Aegon Annual Report 2017

Annual Report

2017

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Table of contents

Strategic information

Financial statements of Aegon N.V.

Introduction3 Income statement of Aegon N.V.

310

CEO letter

4 Statement of financial position of Aegon N.V.

311

Composition of the Executive Board

Notes to the financial statements

312

and the Management Board6

Aegon's strategy

9

Independent auditor's report

323

Business overview

History and development of Aegon

11

Selected financial data

12

Non-Financial Statement

14

Business lines

21

Results of operations

23

Worldwide23

Americas32

Europe48

Asia74

Aegon Asset Management

83

Asset-Liability Management

90

Reinsurance ceded

92

Risk management

94

Capital and liquidity management

100

In control statement

109

Regulation and Supervision

111

Governance

Report of the Supervisory Board

115

Members of the Supervisory Board

123

Remuneration Report

126

Corporate governance

134

Differences between Dutch and US company laws

139

Code of ethics

140

Controls and procedures

141

Consolidated financial statements of Aegon N.V.

Exchange rates

146

Consolidated income statement of Aegon N.V.

147

Consolidated statement of comprehensive income

of Aegon N.V.148

Consolidated statement of financial position of Aegon N.V. 149

Consolidated statement of changes in equity of Aegon N.V. 150

Consolidated cash flow statement of Aegon N.V.

153

Notes to the consolidated financial statements

154

Remuneration302

Other information

Profit appropriation

332

Major shareholders

333

Other financial information

Schedule I

336

Schedule II

337

Schedule III

340

Schedule IV

342

Schedule V

343

Additional information

Compliance with regulations

345

Risk factors

346

Property, plant and equipment

366

Employees and labor relations

366

Dividend policy

367

The offer and listing

368

Memorandum and Articles of Association

369

Material contracts

370

Exchange controls

370

Taxation371

Principal accountant fees and services

377

Purchases of equity securities by the issuer

and affiliated purchasers379

Quarterly results ? unaudited

380

Glossary381

Abbreviations387

References388

Disclaimer389

Contact391

Annual Report 2017

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Annual Report 2017

CONTENTS

3 Strategic information Introduction

Introduction

About this report

This report serves as Aegon's Annual Report for the year ended December 31, 2017. It presents the consolidated financial statements of Aegon pages 147-308 and the stand-alone financial statements of Aegon N.V. pages 310-322, both prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ('IFRS-EU'), and Part 9 of Book 2 of the Dutch Civil Code.

Aegon N.V. is referred to in this document as 'Aegon', or 'the Company', and is together with its member companies referred to as 'Aegon Group' or 'the Group'. For such purposes, 'member companies' means, in relation to Aegon N.V., those companies required to be consolidated in accordance with the Netherlands legislative requirements relating to consolidated accounts.

Presentation of certain information

References to the 'NYSE' are to the New York Stock Exchange and references to the `SEC' are to the US Securities and Exchange Commission. Aegon uses 'EUR' and 'euro' when referring to the lawful currency of the member states of the European Monetary Union; 'USD', and 'US dollar' when referring to the lawful currency of the United States of America; 'GBP', 'UK pound' and 'pound sterling' when referring to the lawful currency of the United Kingdom; and 'PLN' when referring to the lawful currency of Poland.

References

References are included on page 388 of this document.

Annual Report 2017

CONTENTS

4 Strategic information CEO letter

CEO letter

2017 was a year to be proud of as we continued to grow our business profitably, strengthened our capital position, executed our strategy and helped millions of people achieve a lifetime of financial security.

Our environment

Last year saw a welcome improvement in the world economy, with the 3% pickup in global growth the highest rate recorded since 2011. For Aegon, the macroeconomic backdrop was in general positive. Economic growth improved across the majority of our markets, and this was reflected in business and consumer confidence. Inflation remained relatively low and central bank policies moved slowly onto a path of normalization globally. The rise in interest rates, be it from a very low base, was a beneficial development not only for customers wishing to save for the future, but also for Aegon and the industry as a whole.

Political events were once again followed very closely by the financial community. Indeed, political developments in Aegon's three largest markets continued to make headlines, with a new President taking office in the US, the formation of a new coalition in the Netherlands, and the triggering of article 50 by the UK government to leave the EU. The regulatory world also continued to change rapidly. In the US, for instance, the Department of Labor implemented a new fiduciary rule to ensure customers' best interests are served, whereas in the UK, changes to corporate tax rate policy required us to hold more capital.

Our financial performance

2017 was a very positive year for Aegon from a financial perspective, and I am pleased that we are, as a result, well positioned to achieve our 2018 financial targets. In terms of our key financial metrics, our earnings were strong, we continued to generate solid sales ? particularly in fee businesses, pension businesses, mutual funds and third-party asset management ? and we made progress on our return on equity target. Furthermore, recapitalizing our Dutch business and strengthening our group solvency ratio means that we are able to fully focus on continuing to implement our strategy, such as executing our expense savings program, which will lead to annual EUR 350 million cost savings by year-end 2018. Most important of all, we paid out a total of close to EUR 50 billion in claims and benefits over the year, demonstrating how relevant our company is to the lives of our millions of customers

Our company's transformation

Customers' needs and expectations are continuously evolving and we are therefore changing the way we serve them. In 2017, we made significant progress across our company in becoming a more innovative and digital company, positioning us well for future growth.

In our largest market, the US, we continued our work to reduce expenses in order to boost earnings and modernize our business by investing in new technology. In early January of 2018, we announced that we would outsource the administration of our life, health, annuities and benefits businesses. This decision represents a major strategic step forward, as our customers will benefit from both enhanced digital capabilities and higher service levels. In addition, the divestment of the majority of our run-off businesses marked a major milestone in the strategic transformation of our US business.

The most important development in the Netherlands over the last year was the recapitalization of our Dutch business by injecting capital from the Group and divesting Unirobe Mee?s Groep. As a result, the unit is now strongly capitalized, is expected to generate healthy cash flows, and is positioned to pay a dividend to the group in 2018, which represents a very significant turnaround from only a year ago.

In the UK, we have transformed our business into the number one retail investment platform in the market, with over 1.2 million customers. Our main focus over the last year was continuing to integrate Cofunds and BlackRock's defined contribution business, together with upgrading tens of thousands of customers from our backbook onto our state-of-the-art platform, which increased assets to more than GBP 117 billion. This growth is a direct result of our decision to reposition our UK business, and underlines the benefits of moving to a feebased business model.

During 2017, we took the decision to implement a new structure in our European asset management business to enhance synergies, become more agile and improve earnings. Furthermore, our asset management joint ventures in China and France have proven very successful in contributing to underlying earnings and the growth of our business.

The significant progress achieved in our largest markets was also replicated in our developing markets. In Asia, for instance, our Chinese joint venture has become profit-making due to the continued success of our critical illness product. Our Asian highnet-worth business has made a meaningful contribution to the group, upstreaming a special dividend of USD 200 million for the first time. Elsewhere, our business in India is a leader in the digital insurance market, and continues to set the standard for offering life insurance online. Perhaps most pleasing of all, we have made significant progress in terms of how we share ideas, information

Annual Report 2017

CONTENTS

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