AEG

Table of contents

Summary

A. Business and performance

Business and performance

Aegon has life insurance and pensions operations and is also active in savings and asset management operations, accident and health insurance, general insurance and to a limited extent banking operations. Aegon focuses on three core markets (the United States, the Netherlands, and the United Kingdom), three growth markets (Spain & Portugal, China, and Brazil) and one global asset manager. Headquarters are located in The Hague, the Netherlands. The Group employs over 22,000 people worldwide (2020: over 22,000).

Aegon operates in a fast-changing environment, in which we face new challenges but also opportunities. Aegon aims to play a key role in shaping a thriving and sustainable society by delivering on our purpose of Helping people live their best lives. Aegon’s strategy is not just about strengthening our operational and financial performance; but also strives to have a positive impact on society at large, including by managing our direct operations and our investment activities as sustainably and responsibly as possible.

Aegon’s business model focuses on the following items:

For information on Aegon’s strategy, please see the Integrated Annual Report 2021 of Aegon Group.

Milestone moments in 2021 included:

The 2021 net result amounted to EUR 1,701 million and was driven by the operating result of EUR 1,906 million. Aegon’s operating result increased by 11% compared with 2020 to EUR 1,906 million in 2021. Adverse claims experience in the US was more than offset by increased fees from higher equity markets, the positive contribution from business growth and lower expenses driven by expense savings initiatives, leading to higher operating result in all other units, except International. The latter was driven by the reclassification of the 2021 result of Central & Eastern Europe from operating result to Other income following the announced divestment of the business.

Full details on Aegon’s business and performance are described in section A. Business and performance.

B. System of governance

General 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 main corporate bodies: the Executive Board, the Supervisory Board, and the General Meeting of Shareholders. There were no material changes in the system of governance during the reporting period.

Aegon’s Executive Board is charged with the overall management of the Company, and is therefore responsible for developing and executing Aegon’s strategy. Additionally, it is responsible for managing the Company’s risk profile and overseeing any relevant sustainability issues. The Executive Board is assisted in its work by the Company’s Management Board, which had ten members, including the members of the Executive Board per December 31, 2021. Aegon’s Executive Board consists of Lard Friese, Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matt Rider, Chief Financial Officer (CFO).

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.

The Supervisory Board is entrusted with supervising and advising the Executive Board regarding management of the Company and overseeing Aegon’s strategy and the general course of its businesses.The Supervisory Board consisted of eight members as per December 31, 2021. Members of the Supervisory Board are appointed by the shareholders at the General Meeting of Shareholders. Aegon aims to ensure that the composition of the Company’s Supervisory Board is in line with Aegon’s diversity policy and is as such well-balanced in terms of professional background, geography, gender and other relevant aspects of the diversity policy. The Supervisory Board has the following committees:

These committees are exclusively comprised of Supervisory Board members and deal with specific issues related to Aegon’s financial accounts, risk management, executive remuneration and appointments.

In addition to the corporate bodies, described above, Aegon has in place a number of key functions, as required under Solvency II. These key functions are described below, in the section Control environment.

For the composition of and changes in the Supervisory Board, Executive Board and Management Board, refer to section B. System of governance.

Risk management

Aegon’s risk management framework is designed and applied to identify and manage potential events and risks that may affect Aegon. This is established in the Enterprise Risk Management (ERM) framework, which aims to identify and manage individual and aggregate risks within Aegon’s risk tolerance in order to provide reasonable assurance regarding the achievement of Aegon’s objectives. The ERM framework applies to all businesses of Aegon for which it has operational control. Aegon’s businesses are required to either adopt the Group level ERM framework directly, or tailor it to local needs, while meeting the requirements of the Group level ERM framework. Aegon’s ERM framework is based on a well-defined risk governance structure. In addition to the Supervisory, Management and Executive Boards, the risk governance structure includes the following committees:

Control environment

Aegon’s Solvency II control system consists of appropriate administrative and accounting procedures, an internal control framework, appropriate reporting arrangements, as required by regulation. Furthermore, Aegon’s control environment consists of a risk management function, an actuarial function, a compliance function and an internal audit function. The internal control system serves to facilitate compliance with applicable laws, regulation and administrative processes, and it provides for an adequate control environment including appropriate control activities for key processes. The actuarial function takes accountability for the coordination of the calculation of the technical provisions, the assessment of the adequacy and reliability of those technical provisions, together with the assessment of the appropriateness of the overall underwriting policy, and the adequacy of the reinsurance arrangements. The actuarial function also contributes to the effective implementation of the risk management system. Aegon’s internal audit function is independent from operational functions, including in performing its duties in evaluating the effectiveness of Aegon’s internal control system.

Full details on the Aegon’s system of governance are described in section B. System of governance.

C. Risk profile

As an insurance group, Aegon accepts and manages risks for the benefit of its customers and other stakeholders. Aegon’s risk management and control systems are designed to ensure that these risks are managed effectively and efficiently in a way that is aligned with the Company’s strategy. The targeted risk profile is determined by customer needs, Aegon’s competence to manage the risk, Aegon’s preference for this risk, and whether there is sufficient capacity to take the risk. Aegon targets a balance between financial market, credit risks and underwriting risks. The targeted risk profile is set at Aegon Group level and developed in more detail within the subsidiaries where business is written. Aegon’s risk strategy provides direction for the targeted Aegon risk profile while supporting Aegon’s business strategy. Aegon is exposed to a range of underwriting, market, credit, liquidity and operational risks.

The most significant financial risks Aegon faces are related to financial markets (particularly credit, equity and interest rates), and underwriting risks (particularly related to mortality, morbidity and policyholder behavior).

Financial markets saw equity markets generally finding higher levels during 2021. Interest rates increased considerably in the United States compared with the low levels seen during 2020, whereas credit spreads remained relatively stable over the year.

Material movements in Aegon’s risk profile during 2021 include:

The following table provides a quantitative representation of the key risks of the AC (Accounting Consolidation) part of Aegon Group on the basis of the Solvency II framework, split between risks determined using the SF (Standard Formula) and IM (Internal Model), and the D&A (Deduction & Aggregation) and OFS (Other Financial Sector) SCR as one amount.

Composition of Group SCR

Aegon Group’s Partial Internal Model (PIM) net SCR amounted to EUR 9,226 million on December 31, 2021, which was a decrease of EUR 247 million compared to the net SCR on December 31, 2020 of EUR 9,473 million. The net SCR decrease was mainly driven by the following movements:

Full details on Aegon’s risk profile are described in section C. Risk profile.

D. Valuation for solvency purposes

Solvency II valuation principles

Aegon values its Solvency II balance sheet items on a basis that reflects their economic value. Where the fair value under IFRS as adopted by the EU (EU-IFRS) is consistent with Solvency II requirements, Aegon follows EU-IFRS for valuation of its assets and liabilities.

The reconciliation of Excess of Assets over Liabilities (Solvency II basis) and Shareholders’ Equity (EU-IFRS basis) can be summarized as follows:

Long-term guarantees

Aegon applies the matching adjustment in Aegon UK, which has a positive impact to the Group Own Funds of EUR 23 million as of December 31, 2021 (2020: EUR 30 million) and reduces the Group solvency capital requirement by EUR 60 million (2020: EUR 64 million reduction). The matching adjustment methodology has been approved by the UK regulator.

In addition, Aegon applies a volatility adjustment in Aegon the Netherlands, Aegon UK and Aegon Spain, which has a positive impact on the Group Own Funds of EUR 244 million (2020: EUR 453 million) and reduces the Group solvency capital requirement by EUR 1,262 million (2020: EUR 1,468 million).

The combined impact of the matching adjustment and the volatility adjustment on the Group Solvency II ratio is 29%-points (2020: 32%-points).

Full details on the reconciliation between Aegon’s economic balance sheet based on Solvency II and consolidated financial statements based on EU-IFRS are described in section D. Valuation for solvency purposes.

E. Capital management

Key Solvency II figures

During 2021, Aegon Group and all the entities within the Group that are on a solo level subject to Solvency II capital requirements (including Aegon UK) continued to comply with the MCR and SCR requirements. In the following tables the key Solvency II figures for Aegon are presented as at December 31, 2021:

Aegon Group capital position

Aegon Group Eligible Own Funds amounted to EUR 19,431 million on December 31, 2021 (2020: EUR 18,582 million). The increase of EUR 849 million in Own Funds since December 31, 2020, was mostly driven by the positive impact from expected return on inforce business and market impacts. The positive impact was partly offset by claims experience in the Americas due to COVID-19, and the negative impact on Own Funds resulting from management actions.

Aegon’s Group PIM SCR amounted to EUR 9,226 million on December 31, 2021 (2020: EUR 9,473 million). The SCR decreased by EUR 247 million compared to December 31, 2020. This decrease was mainly the result from the release of required capital of in force business, partially offset by the need to setup SCR for new business, the impact from management actions - notably the reinsurance of longevity risk for NL Life - and model and assumption changes. There were partial offsets from market impacts and a lower benefit of group diversification. As a result of the above changes in Eligible Own Funds and PIM SCR, the Group Solvency II ratio increased by 15%-points to 211% in 2021.

Aegon uses 150% of the local Risk-Based Capital (RBC) Company Action Level as the Solvency II SCR equivalent for including the United States life insurance and reinsurance entities into the Group solvency calculation, and in addition, reducing Own Funds by an amount equal to 100% RBC Company Action Level requirement to reflect transferability restrictions. The United States conversion methodology is subject to periodic review and approval by DNB. Aegon allocates centrally issued subordinated debt between the AC and D&A parts of the group on an Available Own Funds basis.

The Solvency II capital ratios of the Group and Aegon the Netherlands do not include the impact of any contingent liability potentially arising from unit-linked products sold, issued or advised on by Aegon in the Netherlands in the past, as any potential liability cannot be reliably quantified at this point.

Full details on Aegon’s Available and Eligible Own Funds are described in section E.1 Own Funds, and Aegon’s PIM SCR is described in section E.2.1 Solvency capital requirement.

Management of capital

Aegon’s capital management framework is based on adequate capitalization of its operating units, Cash Capital at Holding and leverage.

Adequate capitalization levels have been defined as sufficient to absorb moderate shocks without impacting the remittances to the Group. These moderate shocks could be caused by various factors, including general economic conditions, capital markets risks, underwriting risk factors, changes in government regulations, legal and arbitration proceedings. To mitigate the impact of such factors on the ability of operating units to transfer funds, Aegon established an operating level of capital in each of the units, 150% SCR for Solvency II units and 400% RBC Company Action Level in the United States, which includes additional capital in excess of regulatory capital requirements. Aegon manages capital in the units to their respective operating levels.

The regulatory capital requirement, minimum dividend payment level, operating level and actual capitalization for Aegon’s main operating units at December 31, 2021, are included in the following table:

A. 1.3 Holders of qualifying holdings

A qualifying holding means a direct or indirect holding in Aegon N.V., which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of Aegon N.V. Only Vereniging Aegon qualifies based on this definition.

Vereniging Aegon, is a Dutch association located in The Hague, the Netherlands, with a special purpose to protect the broader interests of Aegon N.V. and its stakeholders. On December 31, 2021, Vereniging Aegon, Aegon’s largest shareholder, held a total of 301,774,161 common shares and 538,250,640 common shares B.

Under the terms of the 1983 Merger Agreement as amended in May 2013, Vereniging Aegon has the option to acquire additional common shares B. Vereniging Aegon may exercise its call option to keep or restore its total stake to 32.6% of the voting rights, irrespective of the circumstances that caused the total shareholding to be or become lower than 32.6%. 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. As ‘Special Cause’ qualifies the acquisition of a 15% interest in Aegon N.V., a tender offer for Aegon N.V. shares or a proposed business combination by any person or group of persons, whether individually or as a group, other than in a transaction approved by the Executive Board and the Supervisory Board. 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. Accordingly, at December 31, 2021, the voting power of Vereniging Aegon under normal circumstances amounted to approximately 15.39%, based on the number of outstanding and voting shares (excluding issued common shares held in treasury by Aegon). In the event of a Special Cause, Vereniging Aegon’s voting rights will increase, to 32.6%, for up to six months.

A.1.4 Aegon’s Group structure

Aegon’s operating segments are based on the businesses as presented in internal reports that are regularly reviewed by the Executive Board which is regarded as the chief operating decision maker. All reportable segments are involved in insurance or reinsurance business, asset management or services related to these activities. The reportable segments are:

For more information on Aegon’s governance structure, please see section B.1.1. Corporate Governance.

A.1.5 List of material related undertakings

The principal subsidiaries of the parent company Aegon N.V. are listed by geographical segment. All are wholly owned, directly or indirectly, unless stated otherwise, and are involved in insurance or reinsurance business, pensions, asset management or services related to these activities. The voting power in these subsidiaries held by Aegon is equal to the shareholdings.

On November 29, 2020, Aegon agreed to sell its insurance, pension, and asset management businesses in Hungary, Poland, Romania, and Turkey to Vienna Insurance Group AG Wiener Versicherung Gruppe (VIG) for EUR 830 million, of which EUR 35 million was received by Aegon in the form of net remittances in 2021. As a result of the transaction, the Group Solvency II ratio is estimated to improve by approximately 8 percentage points. Based on the balance sheet position at December 31, 2021, a book gain amounting to EUR 266 million is expected, which includes a loss of EUR 204 million related to the foreign currency translation reserve, which will be reclassified from Other Comprehensive Income into the income statement. As a result of this transaction, IFRS equity is expected to increase by EUR 470 million. The closing of the transaction is subject to local regulatory and competition approvals customary for transactions of this nature. On March 23, 2022, Aegon announced that it completed the divestment of its Hungarian businesses. In April 2022 Aegon also completed the divestment of its Turkish businesses. Reference is made to section E.6 for more information.

On February 28, 2021, Aegon successfully completed the divestment of Stonebridge, a UK-based provider of accident insurance products to Global Premium Holdings group, part of Embignell group. Under the terms of the agreement, Aegon sold Stonebridge for a consideration of approximately GBP 60 million (EUR 65 million), consisting of the purchase price and dividends related to the transaction. This excludes a contingent consideration of up to GBP 10 million. The transaction had no material impact on Aegon’s capital position and results.

For information on the material differences between the scope of the group used for the consolidated financial statements and the scope for the consolidated data used for the Group Solvency calculation, see section D, Valuation of Solvency Purposes, and section E.1.4, Difference between Solvency II Own Funds and EU-IFRS shareholders’ equity.

Americas

The Netherlands

United Kingdom

International

Asset Management

For a complete list of related undertakings, please refer to QRT S.32.01.22 - Undertakings in scope of the Group. Aegon does not have any significant branches in the meaning of Article 354(1) of the Solvency II directive.

A.1.6 Material lines of business and material geographical areas

Below is an overview, region by region, of the material lines of business that they provide.

Americas

Aegon has designated the US as a core market, with Transamerica’s businesses organized into Strategic Assets and Financial Assets.

Strategic Assets are those that are considered to have a greater potential for an attractive return on capital and growth. In Workplace Solutions, Transamerica is focused on small to mid-sized retirement plan administration, employee benefits, stable value solutions and the Transamerica Advice Center. It also continues to operate in the retirement plan administration market for large employers. In addition, Workplace Solutions provides value-added services, such as Managed Advice^® and its proprietary investment solutions. In Individual Solutions, Transamerica focuses on select life insurance and investment products, including term life insurance, final expense whole life insurance, and indexed universal life insurance, as well as mutual funds and individual retirement products, like accumulation variable annuities (VA) with limited interest rate sensitivity.

Several Transamerica product lines are considered Financial Assets, which are capital intensive with relatively low returns on capital employed. These are traditional VAs with interest rate sensitive guaranteed living benefits and death benefits; stand-alone individual long-term care (LTC) insurance; and fixed annuities. Transamerica ceased new sales of these products in the first half of 2021 and any future new sales for Financial Assets are limited, if any, and focused on products with higher returns and a moderate risk profile.

Life

Transamerica offers a comprehensive portfolio of protection solutions to customers in a broad range of market segments. Life products include term life (TL), universal life (UL), variable universal life (VUL), index universal life (IUL), and whole life insurance (WL).

Term life insurance

TL insurance provides death benefit protection without cash value accumulation. Benefits are paid to policy beneficiaries in the event of the death of the insured during a specified period. Living benefit riders that provide accelerated benefits for critical illnesses or chronic conditions are available on term insurance.

Universal life insurance

UL insurance is flexible permanent life insurance that offers death benefit protection together with the potential for cash value accumulation. After the first few years, there is usually no set premium. The policyholder can adjust the frequency and amount of premium payments, as long as sufficient premiums are accumulated in the policy’s account value to cover charges in the month that follows, which are called ‘monthly deductions’. Some versions of this product have ‘secondary guarantees.’ These maintain life insurance coverage when the cash value is insufficient, as long as the customer pays a specified minimum premium.

Variable universal life insurance

VUL insurance is permanent life insurance that offers both a death benefit and cash value accumulation potential with financial market participation. The premium amount for VUL insurance is flexible and may be changed by the policyholder within contract limits. Coverage amounts may change as well. The investment feature usually includes ‘sub-accounts,’ which provide exposure to investments, such as stocks and bonds. This exposure increases cash value return potential, but also the risk of additional premium requirements or lower coverage amounts in comparison with a traditional, non-variable life insurance policy. Transamerica did not actively market VUL insurance in 2021 but may do so in the future.

Index universal life insurance

IUL insurance provides permanent death benefit protection and cash value accumulation with flexible premium payments.

What distinguishes it from other types of permanent life insurance is the way in which interest earnings are credited. Net premiums may be allocated to either a fixed account or indexed accounts. Indexed accounts credit interest based in part on the performance of one or more market indices. The credited interest is based on the index, but with a floor and a cap. IUL offers both market-paced growth potential in the indexed accounts and downside protection. It is an alternative to traditional UL - for which interest is credited at a fixed rate - and VUL, in which the cash value is directly exposed to market fluctuations. LTC riders and other living benefit riders are available on IUL products.

Whole life insurance

WL insurance provides permanent death benefit protection provided that the required premiums are paid, while accumulating cash values based on statutory requirements. Premiums are generally fixed and usually payable over the life of the policy. Among the WL insurance products offered is final expense WL insurance, which is intended to cover medical bills and burial expenses.

Accident & health

Transamerica offers supplemental health insurance and LTC insurance.

Supplemental health insurance

Supplemental health insurance products include accidental death and dismemberment, accidental injury, cancer, critical illness, disability, hospital indemnity, Medicare supplement, retiree medical, dental, vision, and supplemental medical expense indemnity issued by affiliated and/or unaffiliated insurance companies.

Long-term care insurance

LTC insurance products are a category of health insurance and provide benefits to policyholders that require qualified LTC services when they are unable to perform two or more specified activities of daily living or develop a severe cognitive impairment. LTC insurance helps protect against the high cost of LTC services, and it may also help families better manage the financial, health and safety issues associated with LTC. Transamerica offers a LTC rider on certain life insurance products and ceased offering a standalone product in the first half of 2021.

Mutual funds and Exchange Traded Funds (ETFs) and Collective Investment Trusts (CITs)

Mutual funds are professionally managed investment vehicles comprised of pooled money invested by numerous individuals or institutions. Such funds are invested in various underlying security types such as stocks, bonds, money market instruments, and other securities. Transamerica offers mutual funds that are focused on several different asset classes, including US equity, global/ international equity, fixed income, money markets and alternative investments, as well as asset allocation and target-date funds with combined equity and fixed income strategies. Transamerica mutual funds utilize the portfolio management expertise of asset managers across the industry in a sub-advised platform, using managers both affiliated with and not affiliated with Aegon. These managers are subject to a rigorous selection and monitoring due diligence process conducted by Transamerica Asset Management.

ETFs are a pooled investment vehicle for individual and institutional investors that combine some of the features of a mutual fund with the flexibility of allowing investors to trade throughout the day on an exchange. Transamerica offers a suite of managed-risk passive ETFs that seek to track the S&P Managed Risk 2.0 Indices marketed under the name DeltaShares. This Managed Risk strategy is applied to US Large Cap, Mid Cap, Small Cap, International Developed Equity and Emerging Market Equity Indices.

A CIT is a pooled investment fund, held by a bank or trust company, and generally available only to certain types of retirement plans and other institutional investors. Transamerica serves as the advisor to some of the CITs it offers, which are focused on several different asset classes including US equity, international equity, and fixed income. Transamerica also leverages the portfolio management expertise of asset managers across the industry.

Variable annuities

Variable annuities (VAs) allow the policyholder to accumulate assets for retirement on a tax-deferred basis and to participate in equity or bond market performance. Additional insurance guarantees, which are offered through riders, can be added to VAs, including guaranteed minimum death benefits (GMDBs) and guaranteed living benefits (GLBs). GMDBs provide a guaranteed benefit in the event of death. GLBs are intended to provide a measure of protection against market risk while the annuitant is alive. Different forms of GLBs are offered, such as guaranteeing an income stream for life and/or guaranteeing principal protection. While Transamerica discontinued sales of variable annuities with significant interest rate sensitive living and death benefits in the first quarter of 2021, it continues to offer variable annuities, including certain annuities with GLBs and GMDBs.

Fixed annuities

Fixed annuities allow the policyholder to accumulate assets for retirement on a tax-deferred basis through periodic interest crediting and principal protection. Transamerica no longer allows new contracts of any fixed annuities as it ceased new sales of fixed indexed annuities in the first quarter of 2021. Premium additions on in force fixed annuities are allowed in some contracts; however, Transamerica’s fixed indexed annuity rider will no longer receive any premium deposits after the second quarter of 2022, as the contracts allow for additions only for one year after issue.

Retirement plans and IRAs

Comprehensive and customized retirement plan services are offered to employers across the entire range of defined benefit, defined contribution, and non-qualified deferred compensation plans for single employer plans, multiple employer plans (MEPs) and pooled employer plans (PEPs). Services are also offered to individuals rolling over funds from other qualified retirement funds or IRAs.

Retirement plan services, including administration, recordkeeping and related services are offered to employers of all sizes and to plans across all market segments with focus on small to mid-sized organizations. Transamerica also works closely with plan advisors and third-party administrators to serve their customers. Transamerica Retirement Solutions is a top-ten defined contribution record-keeper in the United States based on number of plan participants.

Plan sponsors have access to a wide array of investment options. Tools are provided to help plan participants monitor their retirement accounts and engage in behavior to stay on track towards a funded retirement. Managed Advice^® is a managed account option that plan sponsors can make available to participants that provides investment advice to participants using the plan’s slate of funds.

For individuals, retirement related services and products include IRAs, advisory services, and annuities as well as access to other financial insurance products and resources.

Stable value solutions

Transamerica’s Stable Value Solutions business offers synthetic guaranteed investment contracts (GICs) primarily to tax-qualified institutional entities such as 401(k) plans and other retirement plans and college savings plans. A synthetic GIC ‘wrapper’ is offered around fixed income invested assets, which are owned by the plan and managed by the plan or a third-party money manager hired by the plan. A synthetic GIC is typically issued with an evergreen maturity and may be terminated under certain conditions. Such a contract helps to reduce fluctuations in the value of the wrapped assets and provides book value withdrawals for plan participants. Stable Value fixed annuity contracts are also available to certain types of qualified retirement plans as a participant investment option.

Brazil

Aegon has designated Brazil as a growth market. The Americas business in Brazil consists of a 54.9% economic interest, inclusive of 50% of voting common shares, in Mongeral Aegon Group (MAG Seguros), a Brazilian independent life insurer. MAG Seguros’ activities include a life insurance and pension company, an asset management company, a multi-sponsored pension fund, a liabilities management company for pension funds, and a longevity institute. MAG Seguros and Bancoob (Banco Cooperativo do Brasil) own Sicoob Seguradora de Vida e Previdência (Sicoob), a life insurance and pensions company that provides life insurance and pension products via the Sicoob system. The joint venture distributes products through Sicoob. Bancoob is a private commercial bank owned by the credit cooperative entities affiliated with the Sicoob system. Sicoob represents a key distribution channel for MAG Seguros, which serves over 4 million customers nationwide through over 4,000 brokers.

The Netherlands

Within the strategy of Aegon, Aegon the Netherlands is designated a core market, organized into Financial Assets and Strategic Assets.

The Life activities of Aegon the Netherlands are considered Financial Assets. Aegon has established a dedicated team to manage these businesses, which is responsible for maximizing its value through active in-force management, disciplined risk management and capital management actions. These actions are focused on protecting the capital position, increasing capital generation capital, and reducing expenses by outsourcing of the servicing of the life-books. Aegon selectively competes in the defined benefit market. This also includes supporting employers in their transition towards defined contribution solutions under the new pension agreement. In 2021, new life sales consisted mainly of immediate pensions annuities, indexations on existing group life contracts and risk insurance.

Strategic Assets are the businesses in which Aegon the Netherlands will invest to grow its customer base and increase margins. Aegon the Netherlands strategically focuses on the following business: Mortgages (Aegon Hypotheken), Banking (Knab); and Workplace solutions for employers. The last category consists of the following businesses: Aegon Cappital, TKP Pensioen, Aegon Schadeverzekering, Robidus and Nedasco.

Life

Aegon the Netherlands’ Life entity (Aegon Levensverzekering) is managed as a Financial Asset. This means that the focus is on maximizing its value through active in-force management, disciplined risk management and capital management actions. These actions are focused on protecting the capital position, increasing capital generation capital, and reducing expenses by outsourcing of the servicing of the life-books.

Pensions

Interest rates have been low for an extended period of time, creating a shift from Defined Benefit (DB) pension plans to Defined Contribution (DC) pensions plans. In 2020, fundamental changes were proposed to the Dutch pension system. Although implementation is delayed from 2026 to 2027, these include that new pension accrual is only allowed in DC schemes. As Aegon the Netherlands offers DC schemes through a separate legal entity - Aegon Cappital - the consequence for Aegon Levensverzekering is that all of its Group pension products will become closed books.

Aegon the Netherlands will only selectively compete in the defined benefit market. This also includes supporting employers in their transition towards defined contribution solutions under the new pension agreement. Renewals of existing contracts are possible, but only if the renewal facilitates the existing customers in their transition to DC. In addition, Aegon Levensverzekering will continue to sell risk insurance and annuities that are closely linked to DC schemes. More detail on annuities is provided further below.

The Group DB products that remain on the balance sheet of NL Life are as following:

As the DB subscription product remains open for existing customers and, as some contracts have a due date in the future, there are still premiums received for these products. In addition, indexations remain possible for all of the Group DB products.

Annuities

The actively sold products in this category are simple payout annuities and variable annuities without guarantees. These products are linked to DC schemes in which participants build up their capital and are obliged, by law, to purchase an annuity at the pension date. Participants can choose between a guaranteed annuity - where all risks are borne by Aegon - or a variable annuity without investment guarantees, where all risks are borne by the participant. Given that a significant shift has been observed to DC schemes, these annuities are a natural driver of growth as they provide a solution for the payout phase. Annuity insurance also includes older products with guaranteed interest rates and profit sharing for which no new business is written.

Risk insurance

This category mainly includes the survivor’s pension insurance sold as a rider to DC pension schemes. Premiums are mainly paid by the employer and the product pays benefits to the spouse/children in the event of the death of the insured.

Endowment insurance

Endowment insurance includes several products that accumulate a cash value. Premiums are paid at inception or over the term of the contract. These products pay benefits on the policy maturity date, subject to survival of the insured. Most policies also pay death benefits should the insured die during the term of the contract. Minimum interest guarantees exist for all generations of endowment insurance products written, except for universal life products, for which premiums are invested solely in equity funds. These products are no longer being sold.

Mortgages

Aegon the Netherlands offers mainly annuity and linear residential mortgages, while also catering to consumers requiring interest only mortgage loans. Mortgage loans are originated both as investments for Aegon the Netherlands’ insurance and bank entities as well as distributed to third-party investors. Such investors are provided access to this high-quality asset class through the Aegon Dutch Mortgage Fund, Robuust (a third-party label where Aegon has the exclusive right to purchase and distribute the mortgages receivables), SAECURE (Aegon’s Dutch residential mortgage-backed securities program), Aegon Bank’s covered bond program, and various bespoke structures to tailor to investors’ needs. Investors value our mortgage offering for the attractive spread and low credit-loss experience through disciplined underwriting. Consumers and independent financial advisors choose Aegon mortgages for the high quality of service, reliable operations, and accessibility through the economic cycle.

Banking

In 2021, Aegon completed the migration and integration of the Aegon Bank brand to the Knab brand. Knab is a fully online digital bank that went live in 2012. By integrating both operations and rationalizing product offerings, costs are lower, operations more efficient, and governance is unified. Knab continues to offer banking products like savings accounts and investments, as part of Aegon’s pension offerings in the Netherlands. In 2020, Banking was classified as a Strategic Asset and forms the gateway to individual retirement solutions.

Knab customer growth is geared towards fee-paying customers and products. Increasing efforts to deliver products and offer functionalities (e.g. Google pay, VAT savings) in a higher customer demand environment is key for retaining and acquiring new customers.

Workplace solutions

Non-life

Accident and Health

Aegon the Netherlands offers disability and sick leave products to employers that cover these payments for employees not covered by social security and where the employer bears the risk. For some forms of disability, employers can choose to use the social security system to insure these risks or opt out and seek private insurance, which Aegon also offers. Private insurance appeals to employers, because it offers a wider set of coverage options and therefore better tailor to the needs of the employer regarding the disability risk of their employees, and as a result helps reduce absenteeism and disability thanks to better reintegration efforts.

For individuals, Aegon the Netherlands offers a disability product mainly targeted at the growing self-employed market.

Property and Casualty (P&C)

Aegon the Netherlands has focused exclusively on retail lines in P&C insurance, offering products in the segments of property, motor, travel, legal assistance, private liability claims, pet insurance, and injury. The ambition for the P&C retail segment is to provide the best digital service in the Dutch P&C market while building long-lasting relationships with customers and distribution partners.

Through the service concepts, Aegon the Netherlands supports intermediaries with excellent digital processes to help their customers in the best possible way. This is done by stimulating performance at sustainable levels for customers, intermediaries, and the insurer. In addition to the intermediary market, Aegon the Netherlands has further developed digital and online capabilities, especially as the direct market has sustained a sizable share in the overall distribution in the past years, in particular for the Motor segment. The direct market includes sales via Aegon’s own website and affiliates, as well as through aggregator websites.

Aegon Cappital

Aegon Cappital is a low-cost provider of DC pension schemes offered through intermediary advisors. Aegon Cappital offers DC pension schemes in a standardized subscription-based model to small and medium enterprises and customized contracts for medium-to-large corporations. The model enables employers to choose from a variety of contribution tables and social security offsets, while remaining flexible for regulatory changes, such as changes in pension age or fiscal contribution limits. Savings premiums are invested in life cycle funds managed by Aegon Investment Management B.V

Aegon Cappital is one of the largest pension premium institutions (‘PPIs’) in the Netherlands and benefits considerably from economies of scale. The low interest rate environment, and the fundamental changes of the Dutch pension system as of January 1, 2027, will result in a continued shift to DC schemes.

PPIs cannot bear any investment or insurance risks on their offerings due to regulatory requirements. The schemes include disability and/or life insurance which are offered by partners Aegon Levensverzekering, Aegon Schadeverzekering and Elips Life AG, and the option for participants to buy deferred annuities offered by partner Aegon Levensverzekering. The main risks for Aegon Cappital are operational and regulatory risk.

TKP Pensioen, Robidus and Nedasco

TKP Pensioen is a top three player in the Dutch market for pension administration. TKP Pensioen administers pension rights for several large company and industry pension funds, as well as other pension providers such as premium pension institutions. Their customers – 67,000 employers representing 3.4 million participants – rely on TKP Pensioen for correct and timely pension payments, and clear and accessible pension information and communication. This ranges from the mandatory pension statements to customer contact and digital customer services.

Robidus Groep advises corporations on the risks and associated costs of absenteeism and disability under Dutch social security legislation and acts as an insurance broker for income related insurances.

Nedasco is an intermediary service provider that is mainly active in non-life business domains.

United Kingdom

Aegon UK has both a modern fee-based investment ‘platform’ business, built organically and scaled through the acquisition of Cofund’s retail savings platform and BlackRock’s Workplace Defined Contribution business, and a ‘traditional insurance’ business.

Aegon UK’s platform business delivers a range of propositions through Retail and Workplace channels, together with protection products and an institutional trading platform business. This is supported by an investment solutions capability which allows customers to invest in proprietary Aegon funds, driving additional fee margin.

Aegon UK’s traditional insurance business consists of older contracts that are no longer actively marketed to new customers. An out-source relationship is in place with Atos to service and administer the book, building on an existing relationship, which has seen Atos successfully administer over 400,000 protection policies since 2016.

International

Aegon International consists of businesses in Central and Eastern Europe, the high-net-worth life insurance business and some smaller ventures in Asia and two growth markets, China and Spain & Portugal. As of 2022, International will include Brazil and be responsible for all three growth markets of Aegon.

Aegon International focuses on serving retail customers with individual life and different types of general, accident, and health insurances.

Life Insurance, Savings & Protection

Spain & Portugal’s life insurance business comprises of life savings and individual and group protection products, where individual life-risk and health products form the larger part of the business.

In Asia, Aegon provides a broad range of life insurance products, including unit-linked, universal life, and traditional life products. Over the past year, TLB has updated and diversified its product suite. Along with its enhanced flagship product of Universal Life Alpha Pro & Pro Century, its offerings now include the Genesis Indexed Universal Life (IUL) product, that provides a lower guarantee combined with a greater wealth accumulation potential, and the Trendsetter Ultra Term Life, designed for HNW personal and business protection.

In India, Aegon Life currently offers Group term plans, individual term plans and unit-linked life insurance plans.

In Hungary, Aegon offers primarily unit-linked and traditional savings products, which are frequently accompanied with riders that provide customers with additional financial support in the event of an accident, disability or hospitalization. Similarly, in Poland Aegon focuses on unit-linked and traditional life products. The Romanian branch currently sells term life insurance policies with guaranteed interest, with or without profit sharing component. In Turkey, Aegon focuses on Return on Premium (ROP) and savings life products, available in USD.

Health insurance

Health insurance is primarily offered as riders on life insurance policies in Spain and China and as a standalone health insurance in Turkey and Spain.

Pensions

In Spain, customers’ pension saving needs are serviced by the joint venture with Liberbank Life and Pensions and Aegon España through its managed pension funds.

Aegon’s pension business in CEE was impacted by reforms to the pension system in several countries during the past years. In 2021, Aegon was active in the (formerly mandatory) private pension market in Poland and Romania. In the voluntary pension market, Aegon was active in Hungary and Romania. In Turkey, Aegon is only servicing existing pension customers.

General insurance

Aegon España has been offering general insurance products, mainly household protection, unemployment, accident, dependency and funeral insurance, since 2013 through its joint ventures with Banco Santander. Aegon Hungary also offers various non-life covers, mainly household and car insurance, in addition to some wealth and liability industrial risk and travel insurance. It is a market leader in home insurance in Hungary. Aegon THTF in China also offers short-term accident products.

Aegon Asset Management

Aegon Asset Management has three distinct business lines.

A.1.7 Results of operations

The following table includes our operating results for the year ended December 31, 2021, including certain comparative discussion on our operating results for the year ended December 31, 2020. The information on the following tables also includes the non-EU-IFRS financial measure operating result before and after tax.

The reconciliation from operating result before tax to the net result, being the most comparable EU-IFRS measure, is presented in note 5 of the Integrated Annual Report 2021. Aegon believes that these non-EU-IFRS measures provides meaningful supplemental information about the operating results of Aegon’s businesses, including insight into the financial measures that senior management uses in managing the businesses.

Please note that the following tables have been updated compared to the 2020 SFCR reflecting a change in the naming convention and measurement of Aegon’s primary performance measure. Aegon has changed the naming convention of its primary performance measure to improve alignment with industry practice and the way in which Aegon manages its business. As of 2021, Aegon no longer refers to underlying earnings before tax for segment reporting purposes, instead Aegon refers to Operating result. Furthermore, Aegon introduced a new grouping of non-operating result which is the sum of Fair value items, Realized gains and losses on investments, and Net impairments. Other income / charges remains a separate category outside of Aegon’s operating result. In addition, Aegon has changed the measurement of its operating result from January 1, 2021. Reference is made to note 5 ‘Segment information’ section Change in measurement of performance measure on page 177 of Aegon’s Integrated Annual Report 2021.

Where applicable, comparative numbers have been restated enabling a like for like comparison.

Results 2021 (EU-IFRS)

Net deposits (on and off balance)

Worldwide revenues geographically 2021

Net results

The 2021 net result amounted to EUR 1,701 million and was driven by the operating result of EUR 1,906 million. Non-operating items amounted to a gain of EUR 930 million in 2021, whereas a loss of EUR 508 million was recorded in 2020. The improvement in Non-operating items in 2021 resulted mostly from positive fair value items and increased realized gains on investments, while 2020 reflected the adverse economic impact from the COVID-19 pandemic. Fair value items amounted to EUR 432 million in 2021 and were mainly driven by positive revaluations from real estate and private equity investments in the Americas. Realized gains on investments were EUR 446 million in 2021 and were primarily due to asset sales in the Americas, in part to fund investments in long-duration assets as part of the interest rate risk management plan. Net recoveries – mainly related to the unsecured loan portfolio of the Bank in the Netherlands – amounted to EUR 53 million in 2021. Other charges in 2021 amounted to EUR 780 million, compared with EUR 1,239 million in 2020. Other charges in 2021 were mainly driven by management actions to release capital and increase the predictability of capital generation from the US variable annuity business. The profit before tax in 2021 amounted EUR 2,056 million. After the tax charge of EUR 355 million, the net result for 2021 amounted to EUR 1,701 million. The effective tax rate in 2021 was 17%, and reflects regular tax exempt income items and the use of tax credits.

Operating results

Aegon’s operating result increased by 11% compared with 2020 to EUR 1,906 million in 2021. Adverse claims experience in the US was more than offset by increased fees from higher equity markets, the positive contribution from business growth and lower expenses driven by expense savings initiatives, leading to higher operating result in all other units, except International. This latter was driven by the reclassification of the 2021 result of Central & Eastern Europe from operating result to Other income following the announced divestment of the business

Operating expenses

Operating expenses decreased by 2% compared with 2020 to EUR 3.8 billion in 2021. This decrease primarily reflects a reduction in addressable expenses, which decreased by 3% compared with 2020 to EUR 2.9 billion. The reduction in addressable expense savings reflects the benefits from expense savings initiatives across the Group. All business units showed a reduction in addressable expenses compared with 2020, except for Asset Management. The latter was mainly driven by accruals of performance-related compensation.

Sales

Net deposits in 2021 amounted to EUR 5.4 billion, whereas in 2020 net outflows of EUR 15.2 billion were recorded. The improvement was due to the United Kingdom and Asset Management. In the United Kingdom, this was mainly driven by the Institutional business – which can be lumpy – while Retail and Workplace contributed positively as well. For Asset Management, this was mainly the result of net deposits from the Global Platforms, driven by net deposits in the fixed income platform. Net outflows in the Americas were mainly caused by Retirement Plans due to outflows in the low-margin Large-Market segment. Individual Solutions saw outflows from Variable and Fixed Annuities following product exits as these books mature. Net outflows in the Netherlands were driven by the Bank, and mainly resulted from Aegon’s decision to stop offering savings products to non-fee-paying customers.

New life sales in 2021 decreased by 7% compared with 2020 to EUR 686 million. Higher new life sales in the United States, mainly driven by increased sales of whole life final expense and indexed universal life, were more than offset by lower new life sales in International and the Netherlands. The lower new life sales in International mainly reflect the exclusion of sales from Central & Eastern Europe as of 2021. In the Netherlands, the decrease follows from the decision to classify the Dutch Life business as a Financial Asset and to close most products for new sales.

New premium production for accident & health insurance decreased by 6% compared with 2020 to EUR 170 million in 2021. This was mainly due to the decision to exit the individual Medicare supplement segment in the United States and an unfavorable impact from currency movements, which more than offset higher long-term-care sales also in the United States. The latter resulted from a change in legislation in the state of Washington. Otherwise, the product remains closed for new business.

New premium production for property & casualty insurance amounted to EUR 96 million, which is a decrease of 26% compared with 2020. The decrease was mainly the result of the exclusion of sales from Central & Eastern Europe as of 2021. Adjusting for this impact, property & casualty sales increased compared with 2020 mainly due to higher sales in Spain & Portugal, driven by the introduction of a new household insurance product in the bancassurance channel.

A.1.8 Related party transactions

This section provides information about the material transactions during the reporting period with Aegon’s shareholders, with persons who exercise a significant influence on Aegon, i.e. members of the Executive, Management or Supervisory board. The second part of this section provides information on relevant operations and transactions within the Group.

Referring to section A.1.3 Holders of qualifying holdings, Aegon’s largest and only material holder of qualifying holdings is Vereniging Aegon. All other qualifying holdings in Aegon are less than 10% and are considered not to have significant influence over the management of the company. The transactions with Vereniging Aegon during the financial years 2021 and 2020 were:

Material transactions with persons who exercise a significant influence on the undertaking

The transactions with Key Management during 2021 consisted of transactions related to the remuneration of the active and retired members of the Supervisory, Executive and Management Board.

Supervisory Board

The total EU-IFRS remuneration expenses for active and retired members of the Supervisory Board were EUR 0.9 million in 2021. Members of the Supervisory Board were entitled to the following in 2021:

Where required, Aegon paid the employer social security contributions in the home country of the Supervisory Board member. The employee social security contributions in the home country, if any, was paid by the Supervisory Board members. Each of these fees were a fixed amount. Members of Aegon’s Supervisory Board did not receive any performance or equity-related compensation, and did not accrue pension rights with the Company. These measures were designed to ensure the independence of Supervisory Board members and to strengthen the overall effectiveness of Aegon’s corporate governance. There were no outstanding balances such as loans, guarantees or advanced payments.

Executive Board

In 2021, the Executive Board members were Mr. Friese and Mr. Rider. The total EU-IFRS remuneration expenses in 2021, which consisted of expenses for the fixed compensation, variable compensation, pension contributions and other benefits, were EUR 2.9 million for Mr. Friese and EUR 2.0 million for Mr. Rider. For Mr. Friese this included EUR 0.1 million in expenses for the sign-on arrangement that was offered when he joined Aegon in March 2020. At the reporting date, Mr. Friese and Mr. Rider had no loans with Aegon. No other outstanding balances such as guarantees or advanced payments exist.

Key Management

The total EU-IFRS remuneration expenses of Aegon’s Key Management consisting of the Supervisory, Executive and Management Board members in 2021 was EUR 27.5 million, which consisted of EUR 16.8 million in fixed compensation, EUR 3.6 million in cash-based variable compensation, EUR 3.2 million in share-based variable compensation, EUR 2.8 million in pension contributions and EUR 1.1 million in other benefits.

Relevant operations and transactions within the Group

Aegon facilitates intra-group transactions (IGTs) to support intra-group efficiencies, including optimizing economies of scale, processes, liquidity and capital management. Due to the nature of these activities, there is interaction with business units and affiliates within the Group, resulting in a diverse set of IGTs. These include intercompany loans, derivatives, guarantees, and internal (re-)reinsurance. Aegon’s IGT Policy establishes definitions, governance, reporting and monitoring of IGTs ensuring a consistent standard of IGTs usage across the Aegon Group for new and existing IGTs. All IGTs are further covered by the Aegon Global Transfer Pricing Policy in order to ensure compliance with the internationally accepted at arm’s length principle, which dictates that related entities transact with each other as if they are third parties.

Loans

Aegon utilizes intercompany loans for operational liquidity and capital purposes. Within the Group, the following material uncollateralized intra-group loans are granted:

Derivatives

Aegon Derivatives N.V., a 100% pass-through vehicle, centralizes and mitigates counterparty risk related to the use of OTC derivatives across the Aegon Group in one entity. Primarily European entities (except the UK domiciled entities), make use of Aegon Derivatives N.V. In addition, foreign exchange derivatives are centrally managed within Aegon N.V. ensuring netting and process advantages. As of December 31, 2021, the net (credit) exposure on the abovementioned internal arrangements was limited as these are mitigated through collateral arrangements.

Guarantees

Aegon N.V. and its subsidiaries provide guarantees for performance under contracts for certain aspects of the business transacted within the Group. The agreements include, but are not limited to, letters of credit, (re-)insurance contracts, maintenance of liquidity, capital and net worth maintenance agreements. The performance of the various entities under the terms of the agreements are regularly assessed to ensure that the entity has sufficient resources on a best estimate basis to meet the obligations guaranteed under the agreement. As a result, there is minimum exposure for these guarantees to the group.

Internal reinsurance

Subsidiaries of Aegon N.V. enter into reinsurance agreements in the normal course of business to (among other reasons), pool risks, improve group diversification, facilitate higher group risk retention for smaller units and efficiently manage capital. All transactions are executed with the arm’s length principle and in accordance with the Aegon Global Transfer Pricing Framework. In many cases, reinsurance is supported by trusts, funds withheld and/or letters of credit. Any exposure above these amounts is assessed based on Aegon N.V.’s IGT policy to ensure the exposure is within policy limits.

A.2 Underwriting performance

Underwriting performance by geographical area    

Premium income decreased by EUR 655 million in 2021 and is mainly driven by a shrinking life portfolio in the Netherlands and a reduction of upgraded life insurance policies to the retirement platform in the UK. Premium paid to reinsurers increased by EUR 815 million in 2021, mainly driven by a reinsurance transaction covering universal life policies with secondary guarantees in Americas. More details can be found in Note 6 of the Integrated Annual Report 2021. There are no material changes in the total amount in ‘Policyholder claims and benefits’. More details can be found in Note 12 of the Integrated Annual Report 2021. There are no material changes in the total amount in ‘Commissions and expenses’. More details can be found in Note 14 of the Integrated Annual Report 2021.

A.3 Investment performance

Investment performance recognized in income statement    

The following sections will provide more detail about Aegon’s investment income in general and by asset class (section A.3.1) and its investment related results and impairments (section A.3.2). Section A.3.3 provides information about Aegon’s gains and losses of investments recognized directly in equity. Finally, the last section A.3.4 provides information about Aegon’s investments in securitizations.

A.3.1 Investment income

Aegon Americas is the largest contributor to the investment income with EUR 2,910 million (2020: EUR 2,986 million) followed by Aegon the Netherlands with EUR 2,088 million (2020: EUR 2,083 million), and Aegon UK with EUR 1,691 million (2020: EUR 1,795 million).

Investment income by asset class

For interest-bearing assets, interest is recognized as it accrues and is calculated using the effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial assets or liabilities are recognized as an adjustment to the effective interest rate of the instrument. Investment income includes the interest income and dividend income on financial assets carried at fair value through profit or loss. Investment income also includes rental income due.