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.

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

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.

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

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

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:

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 37719.

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.

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

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.

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.

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.

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.

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 document.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

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.

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

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 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.

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.