achieve a lifetime of financial security.

 

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1 

Percentages are shown to zero decimal places. Rounding percentages to the nearest whole number results in a sum of slightly over 100 percent.

 
 
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Our business environment         15
       
       
       

 

 

Climate change and biodiversity loss

A series of climate-related events in 2020, including extensive wildfires in California, the Amazon rainforest, and Australia, drew further public attention to environmental issues, including the impact of climate change and loss of biodiversity.

While the direct physical risks of climate change to life insurers remain limited, evidence suggests that the associated risks are growing. A joint study by the Dutch Central Bank (DNB) and the Netherlands Environmental Assessment Agency (PBL), published in June 2020, highlighted the exposure of Dutch financial institutions to risks linked to biodiversity loss. According to the study, Dutch financial institutions worldwide have more than EUR 510 billion invested in companies with a high or very high dependency on one or more ecosystems, which represents 36% of the researched portfolio.

Climate-related risks may feature more heavily in future insurance regulations. In October 2020, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation on the use of climate change risk scenarios in Own Risk and Solvency Assessments (ORSAs) that stressed the need for forward-looking management of climate change-related risks. In a previous publication, DNB set out a series of best practices for integrating climate-related risks in ORSAs. There are also reputational risks to consider. Increased societal awareness around climate change has brought the perceived role of the insurance and wider financial services industry into sharp focus. Organizations that fail to address environmental, social, and governance (ESG) factors in their communications and actions may face long-term reputational consequences.

At the same time, with ESG and sustainability investments now accounting for more than one-quarter of assets under management worldwide, companies increasingly view sustainability as a key value driver. Asset managers, in particular, can support investors in developing their sustainable investment ambitions. More widely, today’s organizations increasingly recognize their responsibility to lead by example and encourage sustainable practices when engaging with customers.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Our business environment         16
       
       
       

 

Business Environment Scan

Aegon conducts a biennial Business Environment Scan (BES) to identify the opportunities and challenges with the most significant potential to influence the value created by our business, for example in terms of Aegon’s financial strength or competitive position.

 

The BES combines the materiality assessment with emerging risk identification. It looks beyond impact alone to assess the potential of topics to influence ongoing value creation, as shown by the materiality matrix below. In 2020, we re-evaluated and refreshed the BES by engaging with relevant internal and external experts, as well as selected stakeholders such as non-governmental organizations (NGOs), business partners, and customers. While we see many opportunities for our business, we are also mindful of potential challenges ahead. The BES takes into account the COVID-19 pandemic, for example, and its impact on Aegon’s business and wider market environment.

It is important to note that, while the BES incorporates findings from Aegon’s own overarching risk management process, the exercise is also informed by many other sources. The BES provides a ‘helicopter’ view of the material macro-scale headwinds and tailwinds specific to our business operations, as assessed by our experts and viewed by our stakeholders. For more information on our risk management approach, please see our dedicated risk management section on page 111 and the risk factors for Aegon N.V. on page 370.

 

 

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Aegon Annual Report on Form 20-F 2020             


            Our business environment         17
       
       
       

 

The following table elaborates on the opportunities and challenges posed by the eight material topics identified as both high impact and high likelihood by the BES.

 

 

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Data protection and information security

 

   Opportunity     Challenge   

The increased pace of digital transformation brings greater benefits for Aegon’s business operations in terms of speed and costs. It also means we can provide more personalized and convenient products, as well as a better customer experience. Furthermore, by paying attention to issues of data protection and information security, we can establish strong, long-term customer relationships by building trust with the people we support.

 

   

Cyberattacks can cause damage to the interests of customers and stakeholders and undermine their trust in Aegon. Threats are becoming more sophisticated, and malicious actors are taking advantage of artificial intelligence (AI) and cloud computing to launch increasingly complex attacks. Moreover, data management requirements are evolving quickly: the potential for large fines from regulators and class action litigation is growing. Aegon must continue to invest in information security to protect our business, and our customers’ information, from an evolving cyberthreat landscape.

 

                
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Customer propositions and technological innovation

 

   Opportunity     Challenge   

Aegon is exploring the potential of innovative technologies to help us offer our customers new solutions and improved levels of service. This approach involves close collaboration with fintech and insurtech companies to harness their knowledge and innovation capabilities. Technological advances allow us to be more flexible in our product offering, offering increasing focus on customer well-being, early diagnostics, and health tracking, among other areas. By moving to a service model based on preventive as well as protective services, we can adapt to the evolution of our traditional customer segments. With shifting socio-demographic categories and the emergence of new modes of employment (for example, ‘gig economy’ work and working from home), digital innovations will allow us to tailor our service offering around individuals’ needs. Meanwhile, we can continue to integrate our social purpose into our products, for instance by offering tailored solutions to vulnerable customers, such as people diagnosed with HIV, or by promoting savings plans and financial education to individuals impacted by the COVID-19 pandemic.

 

    Customers increasingly expect a seamless digital journey with Aegon, and they expect us to play a proactive, positive role in society. To maintain our strong relationships with our partners and customers, we need to keep abreast of changes in our industry and in the digital landscape. Doing so allows us to stay ahead of our traditional competitors as well as an emerging generation of fintechs and insurtechs. Furthermore, since business development and innovation often take place at the business unit level, Aegon must ensure that all global business units and teams are working toward cohesive and consistent innovative customer solutions.
                

 

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Reputation

 

   Opportunity     Challenge   

Aegon relies on the trust of all of our stakeholders. In the face of the COVID-19 pandemic, we have the opportunity to further prove our trustworthiness as a company by integrating environmental, social, and governance (ESG) considerations into our core business and by striving to have a positive impact on society at large. How we engage with our customers around ESG is also important. By communicating in a transparent and empathetic way, and offering our customers and stakeholders the support they need, we can ensure our reputation is protected and enhanced. We can also take advantage of social and digital media to spread our message to new audiences. Equally, it is important that we continue to select third-party providers that reflect positively on our brand and reputation.

 

    Society expects insurers to pay attention to a wide range of ESG factors; failure to do so creates the possibility of long-term reputational damage from the perspective of customers and investors. It is particularly easy for trust to be lost in times of heightened tension such as the COVID-19 pandemic. To mitigate the potential for reputational damage, Aegon must remain mindful of the needs of all stakeholders when launching new or amending existing propositions.
                
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Low rates, low economic growth and high debts

 

   Opportunity     Challenge   

Aegon has been working on the assumption of ‘lower for longer’ interest rates for some time, and we closely monitor credit rating and default developments. We are therefore well-positioned to manage through market dislocations to protect value for our stakeholders. Furthermore, the growing pressure on state finances as a result of weak economic growth and debt challenges, in part due to the impact of COVID-19, has led to a shift in responsibility for adequately saving for retirement, and subsequently converting savings into a lifetime income, to the individual. We are prepared to play a greater societal role in supporting individuals through retirement by taking steps to increase the range of products and solutions we offer and to expand our offering to new user groups beyond our traditional customer base.

 

   

The global economic outlook is uncertain in the wake of the COVID-19 pandemic, at least in the short term. The pandemic has pushed up public debt and deficits and raised the likelihood of non-performing loans. The possibility of a debt crisis and sustained low economic growth increases as the pandemic goes on, and with it the probability of a persistent low-interest-rate environment. The threat is difficult to mitigate as it depends on factors largely outside our control. However, we must be aware of its significance to our activities, including our role as an investor, and we must continue to monitor our counterparty and concentration risks. In this way, we can tailor our business strategies and investments to manage the situation.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Our business environment         18
       
       
       

 

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Pandemic

 

   Opportunity     Challenge   

Major health crises, such as COVID-19, provide opportunities for Aegon to prove its relevance by helping customers concerned about their short- and long-term health. The pandemic is also an opportunity to show customers the importance of secure financial planning. Alongside our established long-term financial products, we can provide new preventive services such as health management and monitoring. We can also capitalize on the recent rapid developments in remote customer service and advice to improve digital and in-person customer journeys in the future.

 

   

The COVID-19 pandemic (and possible next waves, mutations, or other viruses) raises mortality rates and increases claim payouts in the short term. The pandemic also increases the likelihood of bankruptcy or receivership among Aegon’s corporate customers, which would impact our pensions business. The outbreak has also had wider economic impacts that affect us and the third parties we work with. To counter third-party risks and improve business continuity management, we have put in place enhanced monitoring and reporting procedures to identify issues at critical and high-risk third parties. Major health crises also threaten our human capital and the well-being of our employees. It is important that we retain the flexibility to adjust our ways of working and that we are able to support our staff and retain their engagement throughout future challenges. Embedding effective measures for transitioning to remote working in our crisis response plans allows us to react quickly to new health threats and maintain business continuity.

 

                
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People skills

 

   Opportunity     Challenge   

With technology playing an ever-growing role in financial services, Aegon can establish itself as a leading employer that is home to a diverse and highly skilled workforce. Through interesting and forward-looking work, future-focused training opportunities – such as our Analytics Accelerator program – and strong inclusion, diversity, and engagement policies, we can attract and develop the wide range of talented people we need to drive our future growth strategy.

 

    As our industry becomes increasingly technology-driven, skills shortages will become more prominent, creating a challenging recruitment environment. This situation is currently being exacerbated as so-called baby boomers (people born between 1946 and 1964) enter retirement. Aegon must be able to compete with different industries, as well as our direct competitors, to attract new talent. New hires must possess the skills required not only for today’s business but also for the financial services industry of the future. Technology is a key area of focus when it comes to selecting new employees and in the development of internal training programs for our current workforce, while risk management, financial modeling, and sales and marketing are also increasingly valuable skillsets.
                

 

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Trade wars, regionalization, and protectionism

 

   Opportunity     Challenge   

At Aegon, we are able to use our geographic diversity (with activities in the United Kingdom, Europe, the Americas, and Asia) to our advantage. We invest in our regional teams to ensure Aegon is represented on the ground by market experts in our local financial markets.

 

    We have little influence over global political processes, and potential barriers to accessing certain markets are beyond our control. We are active in markets in the United States, China, and the United Kingdom, where trade negotiations may continue to be particularly volatile in years ahead. This could pose problems for Aegon’s businesses in those regions.
                
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Climate change and loss of biodiversity

 

   Opportunity     Challenge   

Aegon has robust systems in place to monitor the environmental impact of our direct business activities as well as our investments. By deploying and strengthening these resources, we can continue to take steps to ensure we have a positive impact on the planet and help safeguard the environment for future generations. At the same time, the further integration of ESG into our core strategy will allow us to support our customers by addressing their concerns around climate change and biodiversity loss by shifting our investment portfolio into more ESG-aligned areas. Taking a proactive stance on climate change and other environmental and ESG issues is likely to provide Aegon with long-term commercial opportunities: increasingly, companies that think and act responsibly enjoy a ‘sustainability premium’ that enables them to attract like-minded customers and employees.

 

   

We must continue to embed environmental considerations into our business and investment decisions, to avoid damaging the planet and to minimize the potential for negative impacts associated with environmental changes outside our control. At the same time, while direct physical risks to Aegon from exceptional environmental catastrophes and loss of biodiversity are limited, new regulatory requirements on climate change are highly likely to be relevant to our business. We will need to be ready to comply with any new regulations. We also recognize that environmental and other ESG-related topics are increasingly front of mind for Aegon’s stakeholders, and there is a possibility of reputational damage if we do not demonstrate our commitment to protecting the environment.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Aegon’s strategy         19

 

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Aegon’s purpose

Our purpose is to help people achieve a lifetime of financial security. We do this by providing investments, protection, and retirement solutions that directly address the needs of a world where life expectancies are increasing, and careers and retirement are lengthening and becoming more flexible. While healthcare is increasingly effective, it is also becoming expensive as public and corporate sources of lifelong pensions and care are transferring risk to individuals in the face of financial pressure.

Focused portfolio and capital management

In 2020, Aegon embarked on the transformation of our organization, with a new strategic focus aimed at changing our performance trajectory and increasing value for our customers, shareholders, and other stakeholders. As part of our new direction, we are narrowing our strategic focus to selected core and growth markets, as well as one global asset management business. Aegon’s three core markets are the United States, the Netherlands, and the United Kingdom, which are among the largest retirement, investment, and protection markets in the world. Our growth markets are Spain and Portugal, Brazil, and China. Together, our core and growth markets represent more than 50% of global GDP.

As part of this focused approach, we will explore opportunities for expansion in these regions, including capitalizing on local growth opportunities, building strong local partnerships, and pursuing promising sales and distribution channels. Alongside this, Aegon Asset Management (AAM) – a key enabler for success – will implement a new global operating platform, allowing us to capitalize on economies of scale, realize synergies, and grow our third-party assets.

In small markets or markets where we have sub-scale or niche positions, we will manage capital tightly and have a bias to exit. The agreement to sell our Central & Eastern European (CEE) businesses exemplifies the actions we are taking to increase our focus.

In the fourth quarter of 2020, Aegon decided to restructure TLB as well as its business in India. TLB – a high-net-worth business operating in Hong Kong, Singapore, and Bermuda – has responded to challenging market conditions by rightsizing the organization through a variety of expense reduction initiatives. TLB will pivot to products that are not only capital-light, but will offer an attractive value proposition for its

customers as well. In India, unprofitable and sub-scale traditional sales channels have been closed, and the company’s focus is fully on digital distribution channels going forward.

Disciplined capital management

Within our core markets, our strategy is to distinguish between our Financial Assets and our Strategic Assets. We will reallocate capital from the former to the latter, as well as to our growth markets.

Strategic Assets are businesses with a greater potential for an attractive return on capital, and where we are well-positioned for growth. In these businesses, we will pursue opportunities to increase our customer base through new sales and customer retention, by improving both the customer and the advisor experience. In the United States, these businesses include Workplace Solutions, as well as selected product lines in the Individual Solutions division: Term Life, Whole Life, and Indexed Universal Life.

Aegon will also continue to sell mutual funds, stable value solutions and selected individual retirement products, such as accumulation variable annuities with limited interest rate sensitivity. In the Netherlands, Strategic Assets include defined contribution Workplace Solutions and mortgage origination, where we aim to maintain our leadership positions. We will also look to expand our niche position with our Dutch online bank, Knab, which will serve as a digital gateway to individual retirement solutions. In the United Kingdom, the business as a whole is considered a Strategic Asset, and we will continue to invest in our market-leading platform to improve the digital experience for customers, advisors and employers.

Financial Assets are blocks of business that are generally closed for new sales. They are capital intensive and offer relatively low returns, often due to the low interest rate environment. While continuing to serve our customers, we will run these businesses for optimal financial outcomes, maximizing the net present value of free cash flows and seeking opportunities to reduce and release capital. For example, in the Netherlands, we will no longer offer new defined benefit group pension products and individual life products, with the exception of direct annuities. In the United States, variable annuities with significant interest rate sensitive living and death benefit riders, stand-alone individual long-term care, and fixed annuities are considered to be Financial Assets. We are reviewing the potential to implement a dynamic hedging strategy for variable annuities with income and death benefit riders. Subsequently, we will consider a broad range of options for this block of business.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Aegon’s strategy         20
       
       
       

 

Aligning our organization to our strategy.

To realize our transformation, we will shift to an intense organizational rhythm, and operate with a clear and more disciplined governance. This means that we will adapt our target operating model. A prime example of this adaption is that we are establishing dedicated teams to manage the Financial Assets in the United States and in the Netherlands. We will appoint executives to these teams who have the competencies, skills, and mindset to manage these books for optimal financial outcomes.

We will also speed up decision-making and install clear accountabilities. We will move to a concept of ‘accountability within a clear framework’. In this new model the Group sets strategy, allocates capital, defines risk appetite, sets targets, and drives strategy implementation. In addition, the Group determines functional mandates, sets policies and frameworks, and provides shareholder services. Business units develop local strategies within the group strategic framework, as well as operating plans to ensure their implementation.

In order to implement this transformation, we will invest in our execution capabilities and skills to nurture great talent across the Group and will hire new talent where appropriate. We need to ensure that talented people are in the right positions, and we need to enable them to continue developing.

 

Increasing profitable growth

We are working to materially improve our operating performance by reducing costs, expanding margins, and growing profitably. Our approach is supported by a rigorous and granular operating plan, which includes an expense savings program targeting a cost reduction of EUR 400 million by 2023 compared with 2019 levels, representing 13% of the addressable expense base. Of these savings, Aegon will reinvest EUR 150 million in business growth. In addition to the expense savings initiatives, activities targeting revenue growth are expected to contribute a total of EUR 150 million to earnings by 2023. These include growing in our affiliate distribution channels, optimizing pricing and products, improving customer retention, and increasing cross-selling, as well as increasing the conversion of assets under administration to assets managed in house by AAM.

Further to improving Aegon’s long-term profitability, we are taking steps to create a more robust and financially resilient business that offers greater predictability and stability in our performance and financial strength. In particular, we aim to limit interest rate sensitivity, as well as our sensitivity to other financial market movements, while strengthening our balance sheet and reducing debt. For example, we have put plans in place to reduce our economic interest rate exposure in the United States by one third to one half and we have implemented improvements to our internal model that mitigate the volatility caused by the basis risk between the reference portfolio used for the European Insurance and Occupational Pensions Authority (EIOPA) volatility adjustment and our own asset portfolio.

Creating value

As part of our new strategic approach, we have identified several areas that will contribute to profitable growth and create value for our customers and shareholders over the coming years.

Growing our customer base

Aegon will continue to develop its extensive base of almost 30.4 million individual customers. We will do this by increasing market penetration and improving retention in markets where we are well-positioned for growth and that offer potential attractive returns on capital. Specifically, we will explore opportunities to grow Strategic Assets in our core markets and in our growth markets, examples of which are our life business in China and our bancassurance business in Spain and Portugal.

Enhanced customer experiences

By modernizing our business processes and technology, we can enhance the user experience, namely by introducing straight-through processing to execute customer requests much faster, while offering new and improved customer propositions.

We will also continue to invest in self-service capabilities for our customers, offering them choices in terms of how they interact with Aegon.

We believe high-quality digital tools go hand in hand with strong customer relationships, and we see these as two sides of the same coin. As we develop our front-end advisor and customer portals, we will make sure our interaction with customers remains human and empathetic. We have already made inroads in several of our core and growth markets. For example, in the United Kingdom, we are investing in our platform to improve the digital experience for our customers, while simultaneously enabling Aegon’s advisors and other colleagues to work more productively and efficiently.

Improving margins

We are identifying ways to improve margins by reducing expenses, increasing efficiency, and pursuing opportunities for profitable growth across Aegon’s different markets and business lines. Within our core markets, we have carefully identified specific opportunities for profitable growth, for example by expanding our use of proprietary investment solutions.

AAM’s move to a global operating platform will enable us to streamline our operations and improve profitability. Our new globalized approach will drive growth in affiliated channels and in third-party assets where competitive strength exists.

To support these actions and realize our growth objectives, we will continue to build a high-performance culture, invest in talent development, and focus on delivery. We intend to build on our strengths: our brands, our extensive global customer base, and our deep expertise in designing solutions, managing assets, and creating distribution networks. In this way, we are confident we will be able to better support our customers and fulfill our purpose.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Aegon’s strategy         21
       
       
       

 

LOGO

 

In 2020, we continued to work toward making Aegon a more digitized, customer-centric, and data-driven organization. Across our global business units, we are replacing legacy information technology (IT) infrastructures and processes with a more innovative, digitalized operating model. At the same time, we are developing a more agile working environment that will allow us to absorb new ideas and technologies into our core business more easily.

Set against this long-term digitization strategy, we are also mindful of the possible IT risks created by people working from home during the pandemic. We are therefore taking steps to minimize cyberthreats as well as other potential hazards.

Faster, smoother, more efficient

By transforming and digitalizing more of the customer-facing side of our business, we can offer existing Aegon customers a smoother and more cohesive experience. This will also create opportunities for innovative product offerings and open up new markets for our services. For example, in the UK Aegon launched a workplace app that is helping plan members improve their financial wellbeing, allowing them to view their pension information and to understand their investments even better.

More generally, we are improving the overall user journey for customers who want to do business online. From an operational perspective, a more automated, technology-driven approach will reduce costs and enhance critical functions such as sales and distribution, pricing, claims management, fraud detection, and risk analysis.

For example, as part of our qualitative-to-quantitative (Q2Q) underwriting pilot in Transamerica, we have launched a state-of-the-art electronic application for our intermediaries

which ensures that nearly all submissions are in good order and therefore enables agent-friendly and customer-friendly instant decision making for the vast majority of applications.

Doing more with data

A foundation of our digital transformation strategy is improving how we manage, process, and store data. We have set a three-year timeframe to transfer all our data assets from Aegon’s regional data centers to the cloud. With better and more cohesive stewardship and ownership, we can use our data in a more intelligent way to benefit customers and grow our business, while making sure we continue to comply fully with laws and regulations. For example, we have significantly improved our pricing models for mortgages and P&C insurance at Aegon The Netherlands which helped us to maintain the attractive economics amid intense competition.

People are also a key ingredient of our digital transformation strategy. We have built analytical teams in all major country units to ensure close alignment of these competencies with the local businesses.

Developing for the digital age

At the same time, we are helping existing Aegon employees develop their digital skills and knowledge. Our learning management system, which is open to all employees, offers a range of IT, compliance, and digital training options. We also offer in-depth training on specialist topics, including through our Analytics Accelerator program.

As well as deepening our internal talent, we are working closely with promising technology-driven companies in our industry to tap into their knowledge and innovation capabilities in fintech and insurtech. Within Aegon, our drive for digital transformation has already borne fruit in the form of new businesses, such as Knab, our wholly owned digital bank in the Netherlands.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Performance in 2020         22

 

LOGO

Financial markets were turbulent during 2020 as a result of the COVID-19 pandemic. Interest rates dropped considerably in the United States, whereas equity markets and credit spreads were extremely volatile globally. This had a marked impact on Aegon’s financial results. Furthermore, excess mortality induced by the pandemic had a negative impact on our earnings in the United States. Overall, the Group demonstrated resilience, as demonstrated by the capital ratios of our main business units all being above their operating levels. New medium-term external targets were introduced in December 2020. Aegon has already made good progress toward these targets, as underscored by the expense savings and deleveraging achieved in 2020.

 

Financial targets and performance

Aegon’s underlying earnings before tax amounted to EUR 1,729 million in 2020, a decrease of 12% compared with 2019. All business units except the United States showed improved performance, partially driven by expense savings. Results in the United States decreased due to the direct and indirect effects of the COVID-19 pandemic, namely adverse mortality and lower interest rates. Net income amounted to EUR (135) million in 2020, versus EUR 1,236 million in 2019. The decrease was driven primarily by the adverse impact of assumption updates in the United States. As part of our annual assumptions review process, we lowered our interest rate assumption and updated our Life and Long-Term Care assumptions, which led to a stronger balance sheet. For further details, please refer to the Results of Operations section of this report.

In 2020, we took several actions to strengthen our balance sheet and improve the Company’s risk profile. In this context, we decided to retain the final dividend for 2019 and rebase the interim dividend from a level of 15 cents per share for 2019 to 6 cents for 2020. Rebasing the dividend ensures that it is sustainable and well covered by the free cash flows that we generate, even in reasonable stress scenarios. Free cash flows in excess of what was needed to cover shareholder dividends and holding company expenses were used to repay USD 500 million senior debt in December 2020. Furthermore, actions were taken to improve the capital positions of Aegon’s business units, as well as to reduce the volatility of their capital ratios. The capital ratios of each of Aegon’s main business units ended the year above their respective operating levels.

In December 2020, Aegon introduced new three-year financial targets, covering the period to 2023. The new targets reflect Aegon’s focus on deleveraging, reducing addressable expenses, generating free cash flows, and growing returns for the Company’s shareholders.

Non-financial performance

During 2020, Aegon had six non-financial indicators that were tied directly to specific aspects of our strategy. They also helped us address material topics and measure progress toward our objectives as both as a provider of financial services to our customers and as an employer.

Through these metrics, we can demonstrate an increase in the value we provided to our customers in 2020. Our total customer base increased by 1.4% to 30.4 million, an endorsement of our value proposition reflected by the loyalty of our existing customer base. This value is also reflected through the decisions of 4.6 million customers to entrust us in 2020, an 8% increase in the rate of new customer additions. These results are borne out by our Net Promoter Score (NPS) for 2020, which saw the proportion of our businesses performing above the average of our peers reach 32%.

With respect to the value we provide our employees, we are pleased to see that reflected in the marked increase in the employee engagement score in 2020, with a five point increase over 2019.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Performance in 2020         23
       
       
       

 

Of course, these indicators only tell a small part of our value creation story, with significant examples of success benefiting all our stakeholder groups. 2020 saw key environment, social, and governance (ESG) achievements through our responsible business approach. In terms of our business partners, we rolled out the EcoVadis platform to enhance our ability to evaluate the ESG performance of our suppliers and to use the leverage of our EUR 1.6 billion procurement spend for the benefit of wider

society. On an even larger scale, we are using the leverage of our investments to drive benefits for society; to this end we actively pursued 575 ESG-related engagements with companies in 2020, a 60% increase since 2018. We are also increasing the transparency of our portfolio, notably, in 2020 we extended the disclosure of the carbon footprint of our investments through the Task Force on Climate-related Financial Disclosures (TCFD) to cover our global General Account holdings.

 

 

External targets 2021 – 2023

 

  Metric    Target    2020   2019

  Reduce leverage

   EUR 5.0 – 5.5 billion of gross financial leverage    EUR 6.0 billion   EUR 6.7 billion

  Implement expense savings

  

EUR 400 million lower addressable expenses, compared to 2019

  

EUR 136 million including a contribution from expense initiatives of over EUR 75 million

  Not applicable, as this is the base year

  Increase free cash flows

   EUR 1.4 – 1.6 billion cumulatively    EUR 530 million   EUR 923 million

  Distribute capital to shareholders

   Around EUR 0.25 dividend per share over 2023    EUR 0.12 per share   EUR 0.15 per share

 

 

During 2020, Aegon had six non-financial indicators that were tied directly to specific aspects of our strategy. They also helped us address material topics and measure progress toward our

objectives as both an employer and a provider of financial services. In 2020, employee engagement increased markedly.

 

 

Underlying earnings and net income in 2020

 

  Metric    2020   2019
  Underlying earnings before tax    EUR 1,729 million                           EUR 1,969 million                        
  Net income    EUR (135) million   EUR 1,236 million

 

Non-financial performance

 

Metric

   2020    2019    change        Key stakeholder group            

supported

Net Promoter Score (NPS) coverage1

   87%    88%    -1 pp    Customers

Number of customers

   30.4 million            29.9 million            1%    Customers

Number of new customers

   4.6 million    4.3 million    8%    Customers

Percentage of customers with two or more products

   16%    17%    -1 pp    Customers

Proportion of digitally connected customers

   41%    36%    4 pp    Customers

    (% of total number of customers)

           

Employee engagement score

   72    67    5 pp    Employees

 

 

1 

NPS coverage includes businesses that use relational NPS (rNPS) for steering.

 

pp

– percentage points

For more information on these indicators, please refer to pages 36 (Customers) and 38 (Employees).

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         24

 

LOGO

 

Our approach

Increasingly, the business community understands the urgent need to address critical environmental and social issues such as climate change, as well as the potential for sustainability, in particular, to be a key value driver. At Aegon, we recognize this long-term shift and the implications for our customers and other stakeholders. We have a robust environmental, social, and governance (ESG) foundation in place that underpins our commitment to doing business in a responsible manner and to facilitate the transition to a climate-resilient economy. Oversight of our approach is embedded into the highest levels of governance at Aegon. Aegon’s Responsible Business and Investment Committee (RBIC), chaired by Mark Mullin, Aegon Americas CEO and Aegon Management Board member, reviews

Aegon’s progress against its responsible business vision and commitments and provides advice to the Executive Board and Management Board.

For Aegon, ESG and responsible business are two sides of the same coin. As we continue to strengthen our ESG approach, we seek to do business in a responsible way, taking into account the needs of all our stakeholder groups and catering to individuals, society, and the environment. This approach covers the impact of our direct business activities, as well as the impact of our investments and those of our vendors and business partners. Good corporate citizenship provides us with a license to operate through meeting our stakeholders’ additional expectations of a responsible business.

 

 

LOGO

 

Aegon’s dedication to responsible business led to the announcement in November 2020 of the creation of a new Global Corporate Sustainability Team, and the appointment of a Global Head of Corporate Sustainability, reporting directly into Aegon’s CEO, Lard Friese.

The Global Corporate Sustainability Team will renew the global sustainability vision for Aegon and oversee its integration into the developing new business strategy for the Group.

The success of that vision will be defined through the selection of measurable metrics and targets that capitalize both on the opportunities for new value creation that the ESG agenda brings and on the successful mitigation of identified value erosion for on-going sustainable value creation. The team will review the integration of ESG considerations into Aegon’s core business processes and will bring together the energy and talent of our business units to drive the success of our global sustainability vision.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         25
       
       
       

 

LOGO

 

The gravity of the COVID-19 pandemic made it clear that meeting the challenges it presented would require society to pull together in ways hitherto unseen in generations. It has been humbling to see our colleagues across the world actively stepping up to contribute as individuals and as representatives of Aegon. Through the lens of a provider of financial services with a purpose of helping people achieve a lifetime of financial security, we reflected on a simple question; how can we optimize our contribution to help society though these times?

From the very onset of the pandemic, it was clear that there would be a heavy toll on the finances of people everywhere. To this end, we focused on leveraging the knowledge and expertise of our people to help mitigate this impact. Aegon the Netherlands approached Nibud (the Dutch National Institute for Family Finance Information), as part of its ‘Helpen met geldzaken’ (‘Help with your finances’) program, and from April 2020, our colleagues have been offered training on how to support friends and family

on managing their personal finances during the pandemic and beyond. Participants learn how to help people to create an overview of their incomings and outgoings, and to make better financial choices. They also learn what they can and cannot do as a volunteer and are given information about government measures relating to COVID-19.

Since first offering the training opportunity in April as a pilot with 20 participants, 74 colleagues immediately volunteered and since more than 500 Aegon colleagues at all levels of the Company have taken part. We quickly realized that the benefits of the program could be amplified through wider participation of the financial sector, and to this end we actively engaged with eight other insurance and banking providers. So far, more than 4,500 workers from across the financial industry have taken part. Aegon is now working to promote the training to other members of the Schuldeiserscoalitie (‘Creditors Coalition’), a coalition of Dutch companies committed to preventing their customers from getting into debt.

 

 

Our responsible business approach sets a minimum standard for all Aegon business units to follow, with our individual country units encouraged to take additional steps to tailor their approaches to their local markets. In 2020, Aegon the Netherlands outlined its enhanced responsible business strategy for 2020-2025 in its dedicated Responsible Business Report. Furthermore, Aegon the Netherlands is a founding member of the Spitsbergen Ambition, a collective of Dutch financial services organizations committed to combating climate change by financing activities and investments. The company is also a signatory to the 2019 Dutch National Climate Agreement alongside Aegon Asset Management’s unit in the Netherlands.

Risk management is an important aspect of our responsible business approach. We proactively identify and manage non-financial risks related to ESG that could potentially impact our business. To this end, we include non-financial risks, such as climate change, within our enterprise risk management (ERM) framework and take steps to mitigate their impact on Aegon and our wider stakeholder base.

Individuals

Responsible products

Aegon helps individuals responsibly manage and prepare for retirement by providing a wide range of savings and investment products, as well as offering financial planning and advice. We also help people improve their financial awareness and literacy by providing information and orchestrating regular surveys and campaigns.

We engage with customers through multiple channels, including polls and surveys, conferences, panels, perception studies, and workshops. In all our interactions, whether virtual or face to face, we seek to create a personal connection with customers and to understand their lives, aspirations, and needs.

Close customer interactions enable us to reach untapped or underserved groups of people around the world, including individuals with specific needs who may not be part of the traditional market for our financial products and solutions. While we continue to build our middle- and higher-income customer base worldwide, we also work to bring financial services and our products to lower-income customers. In the United States, Transamerica offers Final Expense Whole Life Insurance to meet the needs of individuals on limited incomes whose families may not be able to afford the expenses associated with death and funeral services.

We are also working to extend insurance coverage to people who have previously been considered uninsurable. Our WinSocial program, run by our joint venture MAG Aegon in Brazil, offers insurance to people with diabetes. The initiative, which forms part of our Qualitative to Quantitative (Q2Q) pilot program (see next page), uses a mobile app and website to ask customers health and lifestyle questions before validating their responses via heart and glucose monitoring. We hope to broaden this initiative to cover other formerly uninsurable groups, including individuals with hypertension, HIV, and certain cancers. Furthermore, in our Transamerica business, we will roll out our new, digital underwriting capability along with significant customer experience upgrades across our core life products over the next two years.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         26
       
       
       

 

LOGO

 

In line with Aegon’s purpose, we are exploring a faster and more efficient approach to underwriting under the banner of our Qualitative to Quantitative (Q2Q) pilot. This automation-based concept is being trialed with potential insurance customers in the United States, via Transamerica, as well as through our Brazilian joint venture, MAG. Q2Q involves moving an applicant from a very reduced set of questions, revolving around medical risk, to a resulting rate-class that both stratifies that risk and determines pricing, without the need for fluid samples or laboratory tests.

A clear advantage of this quantitative approach is that it can be applied consistently to all applicants, vastly reducing the potential for human bias. This is thanks to a systematic

method Aegon has developed for evaluating, and therefore preventing, so-called disparate impacts (when a data input or rule for its use in underwriting produces different results for protected population classes). For example, factors with the potential to create bias, such as or credit scores, are carefully identified and removed from the underwriting process.

We believe Q2Q represents a significant step forward for the insurance industry. We plan to share our observations from the pilot with our partners on an ongoing basis, as we work toward a common goal of meeting a crucial consumer need for a convenient, fair, and accurate underwriting process.

 

 

Smarter customer relationships

Aegon’s increased focus on digital transformation and customer centricity underpins our efforts to help individuals achieve a lifetime of financial security. By combining efficient, digitized interactions with humanized customer experiences, we can provide financially inclusive products and attend effectively to our customers’ needs during challenging periods in their lives.

 

Insurance for people living with HIV in Brazil

About 0.4% of Brazil’s population is living with HIV and AIDS. HIV-positive individuals are often considered uninsurable due to the risk of the condition developing into AIDS.

However, with the right monitoring regime and antiretroviral therapy treatment, HIV can often be controlled, making it a manageable chronic condition. Aegon research indicates that, as in the case of other chronic conditions such as diabetes mellitus, people living with HIV can be insurable if they can give evidence of sufficient control over their condition.

In the spirit of Aegon’s WinSocial pioneering offering of insurance to people living with diabetes mellitus, Aegon looks forward to leveraging its proprietary digital underwriting capabilities (Q2Q) to further expand opportunities for other individuals who have historically struggled to access fair treatment and insurance. We expect to begin issuing policies to qualifying individuals living with HIV in 2021.

Our customer experience experts are working to advance the digital solutions we provide, without overlooking the need for empathy and a human touch during critical interactions. For example, during the COVID-19 outbreak, Transamerica used its Voice of the Customer platform to gather the views of more than 3,000 employers on emergency legislation and shutdowns. A previously largely analog process was made 100% digital, which increased performance, accuracy, and ease of use. At Aegon Spain and MAG in Brazil, new digital environments were made available in 2020, enabling customers to obtain an overview of their products and services and take simple actions such as changing a payment method. This not only offers the digital convenience but also provides reassurance to our customers.

We use advanced technologies, such as data analytics, to help us gather customer data more intelligently via digital user platforms such as mobile phones. This allows us to further customize our products and solutions and drive down costs (see ‘Q2Q’ above).

Sophisticated data-driven insurance technologies can also help us better evaluate the risks of selling to customers, especially those with chronic medical needs. Ongoing digital health tracking using wearable technology and fitness applications can encourage customers to make healthier lifestyle choices. Digital health monitoring not only makes the underwriting process quicker, cheaper, and more accurate, but also enables us to build more sustained and engaged connections with our customers. Moreover, it allows us to reach and help new groups of people with more affordable, personalized products.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         27
       
       
       

 

Digital ethics: A growing area of debate

Data and artificial intelligence (AI) offer opportunities for insurance, but also raise important new questions for the industry. These technologies allow an increased level of insight for insurers when it comes to (potential) policyholders. On an ethical level, this situation poses unprecedented challenges to the traditional pillars of insuring non-certainty of a risk, statistical predictability, and mutual support or pooling across policyholders.

If data is not used in a controlled and compliant way – in terms of sources or invasions of privacy – by consumers or insurers, the relationship between the two parties is jeopardized. Fair insurance is then put at risk, undermining the crucial role it plays. The financial and/or reputational consequences can be dire.

In contrast, using data and algorithms in a controlled, responsible, and compliant way, with an appropriate contract between consumers and insurers, can enhance the societal role of insurance. Insurance can become accessible to segments of the population that were previously considered uninsurable. Policies can be dynamically adapted

 

to the specific circumstances of an individual, and ultimately move from indemnification to prevention.

At Aegon, we want to truly act on our purpose and therefore plan to use innovative data approaches, AI, and other technologies in certain areas. But we want to do so in a controlled, responsible, and compliant manner and we also expect the same from our customers and partners. Furthermore, thanks to our involvement in international industry forums where such issues are increasingly being debated (for example, EIOPA’s Consultative Expert Group on Digital Ethics), we believe Aegon can set an example when it comes to industry standards and can help shape the growing regulatory environment around data ethics.

We are mindful that some of the considerations around AI, digital technology, and data ethics may be controversial. We are therefore looking at the issues carefully, and from a variety of perspectives. Innovation raises questions that are sometimes uncomfortable or difficult to deal with. Nevertheless, we believe it is important to encourage such debates in order to make the most of the opportunities offered by new technologies, and identify smart, valuable, and ethical solutions for our customers.

 

 

Further to the need to comply with relevant laws and regulations, the social benefits of better financial inclusion are matched by the commercial and reputational advantages for Aegon. On the one hand, the costs of accessible digital underwriting solutions are much lower than in traditional, manual methods; on the other, we have found that customers who appreciate how we work to protect the more vulnerable in our society will recommend us to other people, building our reputation in our markets. Smarter customer relationships therefore create value for shareholders and customers alike.

Society

Retirement research

Healthy aging and financial security in later life are at the heart of our business. Given the global trends of longer lifespans and aging societies, we believe we have a societal responsibility to help people plan effectively for old age and lead a longer, more active retirement. To support this ambition, Aegon conducts in-depth, practical research on financial planning, retirement, health, and insurance issues.

The Aegon Center for Longevity and Retirement (ACLR) was established to increase awareness of, and stimulate dialogs about, issues relating to longevity, population aging, and retirement security. Our aim is to see these themes included in policymaking agendas across the globe.

Together with the Transamerica Center for Retirement Studies® and the Instituto de Longevidade Mongeral Aegon, the ACLR conducts an annual survey on retirement readiness and attitudes in 15 countries. The survey has gathered information from more than 130,000 respondents during its nine-year history.

The 2020 survey and accompanying report focused on age-friendly employment and explored the important role of employers in helping workers successfully prepare for retirement. The report drew attention to employer-sponsored retirement and other welfare benefits, flexible work arrangements, and workplace wellness programs, among other initiatives.

Shifting responsibility for retirement

Longer lifespans are putting traditional, state-managed retirement systems under strain and shifting responsibility away from governments and employers toward individuals, who may not be fully equipped to plan for their financial security. The pandemic has further exposed the fragility of retirement systems run by governments that now find themselves needing to redirect funds toward supporting their economies.

Aegon’s products and services are focused on helping our customers to achieve a dignified retirement.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         28
       
       
       

 

LOGO

 

At Aegon, our commitment to upholding environmental, social, and governance (ESG) considerations is demonstrated in our compensation and benefits policies at the highest levels. For example, we are incorporating inclusion and diversity targets into the remuneration of all Executive Board and Management Board members.

More widely, according to our Executive Board’s Remuneration Policy, 50% of a member’s variable compensation is related to non-financial performance indicators, of which at least one must be ESG-related and clearly support the wider interests of society. Such a target might, for example, focus on the organization’s carbon footprint, inclusion and diversity

practices, or risk management. The executives’ variable compensation is dependent on the fulfillment of this target as well as their other performance indicators. In 2021, our CEO, Lard Friese, will work toward specific performance objectives that focus on inclusion and diversity, and on further integrating ESG into Aegon’s strategy.

This is just the start: our aim is for commitments made at the top to filter through the rest of our businesses. This will see managers across our regions take responsibility for employee engagement and make sustainability a key objective that is embedded in everything they do.

 

 

Aegon is active in many international projects that aim to fulfill this goal; for example, an Organisation for Economic Co-operation and Development (OECD) working group on the future of work, and the Living, Learning, and Earning Longer initiative led by the World Economic Forum (WEF), the OECD, and US-based retirement interest group AARP. Within Aegon, our Silver Starters program (developed jointly with the Leyden Academy on Vitality and Ageing) provides online entrepreneurship coaching to over-50s, to promote lifelong learning and healthy attitudes to aging.

The environment

A key part of our responsibility to society is to reduce our impact on the environment. In 2015, Aegon signed the Paris Pledge for Action, affirming our commitment to the ambition set out by the Paris Agreement to limit global temperature rise to less than 2 degrees Celsius. We are also a supporter of the Task Force on Climate-related Financial Disclosures (TCFD).

As a financial services provider, we do not operate energy- or resource-intensive processes in the offices and data centers that comprise our direct business operations, nor are we aware of any environmental incidents relating to these activities. The environmental impact of our business activities relates primarily to the organizations in which we invest. To this end, it is important that we set high standards for ourselves in our responsible investment philosophy (see page 31).

For example, in January 2021, in response to the threat of climate change, Aegon UK announced its intention to achieve net-zero carbon emissions across its default pension fund ranges by 2050. Before then, the business aims to halve carbon emissions associated with its default funds by 2030. This commitment follows a survey of Aegon UK’s customers carried out in late 2020, in which nearly half of all respondents expressed their wish to see investing for a net-zero carbon future made mandatory.

Aegon’s other country units are working toward similar targets. In 2019, Aegon the Netherlands joined more than 50 leading Dutch companies in signing the Coalitie Anders Reizen: an agreement to reduce carbon emissions by 50% by 2030.

Carbon neutrality of our own operations

Aegon’s direct business operations in the Netherlands, the United Kingdom, and the United States have been carbon-neutral since 2016. Carbon neutrality was extended to cover the entire Group in 2019. We take a hierarchical approach to manage our greenhouse gas (GHG) emissions:

1.

We seek to reduce activities with a carbon footprint, namely fossil fuel consumption and air travel.

2.

We look to substitute remaining activities with low-emission alternatives.

3.

We offset any residual emissions.

Aegon’s direct energy usage fell by 17.6% in 2020, as many Aegon employees worked from home throughout much of the year due to the COVID-19 pandemic. Our use of air travel was also greatly reduced as virtual conferencing tools such as Microsoft Teams replaced face-to-face meetings. On a pre-pandemic basis, our overall energy consumption fell by 5.5% year-on-year in 2019, supported by the rationalization of our property portfolio worldwide and the consolidation of our operations into more energy-efficient buildings.

Reduce: The first tier of our GHG reduction approach focuses on limiting activities that result in carbon emissions. We aim to capitalize on changes to our standard working practices as a result of COVID-19 to further reduce the footprint of our direct business operations. Our owned premises in the United Kingdom

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible business         29
       
       
       

 

 

Aegon’s approach to climate change

Aegon believes governments, companies, and investors have a responsibility to mitigate the impacts of a changing climate and facilitate a transition to a climate-neutral economy.

We seek to incorporate climate considerations into management actions across our business. Aegon takes steps to mitigate the environmental impact of our direct operations, for example by minimizing our energy consumption and using renewable electricity. However, we have an even greater influence through our investments: climate change is a key topic within Aegon’s responsible investment framework, and we report the greenhouse gas (GHG) emissions associated with our General Account investments.

At Aegon, we strive for consistent disclosure with regard to climate change and sustainability and have been supportive of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) since 2017. We follow the TCFD’s four-pillar framework for our own reporting and we encourage the wider adoption of the framework by our investee companies and other partners. Aegon’s efforts to comply with the TCFD are presented in more detail in the TCFD disclosure on page 415, which also forms part of the directors’ report.

Governance

Our efforts to address climate change are overseen by the Climate Change Working Group (CCWG), under the instruction of Aegon’s Responsible Business and Investment Committee (RBIC). The CCWG is tasked with evaluating new climate developments affecting our business activities and recommending actions as necessary.

Strategy

Climate change is a fundamental consideration within Aegon’s responsible business strategy. Aegon is committed

to a responsible way of doing business, which includes making a lasting contribution to a healthy environment. We also address climate change through Aegon’s Group-wide Responsible Investment Policy, including through our active ownership approach. As an institutional investor, Aegon expects investee companies to make a concerted effort to minimize their environmental impact. We actively engage with the companies we invest in – both individually and collectively - through networks to encourage better climate-related risk practices, including emissions disclosure and target setting.

Risk management

Climate change is a long-term risk associated with high uncertainty regarding the timing, scope, and severity of potential impacts. Within our wider responsible investment approach, Aegon enforces strict climate-related criteria as part of our screening and engagement process for investee companies. These include measurement and reporting of climate impacts; consideration of transition and/or physical risks, plans, and targets to reduce emissions; and other sector- or situation-specific topics.

Metrics and targets

Aegon measures and reports annually on its operational carbon footprint. Our main operations in the United States, the Netherlands, and the United Kingdom have been carbon-neutral since 2016 by reducing their facility-level emissions and supporting offset projects in cooperation with the non-governmental organization (NGO) ClimateCare. In 2019, we extended the scope of our offsetting to cover all of our wholly owned operations. Our operational emissions are reported in full on page 409. Since 2018, we have also measured the carbon footprint of our General Account investments.

With regards to the carbon footprint associated with our investments, in 2020 we broadened our disclosure beyond the Netherlands to cover our global General Account, reaching 77% coverage of Corporate Fixed Income, and 98% coverage of Sovereign Fixed Income.

 

 

are certified to ISO 50001 (Energy Management Systems), and our Netherlands operations are working toward equivalent coverage to the same standard. In addition, Aegon’s UK premises are certified to ISO 14001 (Environmental Management Systems) and we are pursuing Energy Star Certification for all our owned US premises.

Substitute: Renewable energy forms the second tier of our GHG-reduction approach. We source ‘green tariff’ electricity for our European operations and purchase renewable energy certificates (RECs) for the electricity we consume in the United States. Year

to year, the share of renewable electricity within our wider mix is consistently greater than 95%. Solar panels have also been installed on the roof of our Aegonplein head office in The Hague, generating energy for neighboring homes and businesses.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             

 


            Responsible business         30
       
       
       

 

Offset: Under the final tier of our management approach, we purchase carbon offsets to mitigate any remaining GHG emissions from our wholly owned operations. In developing regions where we have a sizeable operational presence, we specifically support carbon offset projects that reflect our own footprint and align with our priority United Nations (UN) Sustainable Development Goals (SDGs) as well as our purpose. Examples of Aegon’s projects include a Verified Carbon Standard (VCS) deforestation initiative in Brazil, as well as a Voluntary Emission Reduction (VER) project in China to help eliminate atmospheric methane emissions.

Contribution to the UN Sustainable Development Goals

Aegon is committed to supporting the UN SDGs, both as a financial services provider and as an investor. We recognize that sustainable development is in the long-term interest of business and the global economy, but that a sustainable future for people and the planet will not be attainable without cooperation between the public and private sectors.

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

 

 

  Sustainable Development Goal    Aegon contribution to relevant SDG targets (examples)
  Aegon strategic SDGs     
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No poverty

End poverty in all its forms everywhere

  

Contribution to target 1.2

 Aegon the Netherlands colleagues have been offered training on how to advise friends and family on managing their personal finances during the pandemic and beyond (page 25)

 Transamerica launched a comprehensive CARES Act Customer Support Initiative to encourage retirement plan sponsors to offer these new distribution options to participants requiring access to funds, putting customers’ minds at ease (page 36)

 Aegon the Netherlands introduced a ‘Blue Heart’ program that enabled people facing financial difficulties, as a result of the pandemic, to postpone their payment (page 37)

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Good health and well-being

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

  

Contribution to target 3.4/3.8/3.A

 Our Silver Starters program (developed jointly with the Leyden Academy on Vitality and Ageing) provides online entrepreneurship coaching to over-50s, to promote lifelong learning and healthy attitudes to aging (page 28)

 In our engagement process, we entered into a dialog with pharmaceutical companies involved in the development of COVID-19 treatments, to ensure fair access to essential medicines, and in particular, vaccines for people around the world (page 31)

 Under COVID-19, Aegon International also accelerated hospitalization benefits in China and expanded benefit coverage to COVID-19 for customers in India (page 37)

 Aegon excludes tobacco from its investments to help address health concerns over smoking (page 90)

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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

 The Aegon Asset Management Ethical Equity fund’s climate-related investments include companies involved in renewable energy, social and environmental infrastructure, and sustainable materials (page 417)

 The ABN AMRO Aegon Global Impact Equities fund’s climate-related investments include companies involved in renewable energy production and its supply chain, sustainable manufacturing technologies, energy efficiency, building insulation, and the circular economy (page 417)

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Decent work and economic growth

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

  

Contribution to target 8.5/8.7/8.10

 In the spirit of Aegon’s WinSocial pioneering offering of insurance to people living with diabetes mellitus, Aegon looks forward to leveraging its proprietary digital underwriting capabilities (Q2Q) to begin issuing policies to qualifying individuals living with HIV in 2021 (page 26)

 Aegon was the first company in the Netherlands to make agreements with trade unions in its collective labor agreement on equal pay for men and women and Aegon UK has publicly reported its gender pay gap data since 2017, as required by law (page 39)

 Aegon faces the most potential human rights risks in its indirect business relationships, which is why human they are at the core of newly updated Vendor Code of Conduct and our Responsible Investment Policy (page 44)

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Climate action

Take urgent action to combat climate change and its impacts

  

Contribution to target 13.2/13.3

 Aegon the Netherlands is a signatory to the 2019 Dutch National Climate Agreement alongside Aegon Asset Management’s unit in the Netherlands (page 25)

 In 2015, Aegon signed the Paris Pledge for Action, affirming our commitment to ensure that the ambition set out by the Paris Agreement is met or exceeded (page 28)

 Aegon the Netherlands performed an assessment on the impact of climate change on the General Account asset values and the increase and timing of life and non-life insurance claims (page 416)

 In 2018 we began to measure and report on the carbon footprint of our investments, with a focus on our proprietary investment portfolio in the Netherlands and new for 2020 is the first measurement of our global General Account holdings (page 418)

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible investment          31

 

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At Aegon, we recognize that our responsibility extends beyond achieving strong financial returns, and that we must take action to ensure our investments do not negatively affect society or the planet. We apply this ethos to our own proprietary investments and use our influence to encourage similar standards in the accounts we manage. By taking an active approach to responsible investment, we seek to minimize risks and explore new opportunities to serve the interests of our customers and society at large.

On January 1, 2020, Aegon implemented its revised Group-wide Responsible Investment Policy, which determines how we manage our proprietary assets globally as part of the investment process for our General Account. As well as reiterating our previous environmental commitments, the updated policy further limits exposure to climate-damaging activities such as thermal coal production and usage.

The policy recognizes a broad range of recurring environmental, social, and governance (ESG) topics, from climate change to health and corporate governance. These topics are assessed regularly as part of the review process for our Responsible Investment Policy. The most recent review, in January 2021, further underscores our commitment to fighting loss of biodiversity, together with further improvements to our investment process.

In addition to incorporating ESG thinking into investment decisions for our General Account, we are committed to expanding our ESG offering in Separate Accounts, which we offer to policyholders and pension plan members as investment strategies.

Asset manager: Our solutions

Guided by our overarching Responsible Investment Policy, Aegon Asset Management (AAM) has established a Responsible Investment Framework that reflects these key elements including similar policies put forward by AAM’s clients.

Our Responsible Investment Framework is structured as follows:

  ESG integration – Material ESG factors are fundamental to our investment decision-making across all AAM portfolios. By integrating ESG considerations into traditional financial analysis, the AAM research team arrives at an independent view of an issuer’s fundamentals.
  Active ownership – We actively engage with investee companies across a wide range of industries to improve their ESG profile and address sustainability issues, often in cooperation with other investors to maximize our influence. We also exercise any shareholder voting rights we have to support our engagement efforts and enhance long-term value creation for all stakeholders.
  Solutions – AAM provides a range of responsible investment solutions to pursue ESG objectives alongside financial returns. These solutions are categorized into four types: 1) exclusion-based strategies, 2) best-in-class strategies, 3) sustainability-themed strategies, and 4) impact investments.

Activities in 2020

Engagements

In 2020, Aegon engaged with 575 companies on a wide range of issues, including; climate risk and reporting, critical health issues, and corporate governance, through AAM. Many of these engagements focused on the COVID-19 pandemic and the responses of our investee companies. In particular, we have sought to ensure companies provide adequate protection for their employees by taking suitable health and safety precautions. We also entered into a dialog with pharmaceutical companies involved in the development of COVID-19 treatments, to ensure fair access to essential medicines, and in particular, vaccines for people around the world.

2020 also drew attention to issues of diversity and racial equality in the United States and elsewhere. The growing awareness around diversity issues is in line with AAM’s ongoing engagements with investee companies with regard to inclusion and diversity. A priority during these discussions has been to encourage companies to provide more transparent disclosure in terms of their diversity policies, programs, and targets.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible investment         32
       
       
       

 

Engagement activity 2020

 

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1 

General disclosure engagements are not all indicative of ESG concerns, for example dialog between AAM and a company to enable completion of an ESG asessment.

2 

Global Industry Classification Standard (GICS) sector data. A limited number of target companies (<10%) straddle GICS sector categories and have been mapped manually.

 

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Milestone 1: Concerns flagged with a company.

Milestone 2: Company response (letter, e-mail, phone call) commencement of dialog.

Milestone 3: Concrete steps taken by the company to resolve flagged concerns.

Milestone 4: Engagement goal(s) achieved.

No further action required: Where (after dialog with the company) the assessment of flagged concerns changes and decision made to discontinue the engagement.

 

 

Exclusion list developments

In 2020, Aegon strengthened its Group-wide exclusion criteria within the Responsible Investment Policy. Aegon will no longer invest in companies that own more than 10 gigawatts of coal-fired electricity generation capacity and have plans to extend their capacity. We also exclude companies that produce more than 20 million tons of thermal coal annually and are actively expanding their coal-related operations from our investment universe. This is in addition to those deriving 30% or more of their revenue from the exploration, mining, or refining of thermal coal. This threshold will gradually be lowered over the coming years, to eventually reach 5% or below in 2029.

Responsible investment solutions

In December 2020, AAM joined forces with ABN AMRO Investment Solutions to launch the ABN AMRO Aegon Global Equity Impact Fund. The fund selects companies that demonstrate strong ESG performance, the exclusion of controversial activities, and positive impact.

As a signatory of the UN Principles for Responsible Investment (PRI), in 2020 AAM scored the highest possible rating (A+) for strategy and governance of responsible investment activities for the fourth consecutive year.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Responsible investment         33
       
       
       

 

 

Several new responsible investing funds were also launched across our business units during 2020. In September, Transamerica and AAM’s US business jointly launched two new responsible investing bond mutual funds: the Transamerica Sustainable Bond and the Transamerica High Yield ESG funds. In December, Transamerica also replaced one of its sub-advisors on an existing equity strategy with AAM, and changed the strategy to Sustainable Equity Income, thereby giving Transamerica dedicated responsible investing offerings in both the fixed income and equity spaces. At the end of 2020, the Sustainable Equity Income strategy had assets of USD 1.2 billion across two funds: a retail fund and a series trust fund used in Transamerica’s variable annuity business.

Aegon UK also expanded its ESG solutions during 2020. Together with our investment partner, BlackRock, the Company increased its exposure to investments that have ESG credentials in the Aegon BlackRock LifePath portfolios that are available to workplace investors via our Aegon TargetPlan and Aegon Master Trust fund ranges. Between September 2020 and mid-2021, the number of ESG investments held by the LifePath portfolios will increase from 27% to 68% for LifePath investors planning to retire in 2050 and beyond.

Further information about AAM’s activities can be found in the dedicated Responsible Investment Report published by AAM.

Local commitments

Aegon’s business units, including Transamerica, Aegon the Netherlands, and Aegon UK, are guided by our Group-wide Responsible Investment Policy, which they implement through their respective investment activities. Equally, our business units are encouraged to take additional measures to reflect the preferences and standards of Aegon’s customers and other stakeholders in their respective local markets.

Several of our units have taken additional steps to strengthen their screening efforts. For example, in January 2021, Aegon UK announced its commitment to achieve net-zero carbon emissions across its default pension fund ranges by 2050. The company also intends to cut carbon emissions associated with default funds in half by 2030. In November 2020, Aegon the Netherlands joined a coalition of Dutch investors using satellites to target companies with deforestation in their supply chains. The coalition demands that companies publicly disclose supplier lists for palm oil and other agricultural ‘soft’ commodities. Companies that have been involved in deforestation in the past are required to take steps to mitigate their effects and avoid contributing further to this issue.

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As part of our active engagement strategy, Aegon works with companies with the potential to contribute to the clean energy transition and the realization of the climate targets set by the 2015 Paris Agreement.

 

In 2020, Aegon Asset Management (AAM) continued to engage with a leading multinational steelmaker to support its decarbonization plans and its implementation of greenhouse gas (GHG) reduction targets. This engagement has been well-received by the company’s management, and we held several meetings focused on carbon reduction. The interactions have been coordinated within the Institutional Investors Group on Climate Change (IIGCC), an investor-based workgroup aligned with the Paris Agreement.

 

We believe our collaboration has had a positive impact. In October 2020, the steelmaker announced plans to build on its existing carbon-reduction ambitions, having made a Group-wide commitment to being carbon-neutral by 2050. The company has also introduced its first ‘green steel’ solutions for customers, which include steel produced via carbon-neutral processes as well as through the use of ‘green’ hydrogen generated from renewables.

 

Aegon and other IIGCC-affiliated investors will continue to engage with the company on its transition plans in 2021, and the implementation of its sustainability targets.

 

Our country units also commit to local initiatives and platforms aimed at promoting responsible business activity. In 2020, Aegon the Netherlands joined Platform Living Wage Financials (PLWF), an alliance of financial institutions that encourages investee companies to address the failure to pay a living wage in global supply chains. The company also joined the Access to Medicine Index, a research program that ranks leading pharmaceutical companies based on their efforts to ensure the sufficient availability of medicines for people in all regions and of all backgrounds and income levels.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders          34

 

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We strive to create long-term value for multiple stakeholders, including customers, employees, business partners, 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. However, we are mindful that certain decisions we make as a business may result in the erosion of value for stakeholders in some circumstances. The active identification and management of these potential consequences through our decision-making is important both in its own right and also in preserving a net balance of long-term value creation.

To meet the expectations of our stakeholders, we commit to being a good corporate citizen with a strong environmental,

 

social, and governance (ESG) foundation. For us, this foundation encompasses, among other things, 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. The ‘Responsible business’ chapter of this report provides more details for stakeholders about our ESG foundation.

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 Aegon operates. We recognize five main stakeholder groups.

 
LOGO  

Customers – individuals and corporate clients:

By delivering reliable insurance solutions and effective

investment management services, we help our customers protect their lives and legacies. Aegon also plays an important role as a pension platform, helping customers to manage long-term pension savings. Furthermore, we provide mortgage solutions for customers in the Netherlands, giving homebuyers access to essential financing.

 

LOGO   Employees – full and part-time employees (current and retired),

tied agents, trade unions, and other employee representative groups: As our business progresses and grows, we are better able to provide our employees with fulfilling careers, advancement opportunities, and educational support.

 

LOGO   Business partners – distributors, joint venture partners, reinsurers, and suppliers of goods and services:

We cultivate a strong relationship with our business partners by working together to create revenue streams and sharing intelligence and perspectives from markets around the world. We learn from our partners and optimize our business so that we can work together more effectively.

 

LOGO   Investors – shareholders and bondholders: We want our

investors to see sustainable benefits. Our bondholders have received timely coupon payments and principal repayment at maturity. In 2020, we made a considered decision to retain the final dividend for 2019 and to rebase the interim dividend for our equity holders from 15 cents to 6 cents per common share. This was to ensure that the dividend is sustainable and well covered by the free cash flows that we generate, even

in reasonable stress scenarios. Aegon targets an increase in capital returns to shareholders in the coming years on the back of a successful execution of its strategy.

 

LOGO   Society – governments, regulators, charities, tax authorities, community groups, and other non-governmental organizations (NGOs), academia, and public institutions:

Society is supported by dependable insurance solutions that help individuals protect their assets and aspirations. When we enable people to save for their own retirement, we also help reduce future burdens on public pension systems. More widely, we strive to be a good corporate citizen, starting by supporting the communities where we do business through our tax payments, charitable donations, and volunteer work.

In 2020, the value we delivered to Aegon’s stakeholders included:

  EUR 57 billion to our customers in claims, benefits, and plan withdrawals.
  EUR 6.6 billion in commissions, fees, and other payments to intermediaries, suppliers, and reinsurers.
  EUR 2.0 billion to our employees in salaries, benefits, and training.
  EUR 370 million to our investors in dividends and interest payments.
  EUR 318 million in tax payments around the globe.
  EUR 9.7 million in support for local communities.
  4,399 hours of volunteer work.
  EUR 213 billion of investments in responsible investment solutions.
 

 

    

 
Aegon Annual Report on Form 20-F 2020             

 


            Long-term value for our stakeholders         35
       
       
       

 

Value creation

 

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Explanatory note

This chart is based on the Integrated Reporting (IR) framework of the International Integrated Reporting Council (IIRC). 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 applied three of the five most material capitals to our business (financial, human and intellectual, and social and relationship). As a financial services company, we do not directly use or create natural or manufactured capital, 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: the funds to which Aegon has access, including debt and equity capital.

Human and intellectual capital: individual knowledge, skills, and capacities in Aegon’s workforce, as well as the Company’s institutional knowledge, processes, and expertise.

Social and relationship capital: relationships both within and outside the Company, including with customers, employees, suppliers, and other business partners.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             

 


            Long-term value for our stakeholders         36
       
       
       

 

LOGO

 

In March 2020, the US government introduced the CARES Act, a USD 2.2 trillion COVID-19 economic stimulus package for individuals, businesses, and municipalities. One outcome was that US employers sponsoring eligible retirement plans were given the option of offering their employees access to retirement savings through COVID-19-related distributions and loans, along with certain tax waivers. While this was welcome news for many, it meant that employers were faced with complex new rules at an already difficult time.

In April, Transamerica launched a comprehensive CARES Act Customer Support Initiative to encourage retirement plan sponsors to offer these new distribution options to participants requiring access to funds, putting customers’ minds at ease.

There were five steps to Transamerica’s initiative:

  1.

Waiving all retirement plan fees associated with COVID-19-related distributions, thus supporting retirement plan sponsors and COVID-19-impacted workers.

  2.

Waiving plan amendment fees for retirement plan sponsors who used Transamerica’s pre-approved document.

3.

Establishing a team to handle requests from plan participants seeking advice about using their long-term retirement savings to meet short-term financial challenges.

4.

Issuing a detailed summary of the CARES Act to help employers, employees, and their financial professionals navigate the new legislation, as well as providing guidance on the steps needed for plan sponsors to implement the CARES provisions.

5.

Donating USD 500,000 to Direct Relief to support healthcare workers in their COVID-19 relief efforts.

At Aegon, we know that people work hard over many years to build up their retirement funds, and that for customers affected by COVID-19, accessing retirement savings is a last resort at a time of unforeseen upheaval. The Transamerica initiative was a timely and practical response that supported our customers as they made difficult decisions, aligning with Aegon’s wider efforts to help people achieve a lifetime of financial security. By providing clarity on the new legislation and its implications, encouraging plan sponsors to act, and reassuring customers that they would not be penalized unfairly, we were able to help people in immediate financial difficulties access the money they needed to weather the crisis.

 

 

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Customers

Aegon’s purpose is to help our customers achieve a lifetime of

financial security. Part of this security is the peace of mind that comes from knowing we will be there when they need us most and we will respond with empathy and clarity. At Aegon, we know that all of our customer interactions count. We can build trust and value by connecting with people on a human level, by being both personal and informative, and by offering reassurance and care alongside timely and relevant advice so that people can make decisions that are right for them.

We have seen that increases in longevity and population aging are putting government-sponsored retirement benefits under severe financial strain. In many countries around the world, traditional defined benefit plans offered by employers are disappearing and being replaced by employee-funded defined contribution retirement plans. With these shifts, individuals are expected to take on increasing responsibility for self-funding a greater portion of their retirement income.

Workers are shouldering more of the weight of financial decision-making for their retirement savings compared with the past, and they need to make more informed decisions. Good financial

literacy skills are more important than ever, yet barely more than one-quarter (28%) of workers were able to answer three basic financial literacy questions correctly.1 Given what is at stake and the complexity involved, policymakers, the financial services industry, employers, and others must work collaboratively to further develop and offer access to lifetime income solutions.

Where our customers are

(total number of customers by location, in millions, end-2020)

 

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1 

Aegon Retirement Readiness Survey 2020.

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         37
       
       
       

 

At the same time, to support our customers it is important we deliver our products and services smoothly and efficiently At Aegon, we are harnessing new, digital tools and embracing more analytical, data-driven ways of working that allow us to get to know our customers better and meet their needs more effectively. As our underwriting processes evolve and improve, we can also extend our services to new areas of society. These include those who, for various reasons, may have previously been considered uninsurable.

Our response to the pandemic

Throughout 2020, our customers relied on us more than ever as the COVID-19 pandemic took its toll on lives, livelihoods, and well-being. We knew that how we responded to our customers’ needs in a time of great uncertainty would be a moment of truth for our organization. Our aim in all of our communications has been to make our customers feel informed, reassured, connected, and assisted. These four key requirements guided how we interacted and communicated with users of our services.

Around the world, our country units have responded to the pandemic in different ways. At Transamerica, we introduced a new initiative to help customers navigate the CARES Act (see page 36). Aegon International also accelerated hospitalization benefits in China and expanded benefit coverage to COVID-19 for customers in India. Elsewhere, Aegon the Netherlands introduced a ‘Blue Heart’ program that enabled people facing financial difficulties as a result of the pandemic to postpone their payments, reducing customers’ stress at a time when they need to put their health first.

Satisfaction and loyalty

Aegon’s commercial success has always relied on retaining customers and extending our relationship with them across multiple services. Our priority is to continuously improve customer satisfaction and loyalty. To measure our performance, we use the Net Promoter Score (NPS), measured through ‘touchpoint NPS’ (tNPS), ‘journey NPS’ (jNPS), and ‘relational NPS’ (rNPS) on a scale of -100 to +100. These are all used to steer and improve the quality of our internal processes and the customer service experience we deliver. NPS measurements are included in various management-level targets. Our relational NPS programs cover the vast majority of our customers (87%) across our different territories and businesses.

At Aegon, we took care to guide and support our customers during the difficulties they faced in 2020. Our success in improving our customers’ experience with us is shown by our NPS results, with an improved absolute and relative performance in Aegon’s three biggest markets: the United Kingdom, the United States, and the Netherlands.

In the Netherlands, rNPS reached an all-time high score in 2020. We can attribute this increase largely to a better emotional connection with customers, achieved through high-quality customer contact during the pandemic and our empathetic communication.

Aegon recognized for excellent

customer service in Spain

For the second year in a row, Aegon Spain was recognized in the Customer Service of the Year awards, winning awards in both the Health Insurance and Life Insurance categories.

The awards, granted by the Sottotempo association, recognize the innovation and quality of the service that Aegon offers our customers. This follows thorough discussions with customers regarding their thoughts on the customer service Aegon provides by telephone, as well as via email and web browsing. The discussions focused on aspects such as availability, quality of response, and technical quality, and also reflected on the ‘human’ quality of Aegon’s interactions with customers.

Aegon’s approach to customer service in Spain reflects our wider ambition to remain close to our customers by providing support throughout the different stages of people’s lives, especially when they need it most.

In the United States, we used our rNPS survey as an opportunity to gather customer feedback about how communication in times of uncertainty affects brand loyalty and trust. The results were clear: those who indicated they had received some type of communication from Transamerica had an average NPS of +54, and 75% agreed with the statement “Transamerica is a brand I trust.” On the other hand, those who indicated they had received no communication had an average NPS of +2, and only 51% agreed that they trusted Transamerica. Overall, our relational score remained stable at its already high level, which also led to improvements in our market position.

In the United Kingdom, we also saw our response to the pandemic enhance relationships with our customers. Our tNPS performance has remained above target levels since the outbreak of the pandemic. We also maintained the strong improvements made to Aegon UK’s rNPS in previous years. And with our peers’ performance decreasing, our NPS position stood above the market average in 2020 (32%).

Overall, our relationship with customers – relative to our peers – improved in comparison with 2019, mainly driven by the performance of Aegon UK. The details of benchmarked rNPS are provided in Part IV of this report.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         38
       
       
       

 

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Employees

 

Engagement

Aegon’s goal is to continue to form a worldwide community of talented employees who are deeply committed to our purpose. Following the outbreak of the COVID-19 pandemic, and the transition to working from home across our organization, it has become more important than ever that we keep our people feeling supported and engaged. We do this by ensuring our employee community is connected, healthy, and happy.

To promote the health and welfare of our employees, in 2020 we:

  Focused on creating new opportunities for their career development;
  Introduced a new performance management process with a stronger focus on development;
  Promoted greater diversity within an inclusive workplace; and
  Fostered training and development to equip our employees with future-ready capabilities.

Every year, we conduct a Global Employee Survey across our businesses. In 2020, we continued to see very high participation levels, with 82% of our employees providing responses. The survey included questions in four key categories: Engagement, Leadership, Inclusion, and Diversity. Our scores in all of these areas increased compared to the previous year. The Engagement score rose from 67% in 2019 to 72% in 2020, while Leadership increased from 55% to 63%. It is reassuring to see that Aegon’s employees reported feeling engaged and supported. Our 2020 Inclusion score, at 79% (up from 76% in 2019), is one point above our external benchmark. In the Diversity category, our overall score reached 73% (versus 69% in 2019), though responses to specific questions show that we need to gain a deeper understanding of the situation and increase our inclusion and diversity efforts. The results of the survey have been discussed with Aegon’s respective business unit leaders. In 2021, business unit leaders will work toward a personal or business target related to the implementation of follow-up actions to improve employee engagement.

Due to COVID-19, much of Aegon’s staff worked from home throughout most of 2020. We supported employees by providing furniture, as well as information technology (IT), tools, and hardware to enable a healthy and safe home-based working environment. We also introduced the ‘Working from Home’ framework to support staff during this period and set vitality and engagement as a priority. The focus areas of this program are: keep fit, keep connected, keep performing, keep motivated, and keep developing. We also recognize the potential impact of extended remote working on people’s mental health. In spring 2020, Aegon UK began a series of webinars to offer employees support on managing their mental well-being while working from home.

Although the framework is global, local units have been able to adapt it to fit their specific circumstances, thereby better supporting employees and keeping people connected. In several

country units, offers such as increased paid leave in 2020 and expanded flexible working arrangements, helped employees balance their work and personal lives. We also reimbursed additional costs related to working from home.

As the situation evolved, we started to explore future ways of working at Aegon. Like many organizations, we found multiple benefits to remote working, including greater flexibility and a better work-life balance for employees, more digitalization of processes, and reduced travel (which helps both employees and the environment). We conducted two employee surveys (in April and July 2020) to gain insights into how our people were faring during the crisis. On the basis of this feedback, Aegon is actively considering several measures for the future, including possible hybrid working models where offices may no longer be the default workspace for individuals, but would remain available for team collaboration.

Compensation and benefits

In a highly competitive labor market, our remuneration policy is designed to attract, motivate, and retain talented staff whose skills and values can help us achieve our strategy. Aegon’s Global Remuneration Framework stresses the importance of ‘pay for performance’, while ensuring incentives and variable pay do not compromise integrity or encourage excessive risk-taking. Both financial and non-financial metrics are used to assess performance; the mix between the two depends on the individual’s position and seniority. In 2020, we paid out EUR 2.0 billion in salaries and benefits to our 22,322 employees. We also provided a range of other benefits including, flexible working arrangements, company retirement plans, and parental leave, as well as paid time off for volunteering on community projects. Most of our businesses offer employee health programs; these include fitness programs and screening for serious illnesses such as cancer and heart disease, as well as programs to reduce workplace stress and improve mental well-being. Several of Aegon’s country-based business units also offer flexible options for purchasing or leasing a bike.

Where our employees work

(by reporting segment, end-2020)

 

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Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         39
       
       
       

 

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In 2020, Aegon’s new ‘Perform and Develop’ approach to performance management came into effect across all of our business units. This global approach enables us to better measure and prioritize our employees’ development.

The new process, which is hosted on our Workday platform, sees us move away from the manager-led, backward- looking structure of biannual reviews, toward a more frequent and forward-looking approach, with ongoing dialogs led by employees. Goal-setting at the start of each year, now focuses on an employee’s ambitions relating to performance and development. During the year, the new system encourages check-ins with managers, two-way feedback, and discussions about goals as they evolve. End-of-year performance conversations now emphasize an employee’s impact, interests, and long-term career development.

The Perform and Develop system empowers Aegon employees at all levels of the organization to be open about their career aspirations and to take the lead on their own development. As well as giving employees greater ownership of their careers, the new process also brings other benefits: it encourages senior leaders to become more engaged as role models, and helps human resources teams with talent and performance management.

The launch of Perform and Develop has been supported by global and local training and communication materials, as well as digital nudges, to help colleagues make the most of the new system. Indeed, one Pulse Survey in September revealed that 64% of employees had talked about their performance goals with their manager in the past month, while 80% had received or given feedback.

 

 

Equal pay

Aegon was the first company in the Netherlands to make agreements with trade unions in its collective labor agreement on equal pay for men and women. We also recognize that, for some women, a shorter tenure or work history is the direct result of unaddressed inequalities throughout history.

Furthermore, since 2017 Aegon UK has publicly reported its gender pay gap data, which measures the difference between average earnings of male and female employees, expressed as a percentage of males’ earnings. The most recent annual Gender Pay Gap Report, published in April 2020, shows a mean gender pay gap of 34.7% for Aegon UK Corporate Services Limited in 2019, a slight improvement on the 2018 figure of 35%.

Development

Making sure our workforce has the right skills and competencies is vital for the success of our organization. More widely, we are aware of growing shortages of skills and talent across the financial services sector, which are becoming more acute as so-called baby boomers retire and the industry transitions to a more digitized way of working. Closer to home, the value of these skills is only amplified when combined with the deep organizational knowledge and strong capabilities of our employees, which are tailored to the specific functions of Aegon’s business operations. However, we note the difficulty of maintaining our employee development objectives in the context of an evolving organization. 2020 saw a 6% decrease in Aegon’s workforce, continuing a long-term trend, due to the strategic divestment of certain businesses and the transition of specific operational activities (with skilled

employees) to Aegon’s business partners. In addition, our digital transformation continues to provide opportunities for the automation of certain business processes. It is essential that we balance the requirement for on-going financial value creation with the preservation of critical knowledge and skills that support our future success, as well as the need to maintain an energizing environment where our employees feel valued.

To avoid potential skills gaps, Aegon seeks to attract new employees with a wide range of specialties and backgrounds. At the same time, it is essential we give our existing workforce opportunities to develop professionally and adapt to new digital tools and ways of working. We offer Aegon employees – at all levels – a wide range of training and career development programs, including through our Learning Management System.

Many of our trainings focus on IT and digital skills. One such example is our Analytics Accelerator program, which consists of online learning modules and virtual training sessions, available at foundational, manager, and expert levels. Other specialized trainings cover areas including products and sales, new regulations, risk management, responsible investment, information security, and data privacy. All employees have access to our Global Learning Catalog and are encouraged to use it to help shape their development journey. In 2020, we spent a total of EUR 11 million on training and development, equivalent to approximately EUR 500 per employee.

As the COVID-19 pandemic took hold, the number of employees participating in training programs fell, but has since risen to just under pre-pandemic levels. Likewise, in-person seminars and

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         40
       
       
       

 

lectures had to be cut back, but we were able to replace some courses with online versions, such as the Pulse Leadership program, and introduced new ones such as our Let’s Talk: Inclusion training (see next page). We continue to follow our 70-20-10 formula: 70% of an employee’s development takes place during the course of their everyday work, 20% happens via networking and informal learning, and the remaining 10% is made up of formal training.

In 2020, we introduced Absorb: our first, truly global learning management program for all employees, including those in our smaller units and joint ventures. This replaces the previous local systems, yet still allows Aegon’s different businesses to roll out contextually specific content. Absorb also hosts worldwide learning journeys that all employees can access. We continued to focus on analytics in 2020, and launched various programs tailored to different levels of the organization. We also rolled out several ‘deep dive’ digital and technology courses to enable employees to continue working on their core skills while working from home due to the pandemic.

At Aegon UK, our development program for aspiring managers received 32 applications from men and 33 from women in 2020. The first two cohorts will include 17 men and 19 women. By ensuring we have a good gender balance in our talent pipeline, we will ultimately build a more diverse pool of talent from which to select the leaders of the future, and create equal opportunities for men and women.

Inclusion and diversity

At Aegon, we recognize that our workforce is made up of people from a wide range of backgrounds. We want everyone to feel that they can bring their authentic self to work without fear of judgment or discrimination. By creating a safe and engaged environment where people are valued, respected, and committed to supporting each other, we can improve organizational effectiveness, make better and more inclusive decisions, and build our understanding of our customers.

Our approach to inclusion and diversity is to ensure our actions and policies are woven into all areas of our businesses and at all levels of the Company. At the top of the organization, Aegon CEO Lard Friese confirmed his commitment to the Company’s Statement on Inclusion & Diversity and will work toward a specific inclusion-related target as part of his 2021 objectives. Inclusion-related targets will also be included in the objectives of Aegon N.V. Management Board members and local management teams.

In 2020, Transamerica CEO Mark Mullin signed the national CEO Action for Diversity and Inclusion pledge, committing to actions to build trust and empowerment in the workplace. Transamerica was also recognized by the Diversity Best Practices Inclusion Index for the third year running, as well as being named one of the 100 Best Companies for Working Women for a second consecutive year. Meanwhile, Aegon UK signed up to the Race at Work Charter, part

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Aegon Proud is one of our long-established employee resource groups (ERGs). During October, to celebrate Coming Out Day, the network hosted the 2020 Pride Photo Exhibition in the Netherlands. This exhibition was promoted by the global Aegon Proud community across all country units and was made available for all employees to view. The photos featured scenes from the lives of LGBTQ+ people from around the world, promoting the visibility of different identities and raising awareness of diversity. The exhibition took on a special importance this year with COVID-19 restrictions limiting traditional annual Pride gatherings, and accordingly the photos were also made available online to colleagues around the globe.

of a government initiative to boost racial equality in the workplace. The Charter sets out five specific calls to action and provides a framework for measuring diversity and improving inclusion.

Meanwhile, Aegon’s employees continue to take active ownership of inclusivity matters within the Company. As the Black Lives Matter movement gathered pace during 2020, employees at Transamerica founded Black Professionals for Change, a new employee resource group (ERG). The group is already having an impact, with a series of conversations called ‘Straight Talk on the Black Experience’ underway. The discussions provide a space for employees to share their personal stories and experiences. This new group is one of many company-sponsored ERGs that show our employees’ commitment to fostering positive change and an inclusive work environment.

In 2020, we asked the Central Agency for Statistics in the Netherlands (CBS) to measure the cultural diversity of Aegon the Netherlands using anonymized data on race and gender. The results show that we still have work to do for Aegon to be a true reflection of today’s society: only 13% of employees have a non-Western background, most of whom work in lower-level roles. The research also identified an overrepresentation of men in senior (and thus higher-paid) positions. Aegon the Netherlands is taking steps to address this, including by setting targets for the number of women in application procedures, making equality a more central factor in succession planning at the top of the company, and conducting an analysis of a possible glass ceiling. The CBS results will be used as a baseline measurement for future years but will also help us design a diversity policy that truly responds to the current reality of our organization.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         41
       
       
       

 

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Succeeding and building upon our former Global Ethics Line, Aegon Speak Up is a new program that aims to protect whistle-blowers and to encourage, guide, and support anyone who wants to report suspected or observed misconduct. We understand that the decision to speak up can be emotional, complex, and daunting, so Speak Up has been designed to be clear and accessible for use by anyone who works for, or on behalf of Aegon. Our step-by-step Toolkit prepares colleagues for what to expect and guides them through the process, whether they choose to make a report via the anonymous helpline, online, or in person. The Speak Up Toolkit is available as both a website and an app, and offers emotional support as well as practical information.

In 2020, we launched mandatory training on the Speak Up program for all employees. We provided a customized offering for four different user groups: leadership, management, all staff, and report handlers. By tailoring training to specific roles (for example, leaders’ and managers’ training includes sections on being receptive to people coming forward), we hope to empower employees, demystify the reporting process, and encourage people to look out for and speak up about misconduct.

Aegon also completed the universal roll-out of our Let’s Talk: Inclusion e-learning program on unconscious bias and how to identify and tackle it. This inclusion training is designed for all our employees (with a specific version for managers that addresses inclusive leadership) and comprises four learning modules as well as reference materials. The program also features ‘digital nudges’ that will prompt a change in thinking habits at key moments, for example during talent discussions and recruitment processes, to promote more inclusive decision-making. Take-up has been particularly strong at Aegon Asset Management (AAM), where training has been supported by a series of executive coaching sessions and team-based action-planning sessions.

Other steps we took in 2020 include the launch of a new global marketing pledge in pursuit of more inclusive communications messaging and greater diversity in our marketing. Inclusion and diversity are also integrated in Aegon’s core policies, including our new Statement on Human Rights, demonstrating our commitment to this important topic. This also shows how we are maturing in terms of this ambition.

At the global level, we continue to work toward achieving greater gender balance at Board level and have consistently achieved a good gender balance on our Supervisory Board. We recognize that more needs to be done to reduce gender disparities at the highest levels of our organization.

Promisingly, we exceeded our 2020 target of 30% female representation across our worldwide senior management, achieving 32%. This success in part can be attributed to a deliberate focus on more inclusive decision-making and gender-focused interventions within our units.

We will continue with our efforts to improve gender diversity in senior management positions, targeting 34% across Aegon at the end of 2021. We aim to achieve this by linking inclusion and diversity targets to the remuneration of Executive and Management Board members and developing an organization-wide five-year plan. Appropriate targets will be in place by the end of the first quarter of 2021, together with a clear ambition through 2025.

Aegon the Netherlands set a goal for 2020 to hire 10 new employees from disadvantaged backgrounds. While we did not achieve our ambition, we have identified the challenges we must overcome to make this program a success. We are determined to increase diversity in our recruitment and will make renewed efforts in 2021 and beyond. Furthermore, we have introduced a target of 30% for all new hires in the Netherlands to reflect the multitude of dimensions of people diversity, with a particular focus on gender and culture. Aegon’s progress on increasing ethnic diversity will be tracked through our continued partnership with CBS, which will provide analysis on an annual basis.

Compliance

We have long fostered a culture of ethical compliance.

Aegon’s Code of Conduct sets out rules and guidelines that shape and govern the actions of all our employees. It also commits us to complying with all legal and regulatory requirements and to prevent insider dealing, corruption, and bribery. In 2020, training on the Code of Conduct was completed by 97% of Aegon’s global workforce. We also carry out an annual systematic integrity risk analysis (SIRA) and take actions to address any gaps in performance.

In March 2020, we published our Financial Economic Crime Statement, in which we committed to complying with several Aegon policies on financial economic crime (FEC). These policies protect our businesses from involvement in crimes such as fraud, money laundering, and bribery, and are reviewed at least once every three years. We made it compulsory for all Aegon’s global employees to undertake our anti-money laundering training in 2020. Aegon is also committed to the Wolfsberg Group principles on Financial Crime Compliance.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         42
       
       
       

 

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Partners and suppliers

 

Aegon strives to create mutually valuable relationships with all

partners and suppliers. Brokers and financial advisors can build sustainable practices of their own by drawing on our insights and our products to serve their customers. In return, they bring insurance market intelligence and investment assets to Aegon, meaning we can create and distribute targeted product offerings to our customers.

We seek long-term strategic partnerships with suppliers that we believe have superior capabilities and/or can deliver a higher-quality service to our customers at a lower cost. Aegon has trusted, long-standing relationships in place with Tata Consultancy Services (TCS) for Transamerica and with Atos in the UK. In 2020, Aegon the Netherlands agreed on an administration contract with IBM for a portfolio of 800,000 individual life insurance policies, which will be managed using IBM’s cloud technologies.

Responsible procurement

As part of Aegon’s responsibility to our customers and investors, we are careful to make sure the partners and suppliers we work with are aligned with Aegon’s ethics, values, and standards. Our responsible procurement approach focuses on third party vendors who provide rights and protections to their workers who perform important outsourced functions for Aegon. Additionally, we also consider the role of diversity and minority suppliers within our supply chain.

Accordingly, in 2020, we replaced Aegon’s previous Sustainable Procurement Policy with a new Vendor Code of Conduct, which sets out the minimum standards our partners must commit to. This document reflects the consistent approach to responsible business that we aim to foster throughout our organization.

We have also started using SAP Ariba, a vendor lifecycle management platform for registering third parties and monitoring them through data feeds. Moreover, Aegon is an early adopter of Ariba Risk Management technology, which supports our third-party risk management processes and enables us to invite vendors to contribute to a risk assessment directly from the Ariba system.

In addition, Aegon now works with an external assessment company, EcoVadis, to evaluate the ESG risks involved in our partnerships with suppliers. The EcoVadis assessment categories are aligned with the standards laid out in our Vendor Code of Conduct, including key topics such as a supplier’s environmental policies and their labor, human rights, and ethics record. The EcoVadis results can be integrated into our Ariba platform, creating greater oversight of a vendor’s ESG credentials.

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The outbreak of the COVID-19 pandemic was a test of Aegon’s supply chain, including for Transamerica’s outsourced teams in India. Some information technology (IT) workers lacked the equipment and internet access needed to transition to home-based working, but we worked with vendors to facilitate remote access for 635 workers and also brought in additional US-based staff to assist with the backlog that had resulted from the delay. To ensure continuity of services as the situation evolved, we monitored vendors across four areas: productivity, availability of resources, liquidity, and IT infrastructure. This allowed us to anticipate, manage, and resolve supply chain issues arising from the pandemic.

This partnership allows us to take a more proactive approach to responsible business. Should the external assessment reveal that a partner falls short of our expectations, we can work with them on corrective actions. This new system for risk management allows us more comprehensive oversight of our partners’ ESG policies, actions, and results. We are now better able to choose suppliers we can trust, and thus to be a good corporate citizen, creating sustainable value for the societies we operate in.

In 2020, we decided that we would assess our top 250 vendors by spend (representing 80% of Aegon’s total procurement spend). Within one year, we have valid EcoVadis scorecards for 67 of these accounts, covering 56% of the spend of these top vendor accounts. We will continue to increase the level of coverage over time.

In the future, our procurement process will prioritize the selection and contracting of vendors who share our values beyond the minimum standards and support us in upholding our values across the supply chain. By engaging with our suppliers, we encourage them to make positive changes to their operations and products for the benefit of wider society and the environment. While the consolidation of our suppliers and the management of our supplier base are important drivers of Aegon’s ESG and, in turn, economic performance, we are mindful not to exclude smaller, local suppliers with the potential to benefit our immediate communities.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         43
       
       
       

 

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Investors

 

In 2020, we delivered a total of EUR 370 million to Aegon investors. Of this, EUR 123 million was in dividends to

shareholders and the remaining EUR 248 million was delivered to Aegon bondholders.

Payment of dividends depends ultimately on the Company’s capital position and available free cash flows. Before deciding on dividends, Aegon’s management team also assesses the prospects for financial performance. Against the uncertain economic backdrop of COVID-19 in 2020, we announced that we would retain the 2019 final dividend and that we had rebased our 2020 interim dividend at a lower level. This decision also allowed us to strengthen our balance sheet, as part of wider efforts to make Aegon a materially better, more enduring, and more profitable company in the years to come. Our goal is to deliver sustainable dividends to shareholders and, over time, to increase dividends in line with recurring free cash flows.

Shareholders may also derive (or lose) value from the performance of our shares. In 2020, Aegon’s stock price decreased by 20.5%. The wider European insurance sector performed better, with the Stoxx Europe 600 Insurance index ending the year down by 13.5%. We believe the reasons for the relative underperformance include the lower interest rates in the United States, to which we are more exposed than other European insurers. Our total shareholder return for the year amounted to a loss of 18.4% (this measure considers payment of dividends as well as share price performance).

 

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Society

 

Our purpose, to help people achieve a lifetime of financial

security, also helps reduce future pressures on public pension systems by preparing individuals to take greater responsibility for funding their retirement. Moreover, Aegon’s long-running research into retirement readiness builds awareness of risks and provides insights and recommendations that benefit society. We also support our communities in a wide variety of ways.

Community investment

We support local communities through charitable donations and volunteer work. Our goals are to:

  Serve and strengthen the communities where we do business and create a better quality of life for beneficiaries;
  Engage and involve employees; and
  Promote Aegon’s responsible business vision to all stakeholders.

In 2020, Aegon’s Charitable Donations Standards were fully integrated into our charitable work. The new Standards set out our intent to align the majority of our donations not only with Aegon’s purpose, but also with our approach to responsible business.

The Standards require all country and business units to allocate at least 50% of their annual donations to causes that reflect two key themes: financial security and personal well-being. Financial security includes financial education and literacy for children and adults, in addition to later-life employment solutions. Personal well-being comprises longevity, physical fitness, mental vitality, disease prevention, and support for livable communities.

In a year when the health and finances of people globally faced the threat of COVID-19, Aegon acted to support our most vulnerable communities in direct and tangible ways.

During the spring lockdowns, Aegon’s initial response centered on providing immediate healthcare support and relief. Through donations to hospitals, our various business units funded medical supplies and resources in regions worldwide. In Asia, Aegon THTF, Aegon’s joint venture in China, donated RMB 1 million to the Leishenshan Hospital in Wuhan, at the epicenter of the outbreak. We also distributed 50,000 face masks. In Hungary, EUR 85,000 that had been earmarked for canceled Aegon events was redirected to two hospitals. Meanwhile, in the United States, we gave USD 500,000 to Direct Relief, an organization providing protective gear to frontline healthcare workers. Aegon the Netherlands joined other Dutch insurers in donating to a fund for healthcare workers and their families. The fund provides financial support to healthcare workers and/ or their families in the event of them suffering severe illness or death as a result of being infected with COVID-19.

As the COVID-19 situation unfolded, we began to channel our community investments into projects to alleviate the financial consequences of the pandemic, with special attention paid to people who needed help handling their finances. Additionally, Aegon UK is supporting local charities on the frontline of the crisis, such as food banks and organizations providing aid to the vulnerable elderly.

Overall, through our businesses, Aegon supports approximately 500 charities and good causes. Aegon’s donations in 2020 amounted to EUR 9.5 million, a 16% increase compared to 2019. In the United States, our donations are handled by the Aegon Transamerica Foundation, which donates on average 5% of its assets every year. In the United Kingdom, local donation decisions are made by our employee Charity Committee.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         44
       
       
       

 

Volunteering

We encourage our employees to volunteer, with most of our people able to claim paid time off to work on community projects. In-person volunteering was restricted in 2020 due to COVID-19, and our annual company-wide Volunteer Friday was unavoidably canceled. Despite these constraints, 4,399 employee volunteer hours were recorded in 2020 (equivalent to EUR 0.2 million, based on volunteers’ average salaries).

Where possible, we adapted our charitable work to meet society’s needs during the pandemic. Some of our employees in the Netherlands received Nibud (the Dutch National Institute for Family Finance Information) training on budgeting and financial planning, which they then used to support their wider communities by sharing what they learned with family and friends, as well as through virtual volunteering efforts (see page 25 for further details).

Human rights

At Aegon, we are committed to the principle that all people are entitled to basic rights and freedoms, regardless of their nationality, gender, religion, race, or any other protected status. Basic rights and freedoms include civil rights, political rights, social and economic rights, cultural rights, the rights of minorities, the rights of women, and the rights of vulnerable groups, such as children and indigenous peoples.

As well as ensuring the rights and well-being of our own workers, Aegon’s Responsible Investment Policy seeks to ensure human and labor rights are suitably upheld by the companies we invest in. We also reach out to companies that we believe are at risk of breaching minimum standards for human rights, with a view of encouraging them to uphold human and workers’ rights.

Aegon is committed to the UN Universal Declaration of Human Rights, the principles on human rights and labor standards as set forth by the UN Global Compact, and the core standards of the International Labour Organization (ILO). This commitment is explicitly incorporated in numerous Aegon policies, such as the global Code of Conduct, the Statement on Inclusion & Diversity, the new Statement on Human Rights, and the Aegon Operational Risk Taxonomy. Aegon faces the most potential risks in indirect business relationships, which is why human rights are at the core of our Responsible Investment Policy and Vendor Code of Conduct.

In 2020, we carried out our biennial Human Rights Risk Assessment, through which we aim to identify, prevent, and mitigate adverse human rights impacts that may be linked to our operations, products, and services. As in 2018, the results showed no significant human rights risks in most of Aegon’s operating environments (including the United States, the United Kingdom, and the Netherlands). Turkey, Indonesia, India, and China still present the highest likelihood of human rights violations, followed by Brazil. We intend to review the methodology used in the assessment in future years.

We also developed a new and more comprehensive Statement on Human Rights in 2020, which emphasizes the importance of human rights as part of Aegon’s broader ESG approach to responsible business, investment, and procurement. It is designed to frame our ongoing stewardship of human rights, including both the direct impacts of our daily operations and the indirect impacts of our business activities. Aegon seeks to avoid causing or contributing to adverse human rights impacts in areas we can directly influence, and to address any such risks as they are identified. Each business unit’s management team is responsible for implementing the Statement in their local region, but we also encourage each unit to develop supplemental policies, governance, and activities to meet local requirements and stakeholder expectations. We will review and update Aegon’s global Statement annually as necessary.

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.

We publish 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’s business principles require identification and prudent management of risks. Accordingly, robust governance practices necessary to the management and control of tax affairs and risks are maintained. Tax risks are monitored through our Tax Control Framework. The risk response depends on the type of risk, likelihood and impact analysis, and the chance of repetition and reputational exposure. For instance, for tax reporting and compliance risks automated validations and review controls are in place. Specific controls are in place to ensure that tax dilemmas are dealt with in accordance with our Global Tax Policy. On a quarterly basis, local tax teams provide attestation that operations are compliant with the Global Tax Policy. The Tax Risk Oversight Committee has a final say on dilemmas that have been escalated to it. Where deemed necessary, tax authorities clearance is sought.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Long-term value for our stakeholders         45
       
       
       

 

Taxes borne by Aegon, 2020

(in EUR million)

  

Taxes collected on behalf of others, 2020

(in EUR million)

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1 

Includes state and withholding tax

2 

Includes dividends, interest, royalties and others

3 

Includes social security tax

For a breakdown of corporate income tax by country/region, please see page 409. Some numbers may not add up due to rounding.

 

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 tax data management system in combination with automated tax reporting is in the process of being built. We strive for this technology to make tax reporting and compliance, such as preparation of Dutch corporate income tax and value added tax returns, more automatic.

We value transparency. 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;
  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.

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 2020             


            Letter from our Supervisory Board Chairman         46

 

LOGO

 

Society faced a unique and challenging environment in 2020. Nevertheless, the Supervisory Board is satisfied that we fulfilled our responsibilities to Aegon and its stakeholders during the year.

From the early days of the COVID-19 outbreak, the Supervisory Board has been kept informed about the measures being taken to keep employees safe, and to maintain service to our customers at a time when they need Aegon most. Throughout the year we have also noted the resilience and dedication shown by our employees to ensure that our customers were well supported. We are paying close attention to the pressure that long-term working from home, amid lockdowns and other restrictions, can have on our employees. Aegon is taking steps to make things easier where it can.

Alongside the Supervisory Board’s usual oversight functions, key focus areas in 2020 were Aegon’s ability to navigate through the pandemic, the CEO transition, and the development and implementation of the new strategy.

CEO transition and implementation of the new strategy

Restrictions on public gatherings due to COVID-19 necessitated making use of the Dutch Emergency Act to make Aegon’s AGM in May 2020 accessible by electronic means. The meeting was held successfully with online interaction with our shareholders, who approved the appointment of Lard Friese as the new CEO.

Despite the challenges posed by the Working from Home environment, the Executive Board spent a considerable amount of time during 2020 regularly updating the Supervisory Board on the development of Aegon’s new strategy. The detailed proposals and clear presentations by management have allowed us to evaluate, challenge constructively and advise on each step, of which there have been several significant ones during 2020. An important decision was the divestment of Aegon’s businesses

in Central & Eastern Europe. This transaction helped define the perimeter of the Group, while finding the right new owner for these businesses.

During Capital Markets Day on December 10, 2020, the leadership team presented the road map to improve Aegon’s performance, and detailed the actions that had already been taken. These choices are supported by a detailed operating plan that has been designed to reduce expenses, and reinvest capital towards growth.

We welcome the new strategic focus aimed at improving Aegon’s performance and increasing value for customers, shareholders, and other stakeholders.

We have full confidence in the leadership team, who have instilled an intense organizational rhythm to ensure a high-performance culture and the delivery on the plans and targets outlined at the Capital Markets Day. I am pleased that we will propose to the 2021 AGM that Matt Rider be reappointed as Chief Financial Officer for a four-year term to continue his contribution to Aegon’s transformation.

The Supervisory Board fully supports the increased emphasis on environmental, social and governance (ESG) issues within Aegon, as illustrated by the revised Group-wide Responsible Investment Policy. We will intensify oversight of the Company’s policies and performance on these subjects that are vital to both Aegon and wider society.

Strengthening the Supervisory Board

The Supervisory Board was fortunate to be able to draw upon diverse and deep experience when making important judgements during 2020. The appointments of two new members were approved by shareholders at the 2020 AGM. Caroline Ramsay has extensive management, finance, and audit experience at large insurance companies, while Thomas Wellauer has had a broad global career focused on operations.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Letter from our Supervisory Board Chairman         47
       
       
       

 

 

The Nomination & Governance Committee has prioritized getting diversity with respect to gender, nationality, professional background, and technical expertise. To further strengthen the Supervisory Board, it is proposed to appoint Frans Blom, who has had a lengthy career in the management consulting industry, and Jack McGarry, who has extensive experience in the US insurance industry. Their appointments will be put to the 2021 AGM.

A detailed report on the Supervisory Board and its activities during 2020 can be found on page 58.

Note of thanks

On behalf of the Supervisory Board, I would like to thank all employees for the work undertaken in pursuit of Aegon’s purpose of helping people achieve a lifetime of financial security.

Finally, we wish to thank all those who invest in Aegon for their continued trust and confidence.

The Hague, the Netherlands, March 17, 2021

 

William L. Connelly

 

Supervisory Board Chairman

  LOGO
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Corporate governance         48
       
       
       

 

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 may convene an Extraordinary General Meeting of Shareholders. The main function of the General Meeting of Shareholders is to decide on matters such as the adoption of annual accounts, the approval of dividend payments and (re)appointments to the Supervisory Board and Executive Board of Aegon.

Convocation

General Meetings of Shareholders are convened by public notice at least 42 days before the meeting. The convocation states the time and location of the meeting, the record date, the agenda items, and the procedures for admittance to the meeting and representation at the meeting by means of 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 years at the most. Supervisory Board members are no longer

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Corporate governance         49
       
       
       

 

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 2020, 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 seven members, all of whom qualify as independent in accordance with the Dutch Corporate Governance Code. It will be proposed to the shareholders to appoint Jack McGarry and Frans Blom as members of the Supervisory Board during the Annual General Meeting of Shareholders on June 3, 2021.

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 Lard Friese, who is Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matt Rider, who is Chief Financial Officer (CFO). Lard Friese was appointed as member to the Executive Board during the Annual General Meeting of Shareholders on May 15, 2020, following which Alex Wynaendts resigned as member of the Executive Board and CEO 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 2020, 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 12 members, including the members of the Executive Board. Aegon’s Management Board is composed of Lard Friese, Matt Rider, Mark Bloom, Maarten Edixhoven, Mike Holliday-Williams, Allegra van Hövell-Patrizi, Marco Keim, Onno van Klinken, Carla Mahieu, Mark Mullin, Bas NieuweWeme and Duncan Russell.

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.

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, 2020, a total of 2,098,114,300 common shares and 571,795,040 common shares B had been issued.

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

As per the Dutch act on conversion of bearer shares, all 16,040 bearer shares outstanding at December 2020 have been converted into registered shares held by the Company as per 1st January 2021. Until January 1, 2026 and upon request of a

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Corporate governance         50
       
       
       

 

holder of a certificate of a bearer share, the Company will provide the holder of such a valid certificate of a bearer share, with registered share as a replacement of the bearer share.

Each common share carries one vote. There are no restrictions on the exercise of voting rights by holders of common shares.

All issued and outstanding shares B are held by Vereniging Aegon, the Company’s largest shareholder. The nominal value of the common shares B is equal to the nominal value of 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, 2020, Vereniging Aegon, Aegon’s largest shareholder, held a total of 291,145,638 common shares and 558,910,640 common shares B.

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

During 2020, 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 14, 2020, Aegon N.V. repurchased 2,955,600 common shares B from Vereniging Aegon for the amount of EUR 228,911.22 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 15, 2020, Vereniging Aegon exercised its options rights to purchase in aggregate 2,154,000 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 15, 2020 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 term ‘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, BlackRock, Inc., EuroPacific Growth Capital Fund, Capital Research and Management Company and FMR LLC 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 February 26, 2021, Dodge & Cox International Stock Fund stated to hold 80,049,394 common shares, representing 3.0% of the issued capital as at December 31, 2020.

On February 11, 2021, Dodge & Cox’s filing with the US Securities and Exchange Commission (SEC) shows that Dodge & Cox holds 222,733,093 common shares, representing 8.6% of the issued and outstanding capital as at December 31, 2020, and has voting rights for 217,431,134 shares, representing 8.3% of the votes as at December 31, 2020.

Based on its last filing with the Dutch Autoriteit Financiële Markten as at January 27, 2021, EuroPacific Growth Capital Fund stated to hold 80,347,053 common shares, representing 3.0% of the issued capital as at December 31, 2020.

Based on its last filing with the Dutch Autoriteit Financiële Markten as at January 6, 2021, Capital Research and Management Company stated to hold 80,878,440 common shares, representing 3.0% of the issued capital as at December 31, 2020.

Based on its filing with the Dutch Autoriteit Financiële Markten as at June 10, 2015, FMR LLC, a US based investment management firm, stated to hold 81,510,408 shares, representing 3.0% of the issued capital as at December 31, 2020.

Based on its filing with the Dutch Autoriteit Financiële Markten as at February 9, 2021, BlackRock, Inc. stated to hold 129,522,983 shares, representing 4.8% of the issued capital as at December 31, 2020 and 158,656,993 voting rights, representing 5.9% of the issued capital as at December 31, 2020.

On January 28, 2021, BlackRock, Inc.’s filing with the US Securities and Exchange Commission (SEC) shows that BlackRock holds 164,131,698 common shares, representing 6.3% of the issued and outstanding capital as at December 31, 2020, and has voting rights for 145,558,389 shares, representing 5.6% of the votes as at December 31, 2020.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Corporate governance         51
       
       
       

 

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.

It is the right of Vereniging Aegon to, at its own discretion, take the decision to exercise its full voting rights on common shares B. In case of a Special Cause, Vereniging Aegon also preserves its full voting rights on common shares B if the Executive Board invoked a “250-day period to consider” in circumstances as are expected to be determined in the Dutch Civil Code following adoption of a new act thereto by the Dutch government in 2021 or the “180-day period respond time” as provided for in the Dutch Corporate Governance Code.

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 66 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.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Corporate governance     52
       
       
       

 

 

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.

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 2020 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 2020             


            Composition of the Boards         53
       
       
       

 

Composition of the Boards

Members of the Executive Board

 

Lard Friese (1962, Dutch)

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

Lard Friese earned a Master of Law degree at the University of Utrecht. He has worked most of his professional career in the insurance industry, including ten years at Aegon between 1993 and 2003. He was employed by ING as from 2008, where he held various positions. In July 2014, upon the settlement of the Initial Public Offering of NN Group N.V., he became the CEO of NN Group. During his tenure at NN Group, he led a wide range

of businesses in Europe and Asia and created a stable platform for growth and shareholder value.

He has extensive experience in the areas of insurance, investment management, customer centricity, mergers & acquisitions, and business transformation. Mr. Friese was appointed CEO Designate as of March 1, 2020 and is appointed as member of the Executive Board for a term of four years on the AGM of May 15, 2020. Mr. Friese is Chairman of Aegon’s Executive Board and Management Board

 

 

 

Matthew J. Rider (1963, American)

CFO and member of the Executive and Management Boards of 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

 

Lard Friese: 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.

 

 

 

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.

 

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Composition of the Boards         54
       
       
       

 

Mike Holliday-Williams (1970, British)

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

Mike Holliday-Williams started his career with WHSmith in 1991 as a graduate trainee, working as a Retail Manager in many UK stores and in Business Development. In 1997 he joined Centrica where he had several general management and marketing roles in British Gas, before becoming the Residential & Marketing Director of Centrica Telecoms/One.Tel in 2004.

In 2006 Mr Holliday-Williams joined RSA, becoming the UK Managing Director of Personal Lines in 2008, responsible for

 

    

MORETH>N, Partnerships and the Broker businesses. In 2011 he moved to Copenhagen to become the CEO of RSA Group’s Scandinavian businesses, Codan A/S and Trygg-Hansa, he also became a member of the RSA Group Executive. In 2014, he moved to Direct Line Group (DLG) to became MD of the Personal Lines business, joining the Board of DLG in Feb 2017.

Mr. Holliday-Williams joined Aegon UK in October 2019, to take over as CEO. He’s a member of Aegon’s Management Board since March 2020.

 

 

 

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 former member of the Supervisory Board of Eneco Holding N.V..

 

 

 

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.

 

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Composition of the Boards         55
       
       
       

 

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 is a former member of the Supervisory Board of the Royal BAM Group. Ms. Mahieu is a member of 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 from October 2017-October 2018 and served as a member of the Board’s Executive Committee through October 2019. He was re-appointed in October 2020 and remains a member of their Board of Directors.

 

 

 

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 and is a member of the Executive Board of Aegon Industrial Fund Management Co., Ltd (China).

He is also a member of the Board of the Dutch Fund and Asset Management Association (DUFAS), 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.

 

 

 

Duncan Russell (1978, British)

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

Duncan Russell has worked most of his professional career in the financial services sector, lastly as CFO and Board member at Admiral Financial Services, the financial services subsidiary of Admiral Group, responsible for finance, analytics, funding, credit risk and pricing.

Before joining Admiral Group, Mr. Russell was Head of Group Strategy and Corporate Finance at NN Group N.V.,

    

the Netherlands, where he was responsible for capital management, treasury, M&A, and the group’s strategy.

Before joining NN Group N.V., Mr. Russell held various positions at financial services groups in London.

Mr. Russell was appointed Chief Transformation Officer and member of the Management Board of Aegon N.V. on September 1, 2020.

 

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Composition of the Boards         56
       
       
       

 

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 director at the Board of Directors of Singular Bank S.A. (formerly known as Self Trade Bank S.A., not listed) and an independent director at Amadeus IT Group S.A..

Mark A. Ellman (1957, American)

Member of the Nomination and Governance Committee

Member of the Risk Committee

Mark A. Ellman is a former Vice Chairman Global Origination of Bank of America/Merrill Lynch. Before joining Bank of America/ Merrill Lynch, he held various roles in the US insurance industry. These mostly entailed working in corporate finance at large US financial institutions, where he was engaged in M&A advice and transactions, together with equity and debt raisings for insurance companies. He was 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 Risk Committee and the Supervisory Board Nomination and Governance 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.

Caroline Ramsay (1962, British)

Chair of the Audit Committee

Member of the Risk Committee

Mrs. Ramsay gained a Master’s degree in Natural Sciences in 1984 at Cambridge. She started her professional career at KPMG in Ipswich and London, where she qualified as a Chartered Accountant in 1987. During her long career, Mrs. Ramsay gained substantial experience in Finance and Audit at large insurance companies. In addition to her strong financial background, Mrs. Ramsay acquired extensive managerial expertise in executive roles at Norwich Union plc (now Aviva plc) and RSA.

Mrs. Ramsay holds various Non-Executive Board positions. In 2013, she joined the board of Scottish Equitable – and as of 2017 also the boards of Aegon UK plc and Cofunds Ltd. – where she served as the Audit Committee Chair until 14 May 2020. Mrs. Ramsay was appointed to Aegon’s Supervisory Board in May 2020 and her current term ends in 2024. She is Chair of the Supervisory Board Audit Committee and a member of the Supervisory Board Risk Committee.

Mrs. Ramsay is a senior independent director of the Board of Brit Syndicates Ltd (not-listed), Standard Life UK Smaller Companies Trust Plc and of Tesco Underwriting Ltd. (non-listed). Mrs. Ramsay is a member of the FCA Regulatory Decisions Committee and Member of the Payment Systems Regulator’s Enforcement Decisions Committee.

Thomas Wellauer (1955, Swiss)

Member of the Audit Committee

Member of the Remuneration Committee

Thomas Wellauer started his professional career at McKinsey & Company, where he served as Senior Partner and Practice Leader. He held various executive management positions at multi-industries, including financial services, pharmaceuticals and chemicals. Among others, he served on the executive committees of Winterthur Insurance, Credit Suisse, Swiss Re, and Novartis. His most recent position from 2010 to 2019 was Group Chief Operating Officer of Swiss Re. During his career, Mr. Wellauer also served as independent director on the boards of several global companies such as Munich Re and Syngenta.

Mr. Wellauer was appointed to Aegon’s Supervisory Board in May 2020 and his current term ends in 2024. He is a member of the Supervisory Board Audit Committee and a member of the Supervisory Board Remuneration Committee.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Composition of the Boards         57
       
       
       

 

Mr. Wellauer is Chairman of the Board of Directors of SIX Group (not-listed). In addition, he serves as Chairman of the Board of Trustees of the University Hospital Zurich Foundation and Chairman of the International Chamber of Commerce in Switzerland.

Corien M. Wortmann-Kool (1959, Dutch)

Vice Chair of the Supervisory Board

Member of the Audit Committee

Member of the Nomination and Governance Committee

Corien M. Wortmann-Kool is Chair of the Board of Stichting Pensioenfonds ABP, the Dutch public sector collective pension fund. Ms. Wortmann-Kool is 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 Chair 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 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 and a former member of the Supervisory Board of Het Kadaster until March 2021.

Dona D. Young (1954, American)

Chair of the Risk Committee

Member of the Audit 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 Chair 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 and serves as an independent member of the Advisory Board of Spahn and Rose (not listed) and as a member of the Board of Directors of USAA (not listed). Furthermore, Ms. Young is a member 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 a member of the Board of the National Association of Corporate Directors.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board          58
       
       
       

 

Report of the

Supervisory Board

The Supervisory Board is entrusted with supervising and advising the Executive Board in regard to 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 seven members on December 31, 2020. 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 48-52 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 2020 can be found on pages 56-57 of this Annual Report 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 were three changes to the constellation of the Supervisory Board in 2020: During the 2020 Annual General Meeting, Mr. Thomas Wellauer and Ms. Caroline Ramsay were appointed as new Supervisory Board members for a term of four years as of May 15, 2020 (i.e. until the end of the AGM to be held in 2024). After having been a member of the Supervisory Board for twelve years, Mr Ben van de Veer retired as member of the Supervisory Board during the 2020 Annual General Meeting.

During the Annual General Meeting on June 3, 2021, the Supervisory Board will propose to the shareholder to appoint Mr. Jack McGarry and Mr. Frans Blom as members to the Supervisory Board for a term of four years as of June 3, 2021. 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.

An induction program for Supervisory Board members is in place and the program is being updated regularly in order to meet the needs of the specific Board members.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         59
       
       
       

 

Executive Board

The Executive Board consists of Mr. Lard Friese, Chief Executive Officer (CEO) and Chairman of the Executive Board, and Mr. Matthew J. Rider, Chief Financial Officer (CFO).

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 https://aegon.com/about/governance/executive-board/executive-board-documentation/.

During the Annual General Meeting on May 15, 2020, Mr. Lard Friese was appointed as member to the Executive Board. Mr. Friese succeeded Mr. Wynaendts as Chief Executive Officer of the Company.

Board meetings

Attendance

In 2020, the Supervisory Board had twelve meetings: four related to the quarterly results; one to the annual report; and others related to strategy (including the budget and Medium Term Plan). Due to COVID-19, most meetings were held by video conference. 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 Mr. Ben Noteboom was unable to attend. 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
Committee
  Remuneration
Committee
  Nomination &
Governance
Committee
  Additional SB
mtgs. /calls
  Additional
Nomination &
Governance
Committee calls
 

William Connelly

  7/7   -   -   -   5/5   5/5   5/5     1/1  

Mark Ellman1)

  7/7   2/2   3/3   2/2   -   2/2   5/5     -  

Ben Noteboom

  7/7   -   2/3   2/2   5/5   -   5/5     -  

Caroline Ramsay1)

  4/4   2/2   2/2   1/1   -   -   3/3     -  

Ben van der Veer1)

  3/3   2/2   -   1/1   -   3/3   2/2     1/1  

Thomas Wellauer1)

  4/4   2/2   -   1/1   2/2   -   3/3     -  

Corien Wortmann

  7/7   4/4   -   2/2   -   5/5   5/5     1/1  

Dona Young

  7/7   4/4   3/3   2/2   -   5/5   5/5     1/1  

 

1 

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

2 

Outstanding compensation for 4Q2019 has been paid out in 1Q2020. Outstanding compensation for 4Q2020 will be paid out in 1Q2021.

 

Based on the agenda topics, members of the Executive Board and Management Board attended the Supervisory Board meetings held in 2020. 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 2020 Supervisory Board meeting on Aegon’s 2019 Annual Report. PwC also attended all 2020 Audit Committee meetings including the combined Supervisory Board Audit and Risk Committee meetings. 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 Executive Board or Management Board members present.

Highlights and activities

Key topics discussed during the 2020 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, human resources items and the COVID-19 developments.

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 2021 meeting in the presence of the external auditor PwC. The Budget/Medium Term Plan 2021-2023 was discussed in November 2020 and approved ahead of the Capital Markets Day, December 10, 2020.

The Supervisory Board regularly discussed the long-term value creation strategy and transformation with the Executive Board and the Management Board, and closely monitored its execution, the risks involved in its execution, and any opportunities to further enhance the strategy 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, narrowing the strategic focus to selected core and growth markets was an additional important strategic priority that was 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 acquisitions, the sale of underperforming businesses and the disposals of entities no longer consistent

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         60
       
       
       

 

with Aegon’s strategy. During the year, the Board discussed various M&A and balance sheet transactions, including but not limited to the expansion of the life and non-life insurance partnership in Spain and the sale of the UK-based provider of accident insurance products, Stonebridge and the announced sale of the insurance, pension and asset management business in Hungary, Poland, Romania, and Turkey.

In 2020, Supervisory Board discussions included the following topics:

  COVID-19 developments
  Strategy, including Aegon’s long-term value creation based on the three core markets, three growth markets and one global asset manager, its responsible business strategy and business reviews;
  Acquisitions, divestments and the strategic direction of Aegon’s businesses;
  Executive Board and senior management succession planning;
  Executive remuneration, including the remuneration framework;
  Composition of the Supervisory Board, including the Board’s effectiveness;
  Corporate Governance;
  Human resources, including talent development, results of the global employee survey and cultural change and behavior;
  Annual and quarterly results, dividends and the Company’s Medium Term Plan, including the 2021 budget, capital and funding plan;
  Capital generation and Solvency II capital position, including regulatory capital reports and management actions reflecting COVID-19 impacts and developments in the financial markets during 2020;
  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, IT Security, technological developments, and innovations.

Results and budget

In February 2020, the Supervisory Board convened to discuss the fourth quarter 2019 results. In March 2020, the Supervisory Board reviewed and adopted Aegon’s 2019 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 2020 results respectively.

 

In November 2020, the Supervisory Board and Management Board reviewed the Company’s Medium Term Plan, including the budget and capital plan for 2021. The Boards took note of the uncertainties and challenges in the coming years as described in the Plan. These included, among others: COVID-19 developments, increased regulatory requirements, lower interest rates, market volatility and equity markets, digital developments, and execution 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 2021. The Board also approved the 2021 Funding Plan and authorized the Executive Board to execute on the Funding Plan in 2021.

Legal, compliance and regulatory affairs

In 2020, 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 General Counsel, the Global Head of 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, anti money laundering standards 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 December 2020, 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 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. Furthermore, the Board was updated on the IFRS 9 developments and participated in an IFRS 17 educational session.

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. The 2020 (internal) assessment was based on a survey completed by Supervisory Board members and Management Board members, as well as interviews with all Supervisory Board members. The Board review assessed

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         61
       
       
       

 

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 February 2021, and the Supervisory Board will act 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 Board and Management Board over the preceding calendar year in February 2021. In addition, the Executive Board evaluated its own functioning as a whole and that of the individual Executive Board members as well. The performance of the members of the Executive and Management Boards was also discussed regularly during the year. During these reviews, the Executive Board and the Supervisory Board also identified areas for which Board members - or the Board as a whole - could require training or education.

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, 2020, the composition of the Audit Committee was as follows:

  Caroline Ramsay (Chair);
  Thomas Wellauer;
  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 Chair of the Audit Committee, Caroline Ramsay, qualified as a financial expert according to the Sarbanes-Oxley Act in the United States and her 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 outlined in the Dutch Corporate Governance Code are assigned to the Risk Committee. With regard to the oversight of the operation of the risk management framework and risk control systems, including supervising the enforcement of relevant legislation and regulations, the Audit Committee operates in close coordination with the Risk Committee 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 https://aegon.com/contentassets/d837 d12c114040a2aab5bbde9e340d5e/aegon-supervisory-board-audit-committee-charter-2020.pdf.

Committee meetings

In 2020, the Audit Committee held six meetings, which included two combined meetings with the Risk Committee of the Supervisory Board in May and December 2020. Audit Committee meetings were attended by, amongst others, the members of the Audit Committee, Aegon’s Chief Financial Officer, the Head of Corporate Financial Center, the Chief Risk Officer, the Chief Internal Auditor, and partners of PwC, Aegon’s external auditor.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         62
       
       
       

 

 

Members of Aegon’s Group Risk, Group Legal, Group Compliance, Investor Relations, Group Tax, Human Resources, Actuarial and Business departments regularly attended Audit Committee meetings. Aside from the Audit Committee meetings, additional sessions were held with internal and external auditors, without members of the Executive Board or senior management present.

Financial Reporting

In discharging their responsibilities with regards to the 2020 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;

 

  Reviewed and discussed areas of significant judgments in the preparation of the financial statements, including, in particular: Solvency II, investment valuation and impairments, accounting changes, economic and actuarial assumption setting, and model validations; and

 

  Reviewed and approved the internal and external audit plans for 2020 and monitored execution, including progress in respect of recommendations made.

The Audit Committee was satisfied with the explanations provided by the Executive and Management Board, Internal Audit and PwC, and conclusions reached. Recurring items on the Audit Committee agenda in 2020 were Solvency II developments, controls, capital and liquidity, legal and compliance updates, and preparations for IFRS 9 and IFRS 17. Other items included tax updates, capital and funding plans and the performance review of the internal audit function and external auditor.

Risk management and internal controls

With respect to their oversight of internal controls (other than those where oversight is carried out via the Risk Committee), the Audit Committee:

 

  Discussed quarterly updates on the activities of the internal audit function, together with details of progress on internal audits with the internal auditor. Areas of focus in 2020 included the Internal Audit strategy, audit planning process, Internal Audit charter, Internal Audit functional governance, 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 2020. In addition, the Supervisory Board followed the recommendation of the Audit Committee to propose to the shareholder, during the Annual General Meeting on June 3, 2021, to re-appoint the external Auditor for the period 2021-2023. Aegon has well-established policies on audit effectiveness and independence of auditors that set out, among other things:

 

  The review and evaluation of the external auditor and the lead partner of the external audit team on at least an annual basis;

 

  Non-audit services performed by the external auditor;

 

  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 https://aegon.com/contentassets/d837d12c114040a2aab5bbde9e340d5e/aegon-supervisory-board-audit-committee-charter-2020.pdf.

The Risk Committee

Composition

On December 31, 2020, the composition of the Risk Committee was as follows:

 

  Dona D. Young (Chair);

 

  Mark A. Ellman;

 

  Ben J. Noteboom; and

 

  Caroline Ramsay.

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, operations, and compliance with risk policies. The Company’s risk management is an important topic for the Supervisory Board, and the challenge and oversight role of the Risk Committee was particularly important this year in light of the exceptional disruptive circumstances due to Brexit and the COVID-19 pandemic.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         63
       
       
       

 

 

For more information about the functioning of the Risk Committee, please see the Risk Committee Charter on https://aegon.com/contentassets/ f8c52ba9146b4f3789f992efb84a6750/aegon-supervisory-board-risk-committee-charter-2020.pdf.

Committee meetings

The Risk Committee works closely together with the Audit Committee and held two combined meetings, one in May and one in December 2020. The combined meetings focused on the systems of governance, third party & affiliate management, the Model Validation Plan, and IT Security.

The Risk Committee convened five times in 2020, including the combined meetings with the Audit Committee.

The Company’s Chief Executive Officer and Chief Risk Officer attended all the Committee meetings. The Chief Financial Officer had a standing invitation to attend the Committee meetings. The Chair of the Risk Committee granted the Global Chief Audit Executive a standing invitation to all the Risk Committee meetings. Other Management Board members and senior managers attended the meetings when relevant for the discussion.

Risk management and Internal controls

Recurring items on the Risk Committee agenda in 2020 were risk exposure information, risk policy compliance monitoring, risks associated with IT and information security, as well as risks associated with the pandemic and strategic change programs in the company. The Risk Committee assessed the effectiveness of the design and operation of the ERM framework and internal control systems in 2020 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 risk. Specific attention was paid to the Compliance and Control roadmap of Aegon the Netherlands;

 

  Assessing a quarterly 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. A deep-dive was scheduled on the US programs;

 

  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, including the DNB Focus! report and actions in the context of Recovery and Resolution regulation. The Risk Committee furthermore spent time on the market risk impact on the annual budget plan, reinsurance developments, updates on the IT security roadmap, the IT Risk Management

Framework, the assessment of the performance improvement program, 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 the financial markets in 2020 due to the COVID-19 pandemic, and to a number of important asset and liability management and hedging topics across the Group. The Risk Committee noted that the risk framework and the organization adapted well to evolving COVID-19 developments.

The Nomination and Governance Committee

Composition

On December 31, 2020, the composition of the Nomination and Governance Committee was as follows:

 

  William L. Connelly (Chair);

 

  Mark Ellman;

 

  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 the appointment of 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 six meetings in 2020. 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 Committee thereby paused on the internal board structures in Aegon’s material business units.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         64
       
       
       

 

The Nomination and Governance Committee also reviewed the important outside board positions of the members of the Management and Supervisory Boards and discussed specific appointments to important outside board positions where applicable.

Supervisory Board related activities

The Nomination and Governance Committee discussed the composition of the Supervisory Board and its Committees. The profiles of Supervisory Board members, as well as their capabilities also in terms of working collectively with other members of the Supervisory Board, were debated by the Committee. The existing and impending vacancies in the Supervisory Board were discussed (whereby it was considered important to enhance financial and Solvency II expertise) and resulted in (i) the appointment of Ms. Caroline Ramsay and Mr. Thomas Wellauer at the Annual Shareholder meeting of May 15, 2020 and (ii) the nomination of Mr. Jack McGarry and Mr. Frans Blom for appointment at the Annual Shareholder meeting on June 3, 2021.

A Supervisory Board Competency overview is published on aegon.com.

Executive and Management Board related activities

During 2020, the Nomination and Governance Committee discussed the CFO (re)appointment, reviewed the composition of the Management Board and was informed - and consulted on - the succession of Management Board vacancies, and on certain appointments of key management..

The Committee was also kept apprised 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 2020. The Supervisory Board discussed the outcome of this survey in detail in the first quarter of 2021.

Diversity

Enhancing diversity in the Executive, Management and Supervisory Boards 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 Boards. 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 and male representation in the Supervisory Board, the Executive Board and the Management Board.

In the current Supervisory Board composition, there are three female members out of seven members in total (meeting the recent target 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, 2020, the composition of the Remuneration Committee was as follows:

 

  Ben J. Noteboom (Chair);

 

  William L. Connelly; and

 

  Thomas Wellauer.

Role and responsibilities

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

 

  Reviewing the Aegon Group Global Remuneration Framework and making recommendations on the remuneration policies;

 

  Overseeing the remuneration of the Executive Board and Heads of Group Control functions;

 

  Preparing recommendations regarding variable compensation both at the beginning and at the end of the performance year; and

 

  Preparing the information provided to shareholders on remuneration policies and practices, including the Remuneration Report.
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Report of the Supervisory Board         65
       
       
       

 

Committee meetings

The Remuneration Committee had five meetings in 2020. 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 2020, the Remuneration Committee concluded on 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. These amended policies were adopted by the shareholders on the Annual General Meeting on May 15, 2020.

The Remuneration Committee also oversaw the further application, implementation and approval of Aegon’s Group Global Remuneration Framework and the various policies and procedures related to it, including the Remuneration Policy for Material Risk Takers (Identified Staff). The above included:

 

  Setting the outcome of the 2019 Group Performance Indicators and of the 2019 Individual Performance Indicators for Executive Board members, and allocating variable compensation related to 2019 where required;

 

  Setting the 2020 Individual Performance Indicators for Executive Board members;

 

  Setting the 2020 Group Performance Indicators and targets for remuneration purposes;

 

  Preparing for the 2021 performance indicators;

 

  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);
  Addressing the impact of COVID-19 on targets and variable compensation; and

 

  Reviewing the related Remuneration Report.

In addition, the Remuneration Committee discussed developments with respect to possible new regulations pertaining to remuneration.

Annual Accounts

This Annual Report includes the Annual Accounts for 2020, 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 2021 Annual General Meeting of Shareholders for adoption. The Supervisory Board recommends that shareholders adopt the annual accounts.

Acknowledgement

The members of the Supervisory Board would like to reiterate their appreciation for the dedication shown by the Executive Board, management, and all employees to Aegon and its customers during this unprecedented and challenging year.

The Hague, the Netherlands, March 17, 2021

William L. Connelly

Chairman of the Supervisory Board of Aegon N.V.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         66
       
       
       

 

Remuneration Report

The 2020 Remuneration Report from our Remuneration Committee, on behalf of the Supervisory Board

 

Introduction

This report has been prepared by the Remuneration Committee of the Supervisory Board, which was led by the Committee’s Chairman Mr. Ben J. Noteboom, and was approved by the Supervisory Board. In the first chapter, the Remuneration Committee presents an overview of the business and remuneration highlights in 2020 and a look ahead to 2021. 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 2020 Supervisory Board Remuneration Report, which contains a summary of the Supervisory Board Remuneration Policy that applied to 2020 and the Supervisory Board remuneration over the recent years. In chapter four, the 2020 Executive Board Remuneration Report provides a summary of the Executive Board Remuneration Policy that was applicable in 2020, the Executive Board remuneration over the recent years and the 2021 Executive Board performance indicators.

1. Business and remuneration highlights

This chapter presents an overview of the business and remuneration highlights in 2020 and a look ahead to 2021.

2020 Business highlights

In 2020, Aegon introduced its new strategy and put in place a set of measures and new financial targets aimed at increasing value for all our stakeholders. This approach seeks to change Aegon’s performance trajectory over the coming years, improving

our business by reducing costs, and expanding margins and growing profitability. The first concrete steps to deliver on our plans were taken, such as the announcements to divest Stonebridge and our operations in Central & Eastern Europe, and restructuring our businesses in India, Hong Kong, and Singapore. Aegon also took measures to strengthen the balance sheet resulting in the capital ratios of its three main business units ending the year above their respective operating levels. (For a more detailed update, please see the ‘Letter from our CEO’ and the ‘Letter of Supervisory Board Chairman’ in this 2020 Annual Report on Form 20-F.)

In terms of business performance, 2020 was a challenging year. Aegon’s Return on Equity decreased in 2020 due to lower results in the Americas. This was largely due to the direct and indirect effects of the COVID-19 pandemic, namely adverse mortality and lower interest rates. These drivers also caused the Normalized Capital Generation for 2020 to decrease compared to 2019. Fees and Premium based Revenues in 2020 were broadly stable compared to 2019, as the positive impact from higher equity markets on fees was partly offset by outflows in lines of business such as Variable Annuities and Retirement Plans in the Americas. Market Consistent Value of New Business in 2020 decreased primarily due to the impact of lower interest rates on Variable Annuities in the Americas. Lower sales driven by the pandemic were also a contributing factor. The Relational Net Promoter Score increased by one point to 18 due to our NPS improvement plans and administration partnerships with third parties which increased service levels.

 

 

Business performance highlights                         2020                         2019  

Return on Equity (in %)

     8.5%       9.5%  

Fees and Premium based Revenues (in EUR million)

     4,811         4,787    

Normalized Capital Generation (in EUR million)

     1,340       1,569  

Market Consistent Value of New Business (in EUR million)

     262       465  

Relational Net Promoter Score

     18       17  

 

In 2020 Aegon’s Supervisory Board consisted of the following members: Mr. William L. Connelly (Chairman), Ms. Corien M. Wortmann-Kool (Vice Chairman), Ms. Dona D. Young, Mr. Mark A. Ellman, Mr. Ben J. Noteboom, Mr. Ben van der Veer (until May 15, 2020), Mr. Thomas Wellauer (per May 15, 2020) and Ms. Caroline Ramsay (per May 15, 2020). At the Annual General Meeting of Shareholders on May 15, 2020 shareholders approved the appointment of Mr. Wellauer and Ms. Ramsay, while at the closure of the meeting the term of Mr. Van der Veer ended. During the Annual General Meeting of Shareholders on June 3, 2021, the Supervisory Board will propose to appoint Mr. Jack

 

McGarry and Mr. Frans Blom as members to the Supervisory Board for a term of four years as of June 3, 2021.

Aegon’s Executive Board consisted of the Chief Executive Officer, who served as Chairman, and the Chief Financial Officer in 2020: Mr. Alexander R. Wynaendts was the Chief Executive Officer from the beginning of 2020 until he was succeeded by Mr. Lard Friese after he was appointed to the Executive Board at the Annual General Meeting of Shareholders on May 15, 2020. Mr. Matthew J. Rider was the Chief Financial Officer and a member of the Executive Board during the full 2020 calendar year.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         67
       
       
       

 

He was appointed as 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. During the Annual General Meeting of Shareholders on June 3, 2021, the Supervisory Board will propose to reappoint Mr. Rider as member to the Executive Board for a term of four years as of June 3, 2021.

Aegon’s Executive Board is assisted in its work by the Aegon’s Management Board, which has 12 members, including the members of the Executive Board. In 2020, Aegon’s Management Board was composed of Mr. Alex R. Wynaendts (until May 15, 2020), Mr. Lard Friese (per May 15, 2020), Mr. Matthew J. Rider, Mr. Mark Bloom, Mr. Mark Mullin, Mr. Marco Keim, Mr. Maarten Edixhoven, Mr. Adrian Grace (until March 31, 2020), Mr. Mike Holliday-Williams (per April 1, 2020), Mr. Bas NieuweWeme, Ms. Allegra van Hövell-Patrizi, Mr. Onno van Klinken, Ms. Carla Mahieu and Mr. Duncan Russell (per September 1, 2020).

2020 Remuneration highlights

Aegon’s shareholders adopted the Supervisory Board Remuneration Policy and the Executive Board Remuneration Policy at the Annual General Meeting of Shareholders on May 15, 2020 with 98.98% and 83.57% of the votes cast respectively. Both policies were amended to comply with the then new Dutch Act which implemented the European Shareholder Rights Directive, to increase the transparency, and to better substantiate the rationale for the design of the policies. Based on this new Act, both policies also required a qualified majority of 75% of the votes cast. After adoption, both policies came into force retroactively as of January 1, 2020.

The amendment to the Supervisory Board Remuneration Policy did not include any changes to the remuneration structure or fee levels for members of the Supervisory Board. It did add the option for the Supervisory Board to annually index the fees for economic developments in the Netherlands.

Compared to the previous Executive Board Remuneration Policy, the new policy increased the alignment of the Executive Board remuneration with the long-term interest of Aegon. The policy also took into account feedback received on Aegon’s previous Remuneration Policy and embedded new remuneration rules, such as:

  Increasing the portion of variable compensation which is paid in Aegon shares from 50% to 66.66%.
  Simplifying the pay-out of variable compensation to consist of one upfront cash portion of 33.33% and one share portion of 66.66% which is deferred for 3 years (i.e. cliff-vesting, instead of previous practice of vesting in tranches). After vesting, the shares will be subject to an additional 2-year holding period. This increases the average period during which the allocated shares are restricted from 4.2 years to 5 years.
  Basing variable compensation on a mix of performance indicators which are measured either on a 1-year or a 3-year performance horizon, instead of a 1-year performance horizon only.
  Including performance indicators, such as Relative Total Shareholder Return and ESG (Environmental, Social, and Governance), both of which are relevant for Aegon, its shareholders, and other stakeholders.

At the same Annual General Meeting, shareholders were asked to cast an advisory vote on the Remuneration Report for the first time. The 2019 Remuneration Report was approved with 83.79% of the votes cast. After the vote, Aegon collected feedback from several large shareholders to further improve the quality of the Remuneration Report. Based on this feedback, the Supervisory Board made a few changes to this remuneration highlight section, and disclosed more information on the calculation of variable compensation for the Executive Board in chapter four.

Aegon assessed its performance against the 2020 targets that were set prior to the COVID-19 crisis, and no changes to the rules for calculating variable compensation were made as a consequence of it. Aegon believes its mechanism for calculating variable compensation works properly, both in good and in challenging times, so no additional measures were needed. Due to the economic impact of COVID-19, most of the variable compensation that was allocated for 2020 has been lower compared to previous years, including that for the Executive Board members. Aegon also initiated a financial soundness risk assessment in relation to variable compensation which was awarded in previous years (for performance in 2016-2019),and was scheduled to be paid-out in 2020. After reviewing the assessment, the Supervisory Board concluded that payment of these awards would not materially impact the financial soundness of Aegon, and therefore approved the payment thereof.

In 2020 Aegon paid out EUR 167 million in variable compensation and 23 employees received EUR 1 million or more in total annual compensation (i.e. the sum of fixed compensation, variable compensation and pension contributions paid in 2020). These employees worked for Aegon’s Corporate Center, Aegon Americas, Aegon UK and Aegon Asset Management.

The Executive Board members did not receive a salary increase during 2020. For the period during which the individual served as Executive Board member in 2020, Mr. Friese received EUR 931,071 in fixed compensation (ca. 7.5 months), Mr. Wynaendts received EUR 495,931 (ca. 4.5 months) and Mr. Rider received EUR 940,950 (full year). For that same period, Mr. Friese was allocated EUR 2.0 million in total compensation, Mr. Wynaendts EUR 1.2 million (2019: EUR 3.9 million for the full year) and Mr. Rider EUR 2.0 million (2019: 2.1 million). In addition, Mr. Friese received a sign-on arrangement of EUR 1.23 million when he joined Aegon in March 2020, of which 50% is in cash and 50% in shares. Of this amount 55% has been paid in 2020.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         68
       
       
       

 

The remainder will be paid in later years subject to continued employment (20% in 2021, 14% in 2022, 9% in 2023 and 3% in 2024). The sign-on arrangement was offered for a combination of reasons, including the market value of Mr. Friese, making the transfer from a direct competitor to Aegon more attractive and compensation for loss of income during the transfer period.

The 2020 CEO pay ratio was 32.2 (2019: 32.8, 2018: 42.2). This ratio was based on the annualized IFRS-EU remuneration expenses for Mr. Friese and employee expenses in 2020, which have been audited. The annualized annual expenses for Mr. Friese’s total compensation were EUR 3.5 million, including EUR 0.9 million for the sign-on arrangement (2019: EUR 3.8 million, 2018: EUR 4.4 million, both for Mr. Wynaendts). The average expenses for the employees’ total compensation were EUR 109,855 (2019: EUR 115,371, 2018: EUR 104,459), which were calculated by:

  The total IFRS remuneration expenses for all employees, which are the total employee expenses (see Note 14) minus the CEO remuneration expenses: EUR 1,995 million – EUR 3.5 million = EUR 1,991 million.
  Divided by the number of employees in scope, which are the total number of employees minus employees in joint ventures and associates (as their expenses are not included in Note 14) and minus the CEO: 22,322 – 4,193 – 1 = 18,128 employees.

The Remuneration Committee took note that certain factors have influenced the CEO pay ratio, such as the compensation and sign-on package of the new CEO, lower pay-out of variable compensation to employees in 2020, the change to a defined contribution pension plan in the Netherlands per 2020 (was defined benefit) and significant differences in the geographical footprint of the Aegon’s employee population, leading to a slight decrease compared to last year.

Looking ahead to 2021

At the Annual General Meeting of Shareholders on June 3, 2021, Aegon will ask its shareholders to approve the reappointment of Mr. Rider to the Executive Board and cast an advisory vote on this Remuneration Report.

Mr. Rider’s fixed compensation will be increased by 5% per June 2021 (from EUR 940,950 to EUR 987,998), if shareholders approve his reappointment. His last increase was two years ago (2.5% per June 2019). The increase will keep Mr. Rider aligned with internal and external compensation levels, economic developments (e.g. inflation) and changes to the compensation levels of other senior managers within Europe and in the Netherlands. There are no other changes foreseen to the compensation packages of Mr. Friese and Mr. Rider in 2021.

Aegon will monitor the development of rules, regulations and guidance that could affect our remuneration policies. This includes the intended changes to the Dutch Financial Supervision Act, and the finalization of the European Committee’s guidelines on the standardized presentation of the remuneration report.

2. Remuneration at Aegon in general

This chapter contains 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.

Global Remuneration Framework

Aegon’s Global Remuneration Framework (GRF) outlines the Aegon Group Human Resources Strategy, the Aegon Group Remuneration Principles and the Aegon Group Remuneration Guidelines, which apply to all Aegon employees, including the Executive Board members. The GRF has been designed in accordance with relevant rules, guidelines, and interpretations, such as the Dutch Financial Supervision Act, the Dutch Civil Code, the Dutch Corporate Governance Code and the Solvency II Legal Framework.

Aegon’s remuneration policies are derived from the GRF, which includes the Executive Board Remuneration Policy and local business Remuneration Policies. These policies define specific terms and conditions for the employment of our employees across the various countries and local businesses. All steps in the remuneration process are governed by the GRF and its underlying policies. Staff from Human Resources, Risk Management and Compliance are involved in all steps of the process.

Human Resources Strategy

In order to support the Aegon Strategy and local business objectives, the Aegon Group Human Resources Strategy contains the following remuneration-related goals:

  Attract, retain, motivate, and reward a highly qualified and diverse workforce;
  Align the interests of executives, managers and all other employees with the business strategy and risk tolerance, the values and the long-term interests of Aegon;
  Provide a well-balanced and performance-related compensation package to all employees, taking into account shareholder and other stakeholder interests, relevant regulations, the corporate responsibilities and Future Fit values (‘Acting as one, Customer centricity, Agility and Accountability’).

Remuneration Principles

Based on the Human Resources Strategy, Aegon has formulated the following Remuneration Principles, which are the foundation for all remuneration policies and practices within the Group:

  Aegon remuneration is employee-oriented by fostering a sense of value and appreciation in each individual employee; promoting the short- and long-term interests and well-being of all Aegon staff via fair compensation, pension and/or other benefits; supporting employees’ career development; and supporting the (international) mobility of its staff;
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         69
       
       
       

 

  Aegon remuneration is performance-related by establishing a clear link between pay and performance by aligning objectives and target setting with performance evaluation and remuneration; reflecting individual as well as collective performance in line with Aegon’s long-term interests; enhancing the transparency and simplicity of Aegon Group remuneration, consistent with the principle of pay for performance; and avoiding any pay for non-performance;
  Aegon remuneration is fairness-driven by: promoting fairness and consistency in Aegon’s remuneration policies and practices, with remuneration packages that are well-balanced across the different echelons within Aegon and its business units; avoiding any discrimination in Aegon’s remuneration structures, including, among others, discrimination based on nationality, race, gender, religion, sexual orientation, and/ or cultural beliefs; creating global alignment in the total compensation of all Material Risk Takers; and aiming at controlled market competitive remuneration, by providing total compensation packages in line with an appropriately established peer group at a country and/or functional level;
  Aegon remuneration is risk-prudent by: aligning business objectives with risk management requirements in the target setting practices throughout the Aegon Group; giving an incentive to appropriate risk-taking behavior while discouraging the taking of excessive risks; and protecting the risk alignment effects embedded in the remuneration arrangements of individual staff against any personal strategies or insurance to counter them.

Total compensation

Following from the Remuneration Principles, Aegon aims to offer experienced and competent employees a total compensation level which is consistent with the market in which Aegon operates and competes for similar employees. Total compensation typically consists of fixed compensation, variable compensation (where in line with the local market practice), pension and other benefits. Market survey information from reputable sources is used to regularly assess the competitiveness of compensation levels and practices which Aegon offers its employees.

Variable compensation

Variable compensation, if any, is capped at an appropriate level as a percentage of fixed compensation.

The Dutch Financial Supervision Act has a provision that makes it possible to offer employees up to a maximum variable compensation opportunity that is equal to the European Capital Requirements Directive compensation ratio (i.e. 100% of fixed compensation). This provision was specifically created for corporate office employees of companies based in the Netherlands, which employ at least 75% of their employees abroad. In 2020, Aegon met this criterion and offered selected senior corporate office employees a variable compensation opportunity up to this maximum.

In line with the Dutch Financial Supervision Act, Aegon has obtained shareholder approval at the Annual General Meeting of Shareholders of May 20, 2016 to offer a maximum variable compensation opportunity up to 200% of fixed compensation to selected senior employees outside Europe in positions that, based on local market practice, could receive variable compensation that exceeds 100% of fixed compensation. Within this mandate, Aegon offered selected senior employees outside Europe such an opportunity in 2020. Aegon’s capital was not adversely impacted by the maximum variable compensation that could be paid out.

Variable compensation for senior management is usually paid out in cash and shares over multiple years, and is subject to further conditions being fulfilled. Variable compensation already paid out may also be retrieved under certain circumstances (‘claw-back’).

Risk Management in relation to Remuneration

Variable compensation may have an impact on risk-taking behaviors and, as such, may undermine effective risk management. The opportunity to receive high variable compensation can lead to excessive risk taking, which can have a material impact on Aegon’s financial soundness. To avoid such undesired effects, both the Risk Management and Compliance functions are involved in the design and execution of remuneration policies and practices.

The GRF includes additional remuneration requirements for three specific employee categories, as their roles and responsibilities require tailored risk mitigating measures and governance processes. These remuneration requirements are for: (i) the Executive Board; (ii) Material Risk Takers; and (iii) Control Staff. Given the rationale for having a separate policy for Material Risk Takers and the risk mitigating measures that are applied to the remuneration of these individuals, Risk Management is involved in deciding which positions are deemed Material Risk Takers. Furthermore, where exceptions to the policies are requested to reflect local practices or regulations, Risk Management and Compliance are involved to ensure such exceptions do not undermine effective risk management and that sufficient mitigating measures are undertaken.

In addition, the Risk Management and Compliance functions, together with the Human Resources and Finance functions, are responsible for the execution of the various measures that ensure the GRF and associated practices are aligned with the defined risk tolerances and behaviors. The risk mitigating measures are aimed at various moments in the variable compensation process: when the targets are set, before a variable compensation award is allocated, before deferred parts of the award are paid and after pay-out of the award (when relevant).

Aegon endeavors to seek an appropriate balance of ex-ante and ex-post risk assessments to ensure effectiveness in both the short- and long-term risk-taking behavior of employees.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         70
       
       
       

 

Remuneration of Material Risk Takers

Aegon selects Material Risk Takers for the Aegon N.V. legal entity (i.e. the holding company) based on the Solvency II selection criteria. These positions are defined as ‘the administrative, management or supervisory body, persons who effectively run the undertaking or have other key functions and other categories of staff whose professional activities have a material impact on the undertaking’s risk profile’.

Legal entities within the Aegon Group, which are directly subject to the Capital Requirements Directive, Solvency Directive, the Alternative Investment Fund Managers Directive and/ or the Undertakings for the Collective Investment in Transferable Securities Directive, also select their own Material Risk Takers or ‘Identified Staff’. Their selection is based on the selection criteria of the applicable European Directive, its guidelines, and local regulatory requirements (where available).

In order to differentiate between the Material Risk Takers who are selected at the holding level of the company and at the various legal entities within the Group, the former are called Group Material Risk Takers and the latter Local Material Risk Takers.

The Group and Local Material Risk Takers are subsequently subject to risk assessments and remuneration rules outlined in the applicable European Directive, its guidelines and local regulatory requirements (where available). This means that their personal objectives are subject to an ex-ante risk assessment at the start of the performance year. A minimum portion of their variable compensation will be deferred and paid in non-cash instruments (such as Aegon shares or investment in own funds). Before the allocation of variable compensation they are subject to an ex-ante risk assessment, while before pay-out of any deferred variable compensation they are subject to ex-post risk assessments. Based on these risk assessments, Aegon can adjust the intended or allocated variable compensation awards downward where deemed appropriate (however never upward).

3. 2020 Supervisory Board Remuneration Report

The 2020 Supervisory Board Remuneration Report has been prepared by the Remuneration Committee of the Supervisory Board in accordance with the Dutch Civil Code (article art 2:135b) and the Dutch Corporate Governance Code. The Remuneration Committee was led by the Committee’s Chairman Ben J. Noteboom. This report was approved by the Supervisory Board.

This report contains a contains a summary of the Supervisory Board Remuneration Policy which applied to 2020 and the Supervisory Board remuneration over the recent years.

Aegon’s Supervisory Board remuneration is subject to various rules and regulations, including the Dutch Financial Supervision Act, the Dutch Civil Code, the Dutch Corporate Governance Code and the Solvency II Legal Framework.

Supervisory Board Remuneration Policy in 2020

Aegon’s Supervisory Board Remuneration Policy is aimed at ensuring fair compensation and protecting the independence of the Supervisory Board members. The Supervisory Board Remuneration Policy that has been applied in 2020 was adopted at the Annual General Meeting of Shareholders on May 15, 2020. This policy will be subject to annual reviews by the Supervisory Board. The policy remains in place until a new or revised policy has been adopted by the shareholders in accordance with the applicable requirements from the Dutch Civil Code. The Supervisory Board will submit a proposal to the shareholders to adopt a policy at an Annual Meeting of Shareholders at least every four years.

The policy contributes to Aegon’s strategy, long-term interests, and sustainability through the remuneration of the Supervisory Board members in various ways:

  The policy provides the Supervisory Board with the means to attract, motivate, and retain competent, diverse, and experienced Supervisory Board members for the long-term. This is essential for executing Aegon’s strategy and safeguarding and promoting its long-term interests and sustainability.
  Supervisory Board members receive fixed remuneration for their responsibilities which does not depend on the Aegon results in order to protect their independence when supervising the manner in which the Executive Board members implement the long-term value creation strategy. These responsibilities are part of the membership of the Supervisory Board and its Committees and optionally the position of (Vice) Chairman of the Supervisory Board and/or its Committees. The certainty of the fixed compensation also allows Supervisory Board members in their supervisory role to focus on the long-term interest and sustainability of Aegon.
  The Supervisory Board members receive fixed remuneration for their activities, such as attending Committee meetings and additional Supervisory Board meetings, in order to regularly discuss the Aegon strategy, the implementation of the strategy and the principal risks associated with it, while taking into account the broader long-term interests and sustainability of Aegon.
  Supervisory Board members are only allowed to privately own Aegon N.V. Shares if this is a long-term investment, aligning their interests with Aegon’s long-term interests.
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report         71
       
       
       

 

The Supervisory Board took Aegon’s identity, purpose, and values into account when developing the policy and its changes:

  Aegon is an international financial services group based in the Netherlands, that provides life insurance, pensions, and asset management. The main operations are in the US, the Netherlands, and the UK, while there is also significant presence in Southern and Eastern Europe, Asia, and Latin America. The policy provides the Supervisory Board with the means to attract, motivate, and retain Supervisory Board members from various countries, predominantly based in the Netherlands and the US. As Aegon is based in the Netherlands, the policy considers the European Insurance peers as well as Dutch General Industry peers to be the relevant external reference for the Supervisory Board member’s Remuneration. The policy is also influenced by the European and Dutch rules and regulations on (Executive) remuneration, which apply to Aegon as a result of its identity (i.e. being an Insurance firm in Europe and being a listed and financial company in the Netherlands).
  Aegon’s purpose is to help people achieve a lifetime of financial security. In order to fulfill this purpose, Aegon has a strategy to which this policy actively contributes (see above).
  The four Future Fit values ‘Acting as one, Customer centricity, Agility, and Accountability’ aim to create a company that is fit for the future: one that meets customers’ expectations, is right for our digitally-connected, data-driven world, and can adapt quickly to changing market conditions. These values are not explicitly reflected in the policy as a result of the fee-based remuneration structure. However, these values are strongly incorporated in the Supervisory Board Charter.

The Supervisory Board has not taken the internal compensation structures and levels into account as the fee-based compensation structure for Supervisory Board members differs significantly from these internal compensation structures and levels.

The Supervisory Board members are entitled to the following fees (see also the table below):

  A base fee for membership of the Supervisory Board. No separate attendance fees are paid to members for attendance at the regular Supervisory Board meetings;
  An attendance fee for each extra Board meeting attended, be it in person or by video and/or telephone conference;
  A committee fee for members on each of the Supervisory Board’s Committees;
  An attendance fee for each Committee meeting attended, be it in person or through video and/or telephone conference; and
  An additional fee for attending meetings that require intercontinental, continental or US interstate travel between the Supervisory Board member’s home location and the meeting location.
 

 

Base fee for Supervisory Board membership    EUR / year  

Chairman

   80,000  

Vice-Chairman

   50,000  

Member

   40,000  
  
Fee for Supervisory Board committee membership    EUR / year  

Chairman of the Audit or Risk Committee

   13,000  

Member of the Audit or Risk Committee

   8,000  

Chairman of other committees

   10,000  

Member of other committees

   5,000  
  
Attendance fees    EUR  

Committee meeting

   3,000  

Extra Supervisory Board meeting

   3,000  
  
Travel fees    EUR  

Intercontinental

   4,000  

Continental or US interstate

   2,000  

 

Each of these fees is a fixed amount. The Supervisory Board is allowed to annually index the fees for economic developments in the Netherlands, however the fees have not been indexed in 2020.

The Supervisory Board members do not receive any performance or equity-related compensation, and do not accrue pension rights with Aegon. These measures are designed to ensure the

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report          72
       
       
       

 

 

independence of Supervisory Board members and to strengthen the overall effectiveness of Aegon’s corporate governance.

The Supervisory Board regularly assesses the competitiveness of the Supervisory Board’s remuneration structure and levels against peer companies with data provided by Willis Towers Watson. For this purpose, the Supervisory Board selected a primary set of peer group companies according to the following criteria:

  Industry: Insurance, with a preference for Life Insurance;
  Size: Average Market Capitalization, Employees, Revenue and Total Assets;
  Geographic scope: Preferably companies that operate globally; and
  Location: Headquarters based in Europe, excluding UK (because the non-executive directors typically have different responsibilities compared to their continental European counterparts).

Based on these criteria the current peer group consists of the following 12 European Insurance companies: Ageas, Allianz, AXA, CNP Assurances, Assicurazioni Generali, Mapfre, Münchener RE, NN Group, Swiss Life, Swiss Re, Talanx and Zurich Insurance Group. This peer group differs from the European peer group for the Executive Board as a result of excluding the UK companies. The peer group is reviewed each year and may be updated accordingly. The last update of this peer group was in 2018.

In addition, the Supervisory Board selects a secondary peer group according to the following criteria, in order to monitor alignment with the General Industry in the Netherlands:

  Industry: General Industry and listed on the AEX;
  Size: Average Market Capitalization, Employees, Revenue and Total Assets;
  Location: Headquarters based in the Netherlands.

Based on these criteria, the current secondary peer group consists of the following 12 AEX companies: Ahold Delhaize, ING Group, Randstad, Heineken, NN Group, Philips, ABN AMRO, Akzo Nobel, ASML, DSM, KPN, and Wolters Kluwer. This peer group is also reviewed each year and was last updated in 2019. ING, NN Group, ABN AMRO, DSM, and Wolters Kluwer were added and replaced ArcelorMittal, RELX Group, Royal Dutch Shell, Unibail-Rodamco-Westfield, and Unilever. This peer group is identical to the Dutch peer group for the Executive Board.

The Remuneration Committee may recommend changes to the fee levels of the Supervisory Board members, based on the results of a competitiveness review. Such recommendations would be discussed by the Supervisory Board, which can support, revise or reject them. Subsequently, shareholders will be asked to adopt the proposed fee changes at the Annual General Meeting of Shareholders.

The policy contains a temporary derogation clause, with rules which are in accordance with the Dutch Civil Code. This means derogation is only allowed in exceptional circumstances to serve the long-term interest and sustainability of Aegon or to assure its viability, for a limited period of time, when it stays in line with the general spirit of the policy and when the details are disclosed in the next remuneration report. This clause was not used in 2020.

Information on members of the Supervisory Board and the composition of its four committees can be found in the report of the Supervisory Board in this 2020 Annual Report on Form 20-F.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report          73
       
       
       

 

Supervisory Board remuneration in recent years

The table below show the fees that have been allocated and paid to the Supervisory Board members in the calendar years 2018, 2019 and 2020 in accordance with the applicable Supervisory Board remuneration policy at this time. The IFRS expenses for

these fees are equal to the amounts in the table below. The total fees decreased to EUR 739 thousand (2019: EUR 865 thousand), mainly due to lower travel fees as meetings were held by video conference in response to COVID-19.

 

 

In EUR thousand                Year              Base fees     

Attendance

fees

         Travel fees              Total fees  

William L. Connelly

     2020        95        45        4        144  
     2019        95        54        20        169  
     2018        79        34        6        119  

Mark A. Ellman

     2020        55        39        4        98  
     2019        56        39        20        115  
     2018        53        29        21        103  

Ben J. Noteboom

     2020        58        39        -        97  
     2019        58        39        6        103  
     2018        55        25        6        86  

Corien M. Wortmann - Kool

     2020        63        48        -        111  
     2019        63        54        6        123  
     2018        63        37        3        103  

Dona D. Young

     2020        66        57        4        127  
     2019        66        66        26        158  
     2018        61        39        21        121  

Caroline Ramsay (per May 15, 2020)

     2020        38        21        -        59  

Thomas Wellauer (per May 15, 2020)

     2020        33        21        -        54  

Ben van der Veer (up to May 15, 2020)

     2020        22        27        -        49  
     2019        58        54        6        118  
     2018        58        37        6        101  

Robert W. Dineen (up to Oct 11, 2019)

     2019        40        27        12        79  
     2018        52        28        21        101  

Dirk P.M. Verbeek (up to May 18, 2018)

     2018        19        10        -        29  

Robert J. Routs (up to May 18, 2018)

     2018        36        12        -        48  
              

Total

     2020        430        297        12        739  
     2019        436        333        96        865  
       2018        474        251        84        809  
              

Total including 21% VAT

     2020        520        359        15        894  
     2019        527        403        116        1,046  
       2018        574        304        102        979  

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report          74
       
       
       

 

The table below presents the total fees that have been paid in the last five calendar years on an annualized basis and the year-on-year annual change in total fees. Additionally, the table shows the Aegon net income, a proxy of the financial

and non-financial business performance, the inflation in the Netherlands and the average employee compensation over the same period.

 

 

In EUR thousand    Annualized              2016                2017               2018               2019              2020  

William L. Connelly (as of May 19, 2017)

   Fees      -        98       119       169        144  
   Change      -        -       22%       42%        (15% )   

Mark A. Ellman (as of May 19, 2017)

   Fees      -        114       103       115        98  
   Change      -        -       (9%     12%        (15% )   

Ben J. Noteboom

   Fees      109        102       86       103        97  
   Change         (7%     (15%     20%        (6%

Caroline Ramsay (per May 15, 2020)

   Fees      -        -       -       -        94  
   Change      -        -       -       -        n/a  

Thomas Wellauer (per May 15, 2020)

   Fees      -        -       -       -        86  
   Change      -        -       -       -        n/a  

Corien M. Wortmann - Kool

   Fees      90        101       103       123        111  
   Change         12%       2%       19%        (10%

Dona D. Young

   Fees      113        116       121       158        127  
   Change         2%       4%       31%        (20%

Ben van der Veer (up to May 15, 2020)

   Fees      109        106       101       118        131  
   Change         (3%     (5%     17%        11%  

Robert W. Dineen (up to Oct 11, 2019)

   Fees      115        104       101       101        -  
   Change         (10%     (3%     1%        -  

Dirk P.M. Verbeek (up to May 18, 2018)

   Fees      111        100       76       -        -  
   Change         (10%     (24%     -        -  

Robert J. Routs (up to May 18, 2018)

   Fees      140        134       125       -        -  
   Change         (4%     (7%     -        -  

Shemaya Levy (up to May 19, 2017)

   Fees      95        105       -       -        -  
   Change         11%       -       -        -  

Irving W. Bailey (up to May 20, 2016)

   Fees      139        -       -       -        -  
     Change               -       -       -        -  

Aegon net income based on IFRS-EU

   In EUR million      586        2,358       741       1,525        55  

Aegon business performance 1)

   Target = 100%      91%        121%       106%       79%        57%  

Inflation in the Netherlands

   Consumer Price Index      0.3%        1.4%       1.7%       2.6%        1.3%  

Average employee compensation 2)

   Total compensation      97        102       104       115        110  
     Annual change               5%       2%       11%        (4%

 

1 

The weighted average Aegon financial and non-financial business performance, expressed as a percentage on a performance scale with 50% as threshold, 100% as target and 150% as maximum, as used for the allocation of variable compensation in the applicable year.

2 

Consistent with the CEO pay ratio calculation, the average employee compensation is based on the audited total IFRS remuneration expenses for all employees divided by the number of employees in scope for these expenses.

 

All fees that have been paid to the Supervisory Board members were in accordance with the applicable Supervisory Board remuneration policy at the time. They have been exclusively based on their functions in the Supervisory Board, their functions in the Supervisory Board’s committees, their attendance and travel. There were no deviations from the policy in these years.

Each quarter Aegon paid the fees that the Supervisory Board members earned during that period. This means 25% of the annual base fee for Supervisory Board membership and any Supervisory Board committee membership, taking into account their function (i.e. Chairman, Vice-Chairman or regular members) and the fees for their actual attendance and travel during that quarter.

 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report          75
       
       
       

 

 

4. 2020 Executive Board Remuneration Report

The 2020 Executive Board Remuneration Report has been prepared by the Remuneration Committee of the Supervisory Board in accordance with the Dutch Civil Code (article art 2:135b) and the Dutch Corporate Governance Code. The Remuneration Committee was led by the Committee’s Chairman Ben J. Noteboom. This report was approved by the Supervisory Board.

This report contains a summary of the Executive Board Remuneration Policy that applied to 2020, the Executive Board remuneration over the recent years and the 2021 Executive Board performance indicators. The section on remuneration over the recent years is split into a) fixed compensation 2018-2020, b) conditional variable compensation 2020, c) provisional variable compensation 2020, d) variable compensation 2018-2020, e) pay-out of allocated variable compensation, f) pension contributions 2018-2020, g) benefits 2018-2020, h) total compensation in recent years.

Executive Board Remuneration Policy in 2020

The Supervisory Board has the overall responsibility for Aegon’s Remuneration Policies, including the Executive Board Remuneration Policy. The Executive Board Remuneration Policy that has been applied in 2020 was adopted at the Annual General Meeting of Shareholders on May 15, 2020. This policy will be subject to annual reviews by the Supervisory Board. The policy remains in place until a new or revised policy has been adopted by the shareholders in accordance with the applicable requirements from the Dutch Civil Code. The Supervisory Board will submit a proposal to the shareholders to adopt a policy at an Annual Meeting of Shareholders at least every four years.

The current policy contributes to Aegon’s strategy, long-term interests and sustainability through the remuneration of the Executive Board members in various ways:

  The policy provides the Supervisory Board with the means to attract, motivate and retain competent and experienced Executive Board members for the long-term. This is essential for executing Aegon’s strategy and safeguarding and promoting its long-term interests and sustainability.
  The leading performance indicator categories for successful execution of our strategy are Capital, Growth and Strategy. To support the execution of Aegon’s strategy, the policy makes these performance indicator categories mandatory for the Executive Board member.
  Aegon strives to create long-term value for its stakeholders and the communities in which it operates. Due to the nature of our business, value created is often financial, but it may also be social, economic, or environmental. The policy directly aligns Executive Board member’s personal long-term interests with those of Aegon and its shareholders by paying a significant part of the Executive Board members’ variable compensation (two-thirds) in shares, which must be held for 5 years after completion of the performance period. The pay-out in these restricted shares is combined with prohibiting Executive Board members using personal hedging strategies or insurance, which could undermine this long-term alignment of interests. Additionally, Executive Board members are aligned with the long-term interest of Aegon, its shareholders and other stakeholders through the use of mandatory performance indicator categories of Earnings, Shareholders and Other Stakeholders.
  Aegon is committed to doing business responsibly and in a sustainable way. Variable compensation of Executive Board members can be adjusted downwards (i.e. malus) or clawed-back in cases where certain performance has not been achieved in a sustainable way. This includes but not limited to: significant risk and compliance incidents, insufficient response to such incidents and/or insufficient evidence of embedding of good standards of practice, such as sound and responsible business practices and integrity of products and services delivered. Additionally, the policy makes the performance indicator category Environmental, Social and Governance (“ESG”), mandatory for Executive Board members to support this approach of doing business.

Aegon’s Executive Board remuneration is subject to various rules and regulations, including the Dutch Financial Supervision Act, the Dutch Civil Code, the Dutch Corporate Governance Code and the Solvency II Legal Framework. The most prominent requirements thereof are:

  The total variable compensation amount that is allocated to an Executive Board member for a performance year cannot exceed 100% of the fixed compensation level.
  Variable compensation should be based on a mix of Aegon and personal performance, with at least 50% weight on non-financial performance.
  A substantial portion of any variable compensation award should be paid in a non-cash instrument (e.g. Aegon shares) and should be deferred for at least 3 years. Additionally, award shares should be restricted for 5 years. With a 3-year vesting period, this requires an additional holding period of 2-years.
  Aegon can claw-back any variable compensation which has been paid (cash and shares) in specific circumstances such as a material financial restatement or individual gross misconduct.
 

 

    

 
Aegon Annual Report on Form 20-F 2020             


            Remuneration Report          76
       
       
       

 

These are also the main reasons why Aegon operates one Executive Board variable compensation plan per year, with a single variable compensation award which is subsequently split into cash and shares, rather than operating separate Short-Term Incentive (cash) and Long-Term Incentive (share) Plans.

The Remuneration Committee may recommend policy changes to the Supervisory Board. In that case, the Remuneration Committee will conduct scenario analyses to determine the long-term effects on the level and structure of compensation granted to each Executive Board member, and reports their findings to the Supervisory Board. The Supervisory Board can subsequently decide on referring the proposed policy changes to the Annual General Meeting of Shareholders for adoption.

The policy contains a temporary derogation clause, with rules which are in accordance with the Dutch Civil Code. This means derogation is only allowed in exceptional circumstances to serve the long-term interest and sustainability of Aegon or to assure its viability, for a limited period of time, when it stays in line with the general spirit of the policy and when the details are disclosed in the next remuneration report. This clause was not used in 2020.

Total compensation

Total compensation for Executive Board members is defined in the Executive Board Remuneration Policy as a combination of fixed compensation, variable compensation, pension and other benefits. The Supervisory Board determines and regularly reviews the appropriate selection of remuneration elements and their (maximum) remuneration level for Executive Board members to ensure the structure remains competitive and provides proper and risk-based incentives in line with Aegon’s risk appetite. The fixed and variable compensation elements and their levels are reviewed at least once a year. The pension arrangements and other benefits and their levels are reviewed at least every four years. In its review, the Supervisory Board takes the specific role, responsibilities, experience and expertise of Executive Board members into account as well as internal and external reference information:

  The internal references are the compensation structure and levels of the members of the Management Board of Aegon N.V. and the annual compensation changes of the general employee population and senior managers within Europe and the Netherlands specifically.
  The external references are compensation trends in the market, economic developments (e.g. inflation) as well as quantitative assessments of the competitiveness against a peer group of insurance companies in Europe and a peer group of companies based in the Netherlands.
  Additionally, the Remuneration Committee conducts a scenario analysis in case of a policy change to determine the long-term effect on the remuneration structure and level of each Executive Board member, and reports their findings to the Supervisory Board.

The European Insurance peer group was selected by the following criteria:

  Industry: Insurance, with a preference for Life Insurance;
  Size: Average market capitalization, employees, revenue and total assets;
  Geographic scope: Preferably companies which operate globally;
  Location: Headquarters based in Europe.

Based on these criteria, the current peer group consists of the following 16 European Insurance companies: Ageas, Allianz, Aviva, AXA, CNP Assurances, Assicurazioni Generali, Legal & General, Mapfre, Münchener Re, NN Group, Prudential, RSA Insurance Group, Swiss Life Holding, Swiss Re, Talanx and Zurich Insurance Group. The last update of this peer group was in 2020. Ageas, RSA Insurance Group, Swiss Life Holding and Talanx were added, while Old Mutual and Standard Life Aberdeen were removed. The increased peer group size (from 14 to 16) created a more balanced selection in relation to Aegon’s size data (average market capitalization, employees, revenue and total assets). This peer group differs from the European peer group for the Supervisory Board, as the latter excludes UK companies where non-executive directors typically have different responsibilities compared to their continental European counterparts.

The Dutch peer group was selected by the following criteria:

  Industry: General Industry and listed on the AEX;
  Size: Average Market Capitalization, Employees, Revenue and Total Assets;
  Location: Headquarters based in the Netherlands.

Based on these criteria, this peer group consists of the following 12 AEX companies: Ahold Delhaize, ING Group, Randstad, Heineken, NN Group, Philips, ABN AMRO, Akzo Nobel, ASML, DSM, KPN and Wolters Kluwer. The last update of this peer group was in 2019, when ING, NN Group, ABN AMRO, DSM and Wolters Kluwer were added, replacing ArcelorMittal, RELX Group, Royal Dutch Shell, Unibail-Rodamco and Unilever. This peer group is identical to the Dutch peer group for the Supervisory Board.

The Supervisory Board will review both peer groups annually and will amend them as necessary, within the above-mentioned selection criteria, to ensure they continue to provide a reliable basis for comparison. Any change to the peer group will be disclosed in the Remuneration Report.

The Remuneration Committee may recommend changes to the compensation levels of the Executive Board members in accordance with Remuneration Policy, based on the results of this annual total compensation review and on discussions with the Executive Board members regarding their remuneration level and structure. Such recommendations would subsequently be discussed by the Supervisory Board, which can approve, revise or reject them.

The Supervisory Board discussed and approved the 2020 total compensation for the Executive Board, after taking the Remuneration Committee’s review into consideration.

Fixed compensation

The fixed compensation for the Executive Board members is paid in monthly instalments. The policy allows the fixed compensation to be paid in cash and in shares. All Executive Board members received their 2020 fixed compensation in cash.