To prosper, we believe companies must create long-term value for the societies in which they operate. Aegon creates value in several ways: as a provider of financial services, as well as a responsible employer and business partner. We also make significant social and economic contributions through returns to shareholders, tax and support for local communities, as well as through investments both for our own account and on behalf of our customers. Our aim is to be a responsible corporate citizen, fully aware of the impact we have on our stakeholders and on society as a whole.

This is Aegon’s Annual Report on Form 20-F for the year ending December 31, 2018. It is the Company’s first fully integrated report. Aegon’s aim in producing this report is to provide a clear, balanced overview of the Company’s operations, strategy and performance. In this report, we look at the trends and challenges our business is facing, at our strategy, at how we create and share value – and at how we safeguard this value through a responsible approach to business. This report also contains the 2018 consolidated financial statements and Company financial statements for Aegon N.V. from page 98.

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

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

Aegon prepares its consolidated financial statements in accordance with IFRS and with Part 9 of Book 2 of the Netherlands Civil Code for purposes of reporting with the U.S. SEC, including financial information contained in this

Annual Report on Form 20-F. Aegon’s accounting policies and its use of various options under IFRS are described in note 2 to the consolidated financial statements.

Other than for SEC reporting, Aegon prepared its Annual Accounts under International Financial Reporting Standards as adopted by the European Union, including the decisions Aegon made with regard to the options available under International Financial Reporting Standards as adopted by the EU (IFRS-EU). IFRS-EU differs from IFRS in respect of certain paragraphs in IAS 39 ‘Financial Instruments: Recognition and Measurement’ regarding hedge accounting for portfolio hedges of interest rate risk. Under IFRS-EU, Aegon applies fair value hedge accounting for portfolio hedges of interest rate risk (fair value macro hedges) in accordance with the EU ‘carve out’ version of IAS 39. Under IFRS, hedge accounting for fair value macro hedges cannot be applied to mortgage loans and ineffectiveness arises whenever the revised estimate of the amount of cash flows in scheduled time buckets is either more or less than the original designated amount of that bucket.

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

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

If you have comments or suggestions about this report, please contact our offices in The Hague. Contact details may be found on page 436.

These initiatives stem from a clear purpose and culture – fundamentals which define why we exist and will continue to exist, and grow, long into the future. Our purpose is clear, to help people achieve a lifetime of financial security. That requires smart planning, promoting healthy lifestyles and offering the right solutions at every stage of our customers’ lives. We are clear in the responsibility we have for our customers. We have put forward a robust approach to securing the financial security of our customers’ retirement and promoting healthy aging in our society.

Serving customers

Our services have never been more necessary than it is today. According to the World Health Organization, over 2 billion people will be over 60 years of age by 2050 – almost a quarter of the world’s population. This demographic change poses far-reaching challenges for society, governments, business and Aegon. One of the key shifts will be who provides that financial security during retirement. The responsibility is shifting fast from governments and employers to individuals. Though many people are neither equipped with the knowledge nor the resources to protect their financial futures. It is our responsibility to help customers make the right choices.

But it does not end there. There is a clear relationship between well-being and the environment we live in. Toward the end

of 2018, Aegon was entrusted to manage and administer more than EUR 800 billion of investments on behalf of our customers. We are doing so, fully integrating environmental, social and governance factors into our investment analysis. Further to that, we are actively engaging with companies in our investment portfolio to improve their sustainability performance.

Our annual retirement research shows that there is a clear connection between wealth and health. We have therefore taken our commitment one step further, supporting people to achieve prosperity and health through all stages of their lives. We are a vocal participant in debates about the retirement challenge and share our knowledge and expertise with the governments and international organizations we work with. Meeting the dynamic needs of our customers and society, responding to new competition, technological and regulatory change, shapes our DNA. We strive to be future fit: by acting as one in an agile manner, being accountable, and above all, being customer centric. This has led to considerable strategic, operational and financial changes across our company, enabling us to enhance our products and services to meet the evolving needs of our almost 29 million customers worldwide.

There is more work to be done. Our Net Promoter Score (NPS), a measure that captures all aspects of our relationship with our customers, showed a decrease in 2018 compared with

a strong increase the year before. The result only strengthens our commitment to continue to enrich the quality, solutions and support we provide to customers.

Financial results and new medium-term targets

Financially, 2018 was challenging. Markets significantly declined toward the end of the year and this directly influenced the value of our customers’ investments, which impacted results of our own administration and services businesses. Even so, we further strengthened our capital position. We raised our full year dividend per share based on our strong capital position and the confidence that we can continue the sustainable growth of capital generation. We have achieved two out of three financial targets for the period 2016-2018: realizing cost savings of EUR 355 million and returning EUR 2.1 billion of capital to shareholders. We made significant progress on our third target, a return on equity of 10%. We have focused on increasing capital generation across our units, providing sustainable and diversified remittances to the Group. This gives us the capacity to invest a significant portion back into existing businesses and to drive future growth. In addition, steps to significantly reduce our leverage ratio in recent years have lowered funding expenses and increased our financial flexibility.

We have announced new financial targets for the period 2019-2021. Building on the successes of the previous three-year period, our focus remains on strong capital generation and providing shareholders with attractive returns. Our targets are underpinned by an active portfolio management of our various businesses, which can be grouped into three distinct strategic categories. These strategic categories are differentiated from each other based on the maturity of our businesses. This will allow us to unlock the full potential of our large customer base and market positions while leveraging our capabilities and propositions where they are most beneficial. The first category ‘Manage for Value’ includes mature, at-scale businesses, which are important sources of capital and earnings for many years to come. We carefully manage their financial and operational risks to ensure that the important cash flows we generate from these businesses are optimized. In the ‘Drive for growth’ category, we have grouped businesses which are at scale and have strong market positions with attractive, profitable long-term growth potential. This is where the vast majority of our investments will be directed. Propositions in this category are mostly digital or platform-based, with an emphasis on fee income and protection coverage, while focusing on broader and longer relationships with our customers and advisors. Finally, we distinguish our ‘Scale-up for the future’ businesses with meaningful market opportunity, which help drive innovation. These businesses bring new platforms, new technology and new business models, which can be leveraged across the company.

Simplification and growth

We continue to simplify our portfolio of businesses and lay the foundations for sustained growth in the years ahead.

Specific steps in 2018 included rationalizing our geographical footprint, entering partnership agreements, upgrading our technology and the consolidation of our administration systems. Actions like these have allowed us to remove expenses from our operations, while at the same time freeing up resources to focus on further improving customer experience and reduce time-to-market. We finalized the sale of the Irish operation and divested our businesses in the Czech Republic and Slovakia. Rationalization helps to create the space to focus on higher-growth markets and business lines. In July, for instance, we expanded our successful partnership with Banco Santander in Spain. The new agreement gives Aegon access to an additional potential client base of four million customers. In September, Aegon the Netherlands acquired Robidus, consistent with our strategic objective to expand our position in income protection and grow our fee-based businesses.

In the US, Transamerica entered into an agreement with Tata Consultancy Services to administer the company’s US insurance and annuity business lines. Involving over 10 million policies, this transaction offers those customers a unique and enhanced digital platform. Transamerica will see a significant reduction in expenses, and an acceleration in growth through faster product development and state-of-the-art technology. The growth opportunities in the US are in three core areas: integrated solutions to customers in the workplace market, new innovative and fairly priced products for individuals and the level of advice and guidance we offer to our customers. Offering a full suite of products gives us a distinctive competitive advantage. Supporting future growth through modernization and the emphasis on serving the customer has also been a feature of changes elsewhere. In the UK, we strengthened our existing partnership with Atos by signing a 15-year contract to service and administer existing business. This will further improve customer service for around 1.4 million people. In the Netherlands, we are consolidating the administration of pension products into the systems of our subsidiary TKP.

On behalf of Aegon’s Management Board, I would like to express my sincere thanks to everyone who has contributed to our success as a company over the last 12 months. In particular, I want to acknowledge and say thank you to our customers, for the trust they continue to place in us; our shareholders, for their support and confidence; and finally, our team of over 26,000 colleagues whose dedication to serving our customers is second to none.

Alex Wynaendts

Chief Executive Officer and Chairman of the Executive Board of Aegon N.V.

Our purpose

As a company, our purpose is to help people achieve a lifetime of financial security. This purpose is particularly relevant in today’s world as people live longer, healthier lives, new technologies are transforming the way we work, and it is clear that, in many countries, state and company pensions are no longer enough to maintain living standards.

Our products and services

Aegon’s businesses offer a range of financial products and services to help customers throughout their working lives and into retirement. These include life insurance, accident & health cover, pensions and retirement plans, annuities, savings products and investments. In some countries, we also offer mortgages, home and car insurance. We insure customers’ lives, protect their families and help them save for education and retirement. We help them buy new homes, and manage their long-term investments. When they retire, we provide a stable income. We also help our customers meet care costs – a growing concern in many parts of the world – and ensure, that when they are gone, their families’ future is secure. In retirement particularly, we see a connection between health and long-term financial security.

Our markets

We have four main reporting segments: Americas, Europe1, Asia and Asset Management. Of these, the Americas is by far the largest, accounting for nearly 60% of our annual earnings. Our holding company, Aegon N.V., is headquartered in The Hague, the Netherlands. Aegon Asset Management manages assets on behalf of third parties and Aegon’s own businesses, covering all major asset classes, including fixed income, equity and real estate. We also have Transamerica Ventures – our corporate venture capital firm, which invests in innovative, new technology companies. Our businesses operate locally through two main brands: Aegon (mainly in Europe and Asia) and Transamerica (mainly in the US).

In many countries, we have joint ventures; these give us access to local markets and expertise. In Spain and Portugal, for example, we offer products through Banco Santander’s more than 3,000 bank branches. We also have significant joint ventures in China, India, Japan, France, the Netherlands, Brazil and Mexico.

For further details on our businesses, see our Business Overview on pages 336-368.

With businesses across the Americas, Europe and Asia, we have the advantages of a global group. We can share talent, knowledge, processes and technologies. We are also more efficient with our capital: alone, our businesses would not be able to diversify risk, and as a result would need to hold significantly more capital. Size can also be important in the investment industry – our global presence is the basis for our growing asset management business.

Distribution

In many markets, to distribute our products, we work with intermediaries. These include brokers, agents, banks, employee benefit consultants and independent financial advisors. This multi-channel approach allows us to reach more customers. Increasingly, our products and services are sold direct to customers and companies, including via online platforms. We now have nearly 7.7 million ‘digitally connected’ customers. Aegon also owns distribution businesses; these include Origen Financial Services in the UK and World Financial Group, which operates in the US and Canada.

Regulation

We operate in a highly regulated industry. Over the past decade, regulation has become increasingly complex. Much of this new regulation was influenced by the 2008-2009 financial crisis. Since the crisis, regulators have emphasized the need for more effective consumer protection. As a result, we have seen tighter controls on product design, distribution and reporting. The biggest change was the introduction of new capital rules in 2016 under Solvency II; an insurer’s Solvency II ratio has now become an important measure of its financial strength.

At the same time, we have seen new rules on data privacy – both in Europe with the EU’s General Data Protection Regulation (GDPR) and with new cyber security legislation in New York and California. Meanwhile, PSD2 (the new EU Payment Services Directive) will bring in more open banking, allowing consumers to share their personal financial data electronically. We are also seeing further efforts to open up Europe’s financial services market, via MiFID II, as well as changes in financial reporting rules with IFRS 17 on accounting for insurance contracts (due for

introduction in 2022). Changes in regulation can have a profound effect not only on the way we manage our business, but also on our profitability and the products and services we offer.

Sources of revenues and earnings

Most of our revenues come from three sources: premiums from customers, investment income, and fees and commissions. Our earnings come from fees, spreads, and technical profits.

In recent years, we have concentrated more on fee-based business, and less on spread-based business. This is mainly in response to low interest rates and increased capital requirements. This shift makes the source of our earnings more balanced and diverse, and makes our capital base more predictable and less at risk from fluctuations in world financial markets. There is no material seasonality to our sales or income,

though we usually experience an increase in mortality claims in the first quarter (which is winter in our main markets).

Revenues 2018

(in EUR million)

Ownership

Aegon N.V. shares are listed in both Amsterdam (Euronext) and New York (NYSE). More than three-quarters of our shareholders are located in our three main markets: the US, the Netherlands and UK. Shareholders meet at least once a year at our offices in The Hague. Aegon’s largest shareholder is Vereniging Aegon, an association whose purpose is to protect the long-term interests of both Aegon and its stakeholders. Vereniging Aegon currently holds 32.64% of voting rights in the Company. However, in the absence of a Special Cause, Vereniging Aegon may only cast one vote for every 40 common shares B it holds. For more details, see page 43.

Long-term value creation

Our business creates value for our stakeholders and society. Because of the nature of this business, value created is often financial, but it may also be social, economic or environmental:

Social and economic role of financial services

Our businesses make a significant social and economic contribution. Insurance, in particular, strengthens social stability by protecting people, property and assets. Financial companies are also significant long-term investors in the economy, funding public and private sectors, creating new jobs and driving business growth. More broadly, financial services allow individuals and businesses to take risks, as well as plan and invest for the future.

Our value creation model

To operate our businesses, we need resources. We need customers; we need investments; we need a workforce and business partners. These resources may be ‘financial’, ‘human’ or ‘intellectual’. The chart on page 14 shows our value chain: how our business uses these resources (or ‘capitals’) to create long-term value for our stakeholders and the wider community.

Our stakeholders

As an international business, we have many stakeholders. Their relationship with Aegon depends not only on the nature of each stakeholder’s organization and activities, but also the value created by that relationship (both for the stakeholder and for Aegon). Aegon defines its stakeholders as ‘any individual or organization affected, or likely to be affected, by its business or that may, in turn, affect the environment in which the Company operates’.

Aegon recognizes five main stakeholder groups:

Aegon’s relationships with its stakeholders are based on mutual benefit. Through these relationships, we earn our ‘social license to operate’ – implicit consent from employees, stakeholders and the general public to continue our business¹.

Dilemmas

We recognize that, in creating value for one stakeholder group, we may deplete value for another. In recent years, for example, we have seen significant investments in new technologies in the financial services industry. This investment has improved efficiency, reducing costs for financial companies and strengthening customer service. However, it has also led to job losses, particularly in areas of the industry with clearly-defined processes that can be easily automated. Recent research from PwC estimated just over 30% of insurance jobs, for example, will disappear by the 2030s because of automation². Our asset management business faces similar dilemmas: Aegon’s recent decision no longer to invest in tobacco, for example, may reduce investment opportunities, but may also bring wider health and social benefits.

Engagement

Aegon engages with stakeholders to understand these dilemmas. Engagement allows us to take different stakeholder views into account when making our decisions. We engage with stakeholders regularly through polls and surveys, conferences, perception studies, workshops and face-to-face meetings.

We also organize panels with our customers and employees. We use their feedback to improve our products and services, to make sure we are aware of risks and opportunities for our business and can continue to deliver long-term value. Engagement takes place at both local and Group level.

Where appropriate, we also embed this process in our policies and procedures. Our Pricing & Product Development Policy, for example, includes the principle of reasonable distribution of value; this ensures fair returns from our products to customers, intermediaries and shareholders.

We also engage regularly with the companies we invest in. These engagements focus on environmental, social and governance issues. In recent years, we have been particularly active, in this area, on climate change (see page 20). To support this approach, we are signatories to a number of international agreements, including the Global Coalition on Aging and the UN Principles for both Sustainable Insurance and Responsible Investment. For more information, see our Responsible Investment Report, available online.

We operate in a complex environment. We are affected by a host of social and economic factors – from financial market performance and new regulation through to changing demographics and the increasing use of digital technology in our homes and offices.

At the same time, customers are demanding more from financial services. Aging means people are spending longer in retirement; older populations also bring more health issues. People need financial products that will not only help them save, but also manage their savings in retirement and ensure they can meet healthcare costs. Currently, only around 25% of people believe they are saving enough for retirement¹.

With products like life insurance and pensions, trust is important. People need to know that, when the time comes, their insurer or pensions provider will pay out their claims and benefits. Trust in financial companies has improved in recent years, but it is still lower than trust in, for example, healthcare providers or technology companies. Even so, people are more likely to trust their friends or peers than companies or institutions. The fact is, profits or a recognizable brand name are no longer enough. To win trust, businesses must act responsibly, build relationships through regular contact with customers, and play their part in tackling social issues like climate change, poverty or health and well-being.

Our business is also changing. We used to be essentially a manufacturer of financial products. Now, we are a provider of financial services. More of our business is fee-based. We are less reliant on income from financial market spreads. In some cases, our businesses also offer products from other providers. Thanks to technology, we know far more about our customers; with access to data, we are putting more emphasis on prevention. If we can use technology to help our customers lead healthier lives, this benefits them and may reduce claims and costs for us as their insurer.

Business and economic conditions

In the past two years, market conditions have generally been favorable, though there are now significant tensions in the global economy. We have seen economic growth in both the US and the Netherlands, as well as in emerging markets like China and India. The Dutch housing market has been booming. In the US, economic growth has been boosted by tax cuts. In the last quarter of 2018 however, stock markets saw substantial declines. Low interest rates continue to act as a drag on earnings and revenue. And growth in the UK has slowed, in part because of concerns over the country’s planned withdrawal from the EU².

Aegon also faces difficult market conditions in Turkey: political uncertainty, higher inflation and a substantial drop in the value of the Turkish lira. Growth could be slowed by disputes over trade. Meanwhile, a strong US dollar may weaken growth in emerging markets, as could worsening credit risk in China.

Our material topics

We conduct a regular assessment of our operating environment. This assessment allows us to identify our most material topics – those most likely to affect Aegon (its operations, profits or reputation) or its stakeholders (their financial or personal well-being, their businesses, employment etc.). Results from this assessment are incorporated directly into Aegon’s annual strategy, business planning and reporting processes; they help identify emerging risks and opportunities, ensuring that we are able, where necessary, to adjust our strategy or risk management approach to take account of economic, social and environmental developments (for more details, see page 93). Our latest assessment covered 16 different social, financial, environmental, technological and regulatory topics. Of these topics, we identified five as most material (topics which were rated by both management and external stakeholders as having most impact on the Company’s ability to create value over the short, medium and long term): reputation & trust, cyber & information security, new technologies & digital transformation, low interest rates and changing consumer behavior.

Climate change

Climate does not rank highly in our materiality assessment¹. However, we carry out a regular review of climate risk. This is partly in response to stakeholder expectations – partly because we recognize the potential impact of climate change on both our business and on the communities in which we operate.

Our review showed only minor direct risks to Aegon’s businesses; our principal risk is reputational. The assessment covers several areas: these include regulatory, strategic, underwriting and investment risk. All risks are assessed for both impact and likelihood. There are nine risks in all. Most were rated either ‘unlikely’ or ‘extremely unlikely’, including those with the highest

potential impact on our business. One risk was categorized as ‘likely’ – negative media coverage of our investments (this, according to our assessment, would have a moderate impact on our business).

We have measures in place to counter climate risk. These include monitoring of new regulations, business continuity plans and regular analysis of investments.

Our review is overseen by our Climate Working Group (CWG); the CWG’s work is based on recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD), published in 2017.

Our vision

For us, creating this secure future means smarter, long-term financial planning. It means the right financial products and services at every stage of life. It also means healthier lifestyles, redefining what we want from retirement, and it means building a cleaner, healthier environment. In each of these areas, we believe Aegon has a positive contribution to make: in helping people achieve financial security; in speaking out on retirement and healthy aging; in using our influence as an investor on environmental issues, and in supporting the UN’s sustainable development agenda. To implement this responsible business strategy, we are also changing the way we do business. Over recent years, we have built a strong foundation – restructuring our businesses, and investing more in new technologies and growth markets. As a result, we are more efficient – and more focused on sustainable growth and the value we can create over the long term, for both our customers and the wider community. To support the implementation of our strategy, we have set ourselves financial targets for the period 2019-2021 and have selected six non-financial indicators; these will be used to assess progress against specific aspects of our strategy.

For individuals: financial security and well-being

This goes to our purpose as a company. In many countries, we know people can no longer rely on state or company pensions and benefits. They need to take more personal responsibility for their finances. To help them, we are investing in new digital technologies. For our customers, this means instant access to their finances, so they can track their savings and investments. And we are putting more into financial education; to take personal responsibility, people need information and knowledge. In the Netherlands, for example, we have the ‘Goed met Geld’ – or ‘Mastering Money’ – program. By the end of 2018, more than 100,000 people had completed the program’s basic financial awareness test.

At the same time, we are investing in new business models – models, which make use of these new technologies. In the UK, for example, we have created Aegon Retirement Choices (ARC). With ARC, customers and their financial advisors can manage individual pensions, assets and savings through a single, easy-

to-access platform. We are simplifying our products, expanding distribution and stepping up workplace marketing – offering pensions and other products through employers. Aegon now has 11 million workplace customers in our three main markets: the US, UK and the Netherlands. We want to serve customers throughout their working lives and into retirement. We realize that customers need us most at crucial points in their lives: when they buy a home, have children, or prepare for retirement, for example. We also want to increase interaction with customers – we are in an industry where, traditionally, there is very little direct contact. More frequent interaction helps us improve customer service. We believe it will also strengthen trust in our brand, and flow through eventually into higher sales.

See page 39 for more information on how our approach to financial security and well-being contributes to these UN Sustainable Development Goals.

For society: secure retirement and healthy aging

We know the world is getting older. People are spending much longer in retirement. In 1950, you might expect to have lived another 13 years after retirement. Now, that figure is more than 20 years¹. For many people in the US, Europe and Asia, ‘outliving your savings’ has become a real possibility. At the same time, the cost of long-term care is rising. Aging is driving real change in our business – it is putting pressure on state and company pensions; in response, it is clear people will need to take more personal responsibility for saving for their retirement.

Our aim is to become a thought leader on retirement and healthy aging. We invest in research through the Aegon Center for Longevity and Retirement (ACLR), and its sister organizations in the US and Brazil. We have also built a network of partnerships to push for change and reform in the way we manage retirement, healthcare and aging. As part of this network, we work with the Global Coalition on Aging, the American Association of Retired Persons (AARP), the VU University Alzheimer Centre and the MIT AgeLab.

We also have supplemental health and long-term care businesses in the US. In the UK and the Netherlands, we invest in care homes for the elderly. In 2018, we supported a new Dementia Discovery Fund and stopped investments in tobacco; smoking is a leading cause of many of the chronic illnesses pushing up healthcare costs.

Today, we are more likely to see retirement as a new, potentially exciting phase of our lives. However, we are still not saving enough for our pensions – our own research shows that nearly half of people believe that, because of the economic and social consequences of aging, future generations will be worse off than their own. With this work, we want to change attitudes to retirement, health and aging – and encourage more people to save and invest for the long term.

See page 39 for more information on how our approach to secure retirement and healthy aging contributes to these UN Sustainable Development Goals.

For the environment: clean energy and sustainable real estate

As an investor, we have an important role to play – in supporting new low-carbon technologies, and improving the carbon footprint of our real estate investments, so we contribute to a cleaner, healthier environment.

Climate change has been a focus of our investment strategy since 2014. We have built consideration for climate change into our daily investment decisions. We have stopped investing in many coal-mining companies. In February 2019, we also stopped investment in companies involved in oil sands¹; prior to the decision, we had approximately EUR 500 million in these investments. Aegon has also signed up to the Dutch national climate agreement, which looks to reduce the Netherlands’ overall carbon emissions. Where possible, we use our influence as an investor to persuade companies to reduce their impact on the environment. We engage with them on issues like scenario planning, disclosure and water management to increase our understanding of climate-related risk.

At the same time, we are investing in clean energy. At the end of 2018, our investments in this area were worth more than EUR 570 million, mainly in wind power and solar energy tax credits. Alongside renewables, we also invest in green bonds, smart energy storage and smart grids. We encourage greater energy efficiency through our real estate investments – for example, we are renovating properties in our Amvest fund in the Netherlands. We want to achieve an average B label for energy efficiency; currently, more than half of these properties are rated E or F (A is the highest). To Dutch customers,

we offer green mortgages. We have also built consideration for climate into our Responsible Investment and Sustainable Procurement policies.

See page 39 for more information on how our approach to clean energy and sustainable real estate contributes to these UN Sustainable Development Goals.

Building a strong foundation for our business (2016-2018)

To pursue our strategy, we need to have a business that is fit for purpose. Over the past several years, we have been through significant restructuring and simplification. We have sold businesses, and invested more in areas we believe will bring us growth. We have also reduced costs, redesigned products, tightened internal controls and strengthened our capital position. We have had to adapt our products to new circumstances – volatile stock markets and low interest rates, particularly in Europe. Most of this restructuring is now behind us; we are already seeing the results in lower costs and better returns for our shareholders.

Optimizing our portfolio of businesses

Since 2016, we have sold several businesses. These businesses included our US BOLI-COLI¹ and life reinsurance operations, as well as UMG, our distribution company in the Netherlands. We have also sold annuities books in both the US and UK – and have exited Ireland, the Czech Republic and Slovakia².

These divestments have allowed us to invest elsewhere – in businesses we believe will bring future growth. Generally, these businesses are digital or platform-based; they use less capital, provide earnings from fees, have shorter pay-back periods and offer us an opportunity to sell more products and services to existing customers. In the UK, for example, we now have the country’s leading investment platform, with GBP 120 billion in assets under administration. In the Netherlands, we have been expanding our banking services, including Knab, our online bank. We have also invested in distribution – for example, we have expanded our partnership with Banco Santander in Spain and Portugal.

As a result of these changes, approximately two-thirds of our earnings now come from newer, growth businesses. We expect this to increase in the coming years. The rest comes from other

businesses, like our Dutch life insurance operations, which tend to be lower growth, but which still generate cash and earnings for the Group.

Increasing efficiency

We have also worked hard to improve our efficiency. This increases profitability, and helps us deliver quicker, more reliable customer service. We have cut back costs and put in place extensive hedging programs to reduce risk. In the US and the Netherlands, we have been simplifying our back-office systems, introducing new, more efficient IT platforms. We estimate that automating internal processes will bring significant savings. Using artificial intelligence also helps reduce fraud. At the same time, we have been investing in digitalization – encouraging more customer self-service and adding mobile apps. In both the US and UK, we have transferred policy administration, improving customer service and speeding up product development. With more services transferred to external providers, we have strengthened our global procurement department; this will help bring down costs and ensure effective controls over these services.

Improving product pricing and control environment

We have controls embedded in our processes and systems; this is to ensure we have strong and adequate risk and management control – important if we are to retain trust, particularly among customers and investors. In 2018, we settled two cases in the US; one linked to concerns over investment models, the other to rate adjustments on life insurance policies.

To ensure we have effective controls, we have a Control Excellence program. As part of this program, we have recently strengthened IT controls and checks on fraud. We have also tightened controls on financial reporting and revalidated many of our actuarial models. Our goal is to have management controls across the Group that are both predictable and consistently applied.

In some areas, we have also reviewed product pricing and design. We increased rates in our long-term care and universal life businesses, for example – and repriced variable annuities in the US and Japan. We have also introduced a stricter approach to pricing; this includes targets for returns and pay-back requirements. Our approach should mean better margins and avoid unprofitable sales, which weighed on our performance in the past.

Maintaining a strong capital position

A strong capital position is an important part of Aegon’s strategy. It protects our business against fluctuations in world financial markets – and ensures that, in turn, the Company continues to pay customers claims and benefits as expected. As a Group, we have a strong capital position. At the end of 2018, our Solvency II ratio – a measure of our capital strength – stood at 211%³, above our 150%-200% target range.

Our main businesses are all well within, or above, their own target ranges. Aegon’s stronger capital position is the result of both improved capital generation from our businesses and continued investment in less capital-intensive products and businesses. Meeting our capital targets also increases flexibility to return capital to our investors.

Over the past three years, to support our strategy, we have made significant changes at our businesses:

Americas

In the US, we introduced a five-point plan: to sell off non-core businesses, overhaul our products and distribution, save on expenses, reduce our geographical footprint and improve management of existing policies. As part of this plan, we transferred some of our policy administration to Tata Consultancy Services (TCS). In time, this is expected to save us USD 100 million a year. With this partnership, 2,000 employees moved to TCS. We also sold our pay-out annuities and BOLI-COLI businesses, as well as the last of our US life reinsurance activities. We simplified our organization in the US, closing offices in three main locations: Los Angeles (CA), Folsom (CA) and West Chester (OH) – and exited distribution channels like direct TV and direct mail that were no longer core. We simplified our product portfolio by eliminating 20 products. This will allow us to devote more resources to customer service.

Europe

In the Netherlands, Aegon is concentrating on pensions, income protection and mortgages. In recent years, we have seen a sharp decline in premium income from defined benefits pensions and individual life insurance. In difficult financial conditions, there is also increased pressure on capital. In response, Aegon has taken steps to reduce risk, and sold UMG, its distribution business in the Netherlands. We also injected more capital into our Dutch operations – and, since the end of 2015, have cut costs by EUR 79 million. At the same time, we have invested more in fee-based products and products that require less capital. We have also been expanding our banking business. Aegon Bank already has over 600,000 customers. Knab, our online bank, has branched out from simple current accounts; it now offers a range of financial products, including mortgages, savings, insurance, business accounts and investments. Overall, banking now makes up around 20% of our underlying earnings from the Netherlands.

In the UK, we have repositioned our business. In 2016, we sold our annuities book, and made two important acquisitions: Cofunds and BlackRock’s UK workplace pension business. Over the past year, we have been busy switching assets from these acquisitions onto our UK investment platform. Most of these migrations are now complete, though we expect a final tranche in early 2019 with the inclusion of business from UK building

society Nationwide. We also announced the transfer of some policy administration. Atos will take over administration of policies belonging to around 1.4 million UK customers not currently on our investment platform. Over time, the new contract will save us GBP 30 million a year, and bring down our costs per policy by around 40%. We expect partnership to be effective as of mid-2019. In making these changes, Aegon in the UK has moved from providing insurance to pensions and long-term savings. And, in doing so, we have digitized our business, focused on key products for our customers, and sharply reduced our credit and longevity risk. Currently, Aegon has more than 20% of the UK’s retail-advised platform market¹.

In Southern and Eastern Europe, we sold our businesses in the Czech Republic and Slovakia. We also withdrew from the mortgage and home savings markets in Hungary. At the same time, we expanded our distribution agreement with Banco Santander. With this expansion, we will have access to 14 million customers across Spain and Portugal.

Asia

We regard Asia as a long-term growth market. There, we have been concentrating on high-net-worth customers through Transamerica Life Bermuda. We are also putting more emphasis on digital, and have taken steps to reduce costs and improve capital management. In India, Aegon Life is now direct only. In China, 95% of our policies are issued digitally. Our joint venture GoBear has 15 million users across Asia for its comparison website. In Japan, we have been less successful. We recently repriced our products. We are currently reviewing our business there with our joint venture partner Sony Life.

Asset Management

Over the past several years, Aegon’s asset management operations have been growing steadily. Since 2010, our earnings from asset management have more than trebled². We have used our traditional strength in fixed income to expand. We have seen positive net inflows from third-party clients in each of the past seven years; that has more than offset outflows from Aegon businesses (as units have shifted to more fee business, they have brought down risk, changed mandates and reduced their reliance on investment returns). Aegon Asset Management’s recent growth is built partly on our partnerships – in France, with La Banque Postale Asset Management (LBPAM) and in China with Industrial Fund Management Company (IFMC). These partnerships give us access to strong distribution. LBPAM has access to the French Post Office’s more than 17,000 branches across France. Internally, we have restructured Aegon Asset Management. We have created a single organizational structure, and combined our European sales teams to improve efficiency and decision-making.

Having built a solid foundation for our business, our focus now is on sustainable growth in all senses of the word. Almost half the capital we currently generate goes back into our business. In the next few years, we will:

Across our main businesses, we have strategies to put this approach into practice:

Americas

In the US, we will modernize our processes and systems. Our partnership with TCS means we can concentrate on faster product development, improving customer service and expanding our use of technology. We will build a single platform for workplace sales, covering pension administration, life and health, and managed financial advice. We already have six million workplace customers in the US at more than 40,000 companies. Digital technology and our mobile-first approach will help us get closer to customers and drive sales of additional products. We are the only US provider with a top-ten position in workplace-sold pension administration, voluntary employee benefits and long-term care². We are focusing on ‘wealth and health’ – a particularly important issue in the US. Americans spend over USD 10,000 a year on healthcare, more than double the OECD average³.

Europe

In the Netherlands, we will focus on ‘income and living’. We want to consolidate our leading position in pensions, and move more workplace customers into individual pensions and investments. We also want to grow our mortgage and income protection services. In banking, we will continue to look for growth, particularly through Knab, our online-only bank, and by selling more investments through independent financial advisors. We will also aim for profitable growth in our property & casualty and accident & health activities – and shift more to fee businesses. At the same time, our aim is to scale up distribution – in part by working through external partners. We will also look to play an active role in the consolidation of the Dutch insurance market.

In the UK, we will tap into the growing investment platform market. We expect this market to expand by approximately 17% each year through to at least 2022¹. With much of our administration now handled outside the Company, our goal is to attract new customers, and use our scale to bring down costs. We will also look to sell more protection products, and investments alongside platform administration services.

In the rest of Europe, we will bring our businesses closer together. By sharing knowledge and expertise, we can reduce costs and improve customer service. In Hungary, we will look to protect our market position by investing more in IT. In Poland, we will focus on pensions – our insurance business has been shrinking. In Turkey, we are looking for growth despite difficult market conditions. In Spain and Portugal, we will pursue growth, particularly through our partnership with Banco Santander.

Asia

In Asia, we want to continue our recent growth. Over the next several years, we will focus on three important markets: China, India and Indonesia. Key to our strategy is reaching beyond high-net-worth customers, and to increase sales to the region’s burgeoning middle classes.

Asset Management

In asset management, we will look to build on recent progress. We want to grow our third-party business, particularly through fixed income and alternative investments (like mortgages and real estate equity). We will also deepen our partnerships in France and China, extend our responsible investment approach and refocus our sales in Europe and Asia.

Allocation of resources

Our priority is organic growth – in other words, growing existing businesses from our own resources. Any acquisitions are likely to be bolt-on – to add scale to our current businesses or give us access to new customers. We have much less capital committed to run-off businesses than previously; this also frees resources for investment elsewhere and reduces the ‘drag’ effect on our return on equity. We plan to increase returns to investors. Aegon has increased dividends for shareholders in each of the past seven years. Meanwhile, through retained earnings, we expect to reduce our gross financial leverage ratio to the lower end of our current 26%-30% target range. In 2018, we redeemed more than EUR 1 billion in debt and capital instruments; at the same time, we issued EUR 643 million in new debt at a lower rate. This results in lower debt service charges as well as increased financial flexibility for the Group as a whole.

To implement our strategy successfully, we need the right corporate culture. We want to build a flexible organization – one that has the customer at the center of its decision-making.

In 2016, Aegon introduced Future Fit. This program sets out four themes. For each theme, we have defined specific behaviors:

By adopting these behaviors, our aim is to create a company that is fit for the future – one that meets customers’ expectations, is right for our digitally-connected, data-driven world, and can adapt quickly to changing market conditions; this is important if we are to compete with smaller companies that face less regulation and are able to deliver services more quickly. Future Fit behaviors have been incorporated into performance appraisals, training and remuneration. They also form part of Aegon’s leadership development programs. In the Netherlands, Future Fit has been written into our collective labor agreement with trade unions.

Implementation of Future Fit is the responsibility of local businesses. We monitor performance through regular employee surveys. Our latest survey, carried out in November 2018, showed slightly lower scores for Acting as one (74% compared with 75% the year before), Agility (62% compared with 64%) and Customer centricity (72% compared with 74%). Accountability, however, rose to 70%, up from 68%.

As a next step, we will be including Future Fit behaviors in our recruitment. This is important: first, to ensure we recruit the right people for our business and strategy; second, to build a culture focused on long-term value creation.

Future Fit complements our core values. These values form part of Aegon’s Code of Conduct, which applies to all employees worldwide. They are also built into our approach to recruitment and performance appraisal. We require our employees to behave in a way that is consistent with the highest ethical standards to ensure we remain a trusted partner for our customers. Aegon’s Code of Conduct sets out rules and guidelines in different areas, including legal and regulatory compliance, insider dealing, discrimination in the workplace, money laundering, corruption and bribery, protection of personal data and fair treatment of customers and other stakeholders. In addition, Aegon has a 24-hour Global Ethics Line; this allows employees and other stakeholders to report suspected violations of the Code in confidence.

For more information on Aegon’s Code of Conduct, see page 69.

During the year, we paid more to investors – combined, our dividends and interest payments increased by over 19%. Our employee engagement score – at 65 – was unchanged from

the previous year. In relation to customers, our Net Promoter Score (NPS) overall showed a decrease; Aegon businesses ranking in the top half of their markets was down at 41%.

Financial targets and performance

2016-2018

To support our strategy, we had a series of financial targets for 2016-2018 (see table below). These targets addressed return

on equity, expense savings and returns to shareholders. For both expenses and returns to shareholders, we met our targets; for return on equity, we saw an improvement over the three-year period, but failed to meet our 2018 target.

2019-2021

Aegon has now introduced new three-year financial targets, covering the period 2019-2021. These targets focus on sustainable growth, capital generation and ensuring attractive returns for the Company’s shareholders.

The current capital framework and related Group target range remain unchanged for the years 2019-2021.

Over the period, our aim is to maintain a capitalization required for a minimum AA- financial strength rating (for our current ratings, see page 80).

Customers

Claims and benefits

To our customers, we provide significant financial benefits. These include pensions, payment of insurance claims and returns on their savings and investments. For our customers, this money may represent a source of income, or provide resources needed to meet healthcare costs or repair a damaged home. In 2018, total claims, benefits and plan withdrawals increased to EUR 53.6 billion, up from just over EUR 48 billion the year before¹. Alongside these financial benefits, we also manage investments for our customers. At the end of 2018, we were managing and administering more than EUR 800 billion on behalf of Aegon customers.

Customer loyalty

Our goal is to create a positive customer experience; this means high-quality financial products and excellent customer service. We measure our performance in this area through the Net Promoter Score (NPS). In our measurement, we include only individual customers. NPS assesses customer loyalty rather than satisfaction – in other words, the likelihood that customers will recommend Aegon to their friends, colleagues and family². NPS is embedded in our sales and marketing processes; we also use the measure to help determine executive pay.

Where possible, we benchmark NPS scores against peers. In our main markets, our ambition is to be the most recommended financial services provider. Our businesses saw a significant increase in NPS in 2017 – the result primarily of efforts to speed up our processes and improve customer service,

as well as our strong brand in the US. In 2018, however, our NPS scores decreased. According to our latest surveys, 41% of our businesses in the US, the Netherlands and UK rank in the top half of their respective markets, down from 45% in 2017. Businesses ranking in the bottom quartile increased sharply to 54% (see all NPS results by quartile on page 408). Scores for our US retirement business were lower – this more than offset a higher ranking for our Dutch mortgages business. In several markets, our NPS scores improved, but we failed to match improvements by competitors. In response to these results, we will look to increase contact with customers, establish a more emotional connection and provide an effective, personalized customer service.

In addition to NPS, we use a number of other measurements to assess value created for customers and progress with our strategy. These include our total number of customers and new customers – as well as the percentage of customers who are ‘digitally connected’ and those with two or more Aegon products.

We also measure customer complaints. In 2018, complaints increased by almost 20%. Complaints were lower in both the US and the Netherlands, but this was offset by increases in the UK and in Hungary; the increase in the UK was due mainly to the inclusion for the first time of complaints from Cofunds. Complaints relating to digital privacy also rose significantly, following the introduction of the EU’s General Data Protection Regulation (GDPR); these complaints, however, accounted for less than 0.8% of total customer complaints.

Responsible products and investments

Among our products and services, we offer specific financial products for vulnerable groups and socially-responsible investment funds (SRI). In several countries, we sell products for customers on low incomes – for example: our ‘My Family’ micro-insurance product in Brazil and low-cost life insurance in Romania. We also provide support to those facing chronic

illness. In China, our critical illness coverage offers protection against both diabetes and cancer; we also have products that help customers suffering from cervical and breast cancer. In addition to our products, we also support a number of financial education programs – in many countries, people are taking more personal responsibility for their finances. In the Netherlands, for example, we pay for budget coaches to help customers in financial difficulty. In the US, we work closely with the National Foundation for Credit Counseling. We also offer lessons, online seminars and clinics for members of the public.

For our customers in the UK, the Netherlands and Hungary, we have SRI funds. At the end of 2018, these funds had EUR 3.4 billion under management, almost 80% more than they had five years before – thanks primarily to growing demand among retail investors for a more ethical approach to investment.

Salaries and benefits

In our approach to salaries and benefits, we strike a balance. It is important that we control expenses. At the same time, we need to pay fair, competitive salaries if we are to attract and retain talented staff. Aegon’s approach in this area is set out in our Global Remuneration Framework. This contains several important principles, including ‘pay for performance’. Pay is tied directly to regular performance appraisals. To assess performance, we use both financial and non-financial metrics (the precise combination depends on an individual’s position and seniority). We have provisions ensuring that incentives and variable pay do not compromise integrity (in the case, for example, of internal audit employees) and do not encourage excessive risk-taking. In 2018, we paid out EUR 2.1 billion in salaries and benefits for our employees. Of this total, salaries accounted for almost 60%. The remainder comprises mainly benefits and other personnel costs.

Employee engagement

To implement our strategy effectively, we need a committed and engaged workforce. We measure employee engagement annually. Our latest survey was carried out in November 2018. It showed an overall engagement score of 65, unchanged from the previous year. 89% of Aegon employees completed the survey. We benchmark our score against both the finance and professional services sectors; this benchmark compares scores for individual questions, however; there is no benchmark for our overall engagement score.

As well as engagement, our survey also helps us monitor progress in more specific areas; these include work-life balance, opportunities for career development, management performance, workplace diversity, pay, training and development. In 2018, we saw improvements in ‘constructive feedback’, ‘learning from mistakes’ and ‘work-life balance’; these were offset, however, by a lower score in ‘vision communications’; ‘recommending Aegon as a financial services provider’ also scored lower in the survey. As part of our response to these results, we are putting a specific focus on leadership and development.

We also use the survey to track progress with our Future Fit program (for details, see page 27). Survey results are communicated to all levels of the business, and broken down by unit and individual team, so that effective action plans can be put in place to address areas of weakness. In addition to our employee survey, we also measure turnover. Our goal is to keep turnover to a sustainable level. In 2018, turnover increased to 33%, up from 25% the previous year; this was due mainly to an increase in involuntary departures following recent reorganizations.

Employee engagement scores

(2016 - 2018)

Employee welfare and development

Our aim is to create a safe and inclusive working environment. We offer benefits, including flexible working, regular health checks, parental leave and company retirement plans. We also provide paid time-off for employees who wish to volunteer on local community projects. We work to keep absenteeism to a minimum. Most of our businesses have health programs; these include fitness programs and screening for serious illnesses like cancer and heart disease, as well as programs to reduce workplace stress. In 2018, our absentee rate was unchanged at 2.4%. The number of work-related accidents and illnesses fell slightly – to 163, down from 167 in 2017.

We also offer extensive training and career development. Our programs include online courses, seminars and lectures. We provide specialist training in areas including products and sales, new regulations, risk management and cyber security. We also offer leadership training and awareness programs in diversity and health and safety. All employees have access to our global Learning Catalog. We also have a Digital Academy, which offers a three-year course to data and business analysts across the Company. In 2018, we spent a total of EUR 12.5 million on training and development (equivalent to nearly EUR 470 for each employee).

Diversity and inclusion

We believe diversity leads to better decision-making; it also brings us closer to the communities we serve. Diversity and non-discrimination are built into our Code of Conduct. In the Netherlands, our latest collective labor agreement stipulates equal pay for men and women performing the same functions. In 2018, we conducted a study into equal pay; this found, in general, no difference in pay between men and women doing the same work¹. In the UK, we also report our gender pay gap each year. Like other financial companies, we have fewer women in leadership positions; this results in a significant gender pay gap. In 2017, this gap stood at just over 27% – compared with a sector average of 30%².

We have initiatives to support gender diversity. In the Netherlands, for example, we are signatories to the Talent to the Top program, which works to increase the number of women in senior management. In the US, we have a dedicated diversity team. At the end of 2018, women made up 33% of Aegon’s senior management, an improvement of 5 percentage points from 28% in 2017. In addition, two of our seven Supervisory Board members are women, as are three of our ten Management Board members. We want to increase the proportion of women on both Boards, over time, to at least 30% – in line with Dutch government objectives¹.

Diversity, of course, goes beyond gender. Our aim is to create a productive and open working environment, in which all employees are valued for their contribution and able to realize their full potential. We have mentoring programs; we support Company-wide groups like Aegon Proud and Young Aegon. We are also members of outside organizations, like Women in Financial Services and Workplace Pride. In the latest US Corporate Equality Index, we were ranked as one of the best places to work for LGBT employees.

Business partners

Our partners

We work with a number of different business partners. These partners help us develop, market and distribute our products and services. In many countries, we operate through joint ventures, particularly where this gives us immediate access to a large customer base. To distribute our products and services, we work through brokers and other financial intermediaries (including banks, agents, independent financial advisors etc.). In the US and UK, we have also signed partnerships to transfer much of our policy administration.

When working with outside providers, our goal is to create long-term relations that benefit Aegon and allow our partners to develop and grow their businesses. We regularly assess the companies we work with against minimum social and environmental standards. These standards are set out in our Sustainable Procurement and Outsourcing Risk policies.

Payments to business partners

Distribution

We pay commissions to brokers and other financial intermediaries in return for selling Aegon products and services. In 2018, these commissions totaled EUR 2.4 billion. Over the past five years, commissions have declined by almost 26%. This is partly a result of lower sales, but also the introduction of new, digital technologies (which have made it easier to sell directly to customers) and recent regulations in the Netherlands and the UK (which restrict payment of commissions to intermediaries¹). Though the nature of our relationship has changed, intermediaries remain a valuable sales channel. We provide training to our distributors, so they understand our policies and are able to provide the right advice to our customers.

Payments to business partners

(2016-2018, in EUR billion)

Suppliers

As a financial services company, we buy goods and services – including IT support, office equipment and management consultancy. We also buy utilities (electricity, water etc.). That said, we do not have a particularly complex supply chain – we do not need to source raw materials or deliver physical goods to customers. In 2018, we spent EUR 1.5 billion on our suppliers, up from EUR 1.4 billion in 2017. We have a Sustainable Procurement Policy, which sets out environmental, social and governance standards for our suppliers. As part of our approach, we require some of our suppliers to sign a Supplier Sustainability Declaration; at the end of 2018, these declarations covered 25% of our total procurement spend. In 2018, we also signed partnerships in both the US and UK to transfer a large part of our policy administration to outside providers (see pages 6 and 24). In both cases, we will pay regular fees for this service; we expect these contracts, over time, to deliver more than EUR 120 million a year in cost savings.

Reinsurance

We work with a number of reinsurers; they help us offset risk and ensure we are able to meet our financial commitments, even in extreme scenarios. In 2018, we paid EUR 2.7 billion in premiums to our reinsurers, and received EUR 3.7 billion in claims (this compares with EUR 3.4 billion and EUR 4.3 billion in 2017, respectively).

Investors

Payments to investors

Shareholders receive regular dividends. An interim dividend is paid following half-year results. Final dividends must then be approved by Aegon’s General Meeting of Shareholders in May before payment. Shareholders can opt for payment in cash or stock. Just under half our shareholders are based in the US, another 20% in the Netherlands and 10% in the UK. In 2018, we paid a total of EUR 861 million to Aegon investors. Of this, EUR 570 million was in dividends to shareholders; the remaining EUR 291 million was paid to Aegon bondholders. Unlike shareholders, bondholders receive regular coupons – or interest payments – on their investments. These payments are determined at the moment the bond is issued.

Dividend policy

Payment of dividends depends ultimately on the Company’s capital position and cash flow. Before deciding on dividends, management will also assess future prospects for financial performance. Our goal, over time, is to deliver sustainable dividend growth for our shareholders. In recent years, we have been able to do this thanks to an improvement in our earnings and a stronger capital position. Since 2012, we have increased dividends every year by either one or two cents – equivalent to a 38% increase over six years. Currently, our dividend yield – an important indicator for insurance stocks – is around 6%, slightly above the European sector average.

Stock performance

Shareholders may also derive (or lose) value from the performance of our shares. In 2018, Aegon’s stock price fell by 23.3%, which we believe was largely a reflection of wider concerns over economic growth, trade tensions and the effect of persistently low interest rates, as well as concerns about Aegon’s US long-term care portfolio. Most of the losses were concentrated in the last two months of the year. Other European insurance sector stocks also lost ground during 2018, though not as much as Aegon. The Stoxx Europe 600 Insurance index ended the year down 10%. Our total shareholder return for the year came to -19% (this measure takes into account payment of dividends as well as share price performance).

Regular communications

We keep financial markets fully informed of our strategy and performance. We have a dedicated Investor Relations team. In 2018, we organized 642 face-to-face meetings with investors in the Americas, Europe and Asia. We hold a regular Analyst and Investor Conference; the most recent was held in New York in December 2018. Our executives also speak regularly at insurance industry events. In 2018, we started publishing our financial results every six months, rather than quarterly. This was to encourage investors to take a longer-term perspective on our financial performance.

Wider community

Job creation

In 2018, Aegon reduced its total workforce by a net 1,775 employees. A total of 5,666 employees left the Company – most in the US, Netherlands and the UK; 3,891 joined Aegon during the year. Departures were mainly the result of business restructuring. Around 2,000 employees were also transferred to Tata Consultancy Services as part of our recent contract in the US. Where possible, we limit compulsory redundancies. In Europe and Asia, we work closely with trade unions and other employee representative groups. We provide training, advice and support to those leaving the Company.

Responsible investment

We take a responsible approach to investments. As part of this approach, we integrate ESG (environmental, social and governance) factors into our daily investment decisions. We do this for our own investments; we also advise customers to take a similar approach, though in most cases the final decision as to how and where to invest remains with our clients. Integrating ESG helps minimize investment risk both for Aegon and its customers. Our ESG investment standards are based, for the most part, on international agreements (these include the UN Declaration of Human Rights, the core standards of the International Labor Organization, and the UN Arms Trade Treaty).

To oversee our approach, we have a Responsible Investment Strategy Committee. We also have a formal Responsible Investment Policy; we provide mandatory ESG training for portfolio managers, and have built responsible investment into both our risk management framework and into our investment mandates.

We engage with the companies we invest in when they fall short of our ESG standards or show poor overall ESG performance. In 2018, we engaged with 360 companies. We have been especially active on climate change in support of our corporate strategy. Over the past year, we engaged on a number of issues, including climate risk and reporting, and corporate governance. When engaging, our aim is to improve companies’ business practice, and reduce investment risk for ourselves and our customers.

We prefer to engage, though we do exclude some investments, where there are international agreements in place, or a clear social or environmental case to do so. Currently, we exclude a total of 136 companies – involved in tobacco, coal mining, oil and tar sands, or controversial weapons, such as cluster bombs and anti-personnel mines¹. In the Netherlands, we exclude investments in palm oil. We also refuse to invest in countries that are subject to sanctions, or where there is evidence of systematic human rights abuses. We publish a full list of exclusions on our website. For more details on our approach, see our Responsible Investment Report, also available online.

Impact investment

Alongside ESG integration, we also make ‘impact investments’; these are investments that deliver both a minimum financial return and a specific social or environmental benefit. Examples include affordable housing, care homes, and renewable energy. We also invest in green bonds and in international development banks that work to reduce poverty in developing countries. At the end of 2018, our impact investments totaled EUR 8.4 billion. Nearly 60% of this amount is invested in affordable housing in the US. Impact investments are an important part of our strategy – particularly in supporting the switch to cleaner, low-carbon technologies and promoting health and well-being.

Retirement research and expertise

We provide extensive research into aging and retirement. Most of this is done through our Aegon Center for Longevity and Retirement (ACLR) and its partners: the Transamerica Institute in the US and the Instituto de Longevidade Mongeral Aegon in Brazil. The ACLR publishes an annual Retirement Readiness Survey, covering 15 countries around the world. The ACLR’s 2018 report called for a new social contract on pensions and retirement (see page 22). Through our research, we want to raise awareness of aging issues among both public and policymakers. We also use our research to drive improvements in customer service and product development.

In addition to our own centers, we work closely with other partners. These include the Stanford Center on Longevity, the American Association of Retired Persons (AARP), the Leyden Academy for Vitality and Aging, and the Global Coalition on Aging – an alliance of businesses working on aging and retirement. We are also working on health issues – these are, of course, closely related to aging. We have our own Transamerica Center for Health Studies. In the US, through our business activities, we emphasize the importance of ‘wealth and health’. In 2018, we organized our global Hackathon focusing on the connection between financial security and well-being – with events in Mumbai, Budapest and Dallas. We also support research into chronic illnesses like cancer, heart disease and Alzheimer’s.

Responsible tax

We are firmly committed to making a valuable economic and social contribution to the communities in which we operate, both through our own tax payments and through collection and

payments of third party taxes. We seek to pay ‘fair taxes’, which for us means paying the right amount of tax in the right places.

It is our policy to allocate profits where value is created through our commercial business activities. For us, tax follows business, which means that our decisions are taken for business reasons and not for tax advantages. We will not, for example, set up artificial tax structures or base business in countries simply to reduce the amount of tax we pay.

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

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

Disclosures are provided in our financial statements and cover tax payments in our main markets. We provide country-by-country tax reporting in a transparent and accurate manner to the tax authorities. We are currently assessing the value that public disclosure of this information might have for our business and our stakeholders.

We also provide details of our total tax contribution company-wide and by region in the charts below. Taxes borne are a cost of business and affect our financial results. Taxes collected are not a direct cost of business but are collected on behalf of government from others. The reported numbers are on cash payment or accrual basis.

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

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

Community investment

We support local communities through donations and volunteer work. This brings us closer to our customers and gives our employees an opportunity to share their knowledge and expertise. In 2018, we donated a total of EUR 9.3 million. Most went to our three focus areas: health, welfare and literacy. Where possible, we align our community investment with our purpose as a company. In the Netherlands, we’re part of a ‘From Debt to Opportunity’ project; this project is working with 7,000 in-debt families across the country.

Through our businesses, we support more than 500 local charities and good causes. Among the largest recipients in 2018 were United Way and Habitat for Humanity in the US, the VUMC Alzheimer Center in the Netherlands, and Sick Kids Friends Foundation and the Teenage Cancer Trust in the UK. We have a Charitable Donations Policy, setting out our approach to community investment. In the US, our donations are channeled through the Transamerica Foundation. This Foundation donates at least 5% of its assets each year. In the UK, donation decisions are taken by our employee Charity Committee. We also encourage our employees to volunteer; 97% of our staff worldwide can now claim paid time-off to work on local community projects. Volunteering is built into our Charitable Donations Policy. In 2018, Aegon employees volunteered just over 14,000 hours – equivalent of EUR 0.7 million, based on average salaries.

Aegon’s contribution to UN Sustainable Development Goals (SDGs)

We have a responsibility to support the UN SDGs where we can, both as an investor and a provider of financial services. We recognize that sustainable development is in the long-term interests of business and the global economy, and that genuine

sustainable development will not be possible without cooperation between private and public sectors. We focus on SDGs most relevant to our business. Within these SDGs, we have selected specific goals and targets¹ linked to our strategy. This is where we believe we can make a significant contribution to the international development agenda.

In addition to the goals and targets above, we also work directly with other organizations to support the SDGs. As well as the UN Principles for both Sustainable Insurance and Responsible Investment (UNPSI, UNPRI), we are members of the CDP (formerly the Carbon Disclosure Project) and the Extractives Industry Transparency Initiative (EITI), which works for greater transparency in reporting financial flows

within the global energy and minerals sector. Aegon also signed the Paris Pledge for Action, launched at the Paris climate change conference in 2015.

Further details of our support for the UN SDGs may be found on page 425.

I was honored to be appointed Chair of Aegon’s Supervisory Board in May 2018. Our Board consists of people from a diverse range of backgrounds, nationalities and specialisms, with an equally diverse range of perspectives. What we share, is a common desire to support management in meeting its objectives.

A key objective has been the significant transformation Aegon has undergone in recent years, both in terms of what it does and where it does it. In particular, we are impressed by Aegon’s embrace of new digital technology, and its new capital allocation model. Now that Aegon’s transformation is largely complete, the Supervisory Board looks forward to shifting its focus to supporting the company’s growth agenda.

Beyond the horizon

From regulatory requirements to customer demands, the financial services landscape has never changed so fast and

as fundamentally as over the last decade. This process of change is only likely to accelerate in the years to come. For this reason, when it comes to strategy, our role as a Supervisory Board is to look beyond ‘the here and now’ and to focus on what lies beyond the horizon. What will, for instance, the industry look like a decade from now? What are the opportunities and risks? Above all, how can Aegon ensure that it first and foremost continues to grow as a responsible business dedicated to its purpose of helping people achieve a lifetime of financial security? By posing these questions we are able to assess how future-focused and prepared the company is, which in turn supports long-term thinking and long-term value creation, as set out in this report.

How we engage with Aegon’s long-term strategy is crucial to this task. Indeed, while regular meetings with senior management are critical to what we do, Supervisory Board visits to Aegon’s various

business units can prove every bit as illuminating, offering a ‘shop floor’ rather than purely a ‘board room’ perspective. For instance, such visits are an opportunity to witness how Aegon is embracing the latest digital technologies and data analytics, as well as talking to the people leading these initiatives from the ground up.

Public trust

No business operates in a vacuum and the Supervisory Board is both very aware of and attuned to discussions and debates regarding the role of financial services in society. The relationship between financial institutions and the public should, of course, be a positive one. Yet while the industry plays an important and laudable role providing people with financial security and helping businesses and economies to grow, it has yet to fully regain trust following the financial crisis, nor redress the apathy many still feel towards it.

The Supervisory Board is working with the Management Board to examine how Aegon can be part of the solution. Moreover, it is impressed with how Aegon’s purpose continues to not only provide the basis for putting customers first in all that it does, but also the inspiration to raise awareness about financial matters – such as the need to start saving early, and the consequences of moving away from traditional pension systems. Simple changes that can have hugely positive effects on millions of people’s lives.

Aegon also takes its responsibility to assist policy makers to deliver the right legislation that keeps pace with changes in society and continues to meet customers’ needs. The company can only do so because of the dedication and expertise of its people. I would, therefore, like to say a big thank you to Aegon staff across all businesses and regions.

I would like also to express my gratitude to my Supervisory Board colleagues for their contribution and support in 2018. I invite you all to look at the Report of the Supervisory Board, starting from page 51, for a comprehensive overview of our activities during 2018. We look forward to working with the Management Board in the year ahead to help them meet their targets and achieve Aegon’s purpose.

William Connelly

Supervisory Board Chairman

Aegon is governed by three corporate bodies:

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

The shareholders

Listing and shareholder base

Aegon’s common shares are listed on Euronext Amsterdam and the New York Stock Exchange. Aegon has institutional and retail shareholders around the world. More than three-quarters of shareholders are located in Aegon’s three main markets, the Netherlands, United States and the United Kingdom. Aegon’s largest shareholder is Vereniging Aegon, a Dutch association with a special purpose to protect the broader interests of the Company and its stakeholders.

General Meeting of Shareholders

A General Meeting of Shareholders is held at least once a year and, if deemed necessary, the Supervisory or Executive Board of the Company is able to convene an Extraordinary General Meeting of Shareholders. The main function of the General Meeting of Shareholders is to decide on matters such as the adoption of annual accounts, the approval of dividend payments and (re)appointments to the Supervisory Board and Executive Board of Aegon.

Convocation

General Meetings of Shareholders are convened by public notice at least 42 days before the meeting. The convocation states the time and location of the meeting, the record date, the agenda items, and the procedures for admittance to the meeting and representation at the meeting by means of a written proxy. Those shareholders who alone or jointly represent at least 1% of Aegon’s issued capital or a block of shares worth at least EUR 100 million may request items be added to the agenda of a General Meeting of Shareholders. In accordance with Aegon’s Articles of Association, such a request will be granted if it is received in writing at least 60 days before the meeting, and if there are no important interests of the Company that dictate otherwise.

Record date

The record date is used to determine shareholders’ entitlements with regard to their participation and voting rights. In accordance with Dutch law, the record date is 28 days before the day of the General Meeting of Shareholders.

Attendance

Every shareholder is entitled to attend the General Meeting to speak and vote, either in person or by proxy granted in writing. This includes proxies submitted electronically. All shareholders wishing to take part must provide proof of their identity and shareholding, and must notify the Company ahead of time of their intention to attend the meeting. Aegon also solicits proxies from New York registry shareholders in line with common practice in the United States.

Voting at the General Meeting

At the General Meeting, each common share carries one vote. In the absence of a Special Cause, Vereniging Aegon casts one vote for every 40 common shares B it holds.

Supervisory Board

Aegon’s Supervisory Board oversees the management of the Executive Board, in addition to the Company’s business and corporate strategy. The Supervisory Board must take into account the interests of all Aegon stakeholders. The Supervisory Board operates according to the principles of collective responsibility and accountability.

Composition of the Supervisory Board

Members of the Supervisory Board are appointed by the General Meeting of Shareholders, following nomination by the Supervisory Board itself. Aegon aims to ensure that the composition of the Company’s Supervisory Board is in line with Aegon’s diversity policy for the Supervisory Board, Executive Board and Management Board and is as such well-balanced in terms of professional background, geography, gender and other relevant aspects of the diversity policy. A profile, which is published on aegon.com, has been established that outlines the required qualifications of its members. Supervisory Board members are appointed for a four-year term, and may then be reappointed for another four-year period. Subsequently, the Supervisory Board member can be reappointed again for a period of two years, and then extended by two years at the most. Supervisory Board members are no longer eligible for (re)appointment after reaching the age of 70, unless the Supervisory Board decides to make an exception. Remuneration of the Supervisory Board members is determined

by the General Meeting of Shareholders. In 2018, no transactions were concluded between the Company and any of the Supervisory Board members. Furthermore, the Company did not provide loans or issue guarantees to any members of the Supervisory Board. At present, Aegon’s Supervisory Board consists of seven members, all of whom qualify as independent in accordance with the Dutch Corporate Governance Code.

Committees

The Supervisory Board also oversees the activities of its committees. These committees are composed exclusively of Supervisory Board members and deal with specific issues related to Aegon’s financial accounts, risk management, executive remuneration and appointments. These committees are the:

Executive Board

Aegon’s Executive Board is charged with the overall management of the Company and is therefore responsible for achieving Aegon’s aims and developing the strategy and its associated risk profile, in addition to overseeing any relevant sustainability issues and the development of the Company’s earnings. Each member has duties related to his or her specific area of expertise.

Aegon’s Articles of Association determine that for certain decisions the Executive Board must seek prior approval from the Supervisory Board and/or the approval of the General Meeting of Shareholders. In addition, the Supervisory Board may also subject other Executive Board decisions to its prior approval.

Composition of the Executive Board

Aegon’s Executive Board consists of Alexander R. Wynaendts, who is Chief Executive Officer (CEO) and Chairman of the Executive Board, and Matthew J. Rider, who is Chief Financial Officer (CFO), and member of the Executive Board.

The number of Executive Board members and their terms of employment are determined by the Company’s Supervisory Board. Executive Board members are appointed by the General Meeting of Shareholders for a four-year term, following nomination by the Supervisory Board.

The members of the Executive Board have an engagement agreement with the Company rather than an employment contract. The Company’s Remuneration Policy for the Executive Board limits exit arrangements to a maximum of one year of the fixed component of the salary.

In 2018, no transactions were concluded between the Company and either member of the Executive Board. Furthermore, the Company did not provide any loans to or issue guarantees in favor of either of the members of the Executive Board.

Management Board

Aegon’s Executive Board is assisted in its work by the Company’s Management Board, which has ten members, including the members of the Executive Board. Aegon’s Management Board is composed of Alex Wynaendts, Matthew J. Rider, Mark Bloom, Adrian Grace, Allegra van Hövell-Patrizi, Marco Keim, Onno van Klinken, Carla Mahieu, Mark Mullin and Sarah Russell.

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

In the relation between the Management Board and the Supervisory Board, the CEO shall be the first contact for the Supervisory Board and its Chairman. In addition thereto, and in connection with how the contacts between the Supervisory Board and the Management Board committee have been given shape, the members of the Management Board will act in accordance with the provisions provided therefore in the Management Board Charter, the Executive Board Charter and the Supervisory Board Charter.

Capital, significant shareholders and exercise of control

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

The capital of the Company

Aegon has an authorized capital of EUR 1,080 million, divided into 6 billion common shares and 3 billion common shares B, each with a nominal value of EUR 0.12. As of December, 31 2018, a total of 2,095,648,244 common shares and 585,022,160 common shares B had been issued.

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

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

All common shares B are held by Vereniging Aegon, the Company’s largest shareholder. The nominal value of the common shares B is equal to the nominal value of a common share. This means that common shares B also carry one vote per share. However, the voting rights attached to common shares B are subject to restrictions as laid down in the Voting Rights Agreement, under which Vereniging Aegon may cast

one vote for every 40 common shares B it holds in the absence of a Special Cause.

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

Significant shareholdings

On December 31, 2018, Vereniging Aegon, Aegon’s largest shareholder, held a total of 279,236,609 common shares and 571,165,680 common shares B.

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

During 2018, one transaction was concluded between Aegon N.V. and Vereniging Aegon under or in connection with the 1983 Merger Agreement. All requirements determined by Best Practice 2.7.5 of the Dutch Corporate Governance Code were complied with in the execution of these transactions.

On May 18, 2018, Vereniging Aegon exercised its options rights to purchase in aggregate 1,489,200 common shares B at fair value (1/40th of the market value of a common share in the capital of the Company at the time of issuance) to mitigate dilution caused by Aegon’s issuance of shares on May 18, 2018 in connection with the Long Term Incentive Plans for senior management.

To Aegon’s knowledge based on the filings made with the Dutch Autoriteit Financiële Markten, Dodge & Cox International Stock Fund, BlackRock, Inc. and Franklin Resources, Inc. hold a capital or voting interest in Aegon of 3% or more.

Based on its last filing with the Dutch Autoriteit Financiële Markten as at June 20, 2018, Dodge & Cox International Stock Fund stated to hold 131,792,024 common shares, which represent 4.9% of the issued capital and votes as at December 31, 2018. On February 14, 2019, Dodge & Cox’s filing with the US Securities and Exchange Commission (SEC) shows that Dodge & Cox holds 237,992,105 common shares, representing 8.9% of the issued and outstanding capital as at December 31, 2018, and has voting rights for 232,925,689 shares, representing 8.7% of the votes as at December 31, 2018.

Based on its filing with the Dutch Autoriteit Financiële Markten as at March 27, 2018, BlackRock, Inc. stated to hold 112,661,670 shares, representing 4.2% of the issued capital as at December 31, 2018 and 131,979,873 voting rights, representing 4.9% of the votes as at December 31, 2018. On February 4, 2019, BlackRock, Inc.’s filing with the US Securities and Exchange Commission (SEC) shows that BlackRock holds 122,040,092 common shares, representing 4.6% of the issued capital as at December 31, 2018, and has voting rights for 106,522,921 shares, representing 4.0% of the votes as at December 31, 2018.

Based on its filing with the Dutch Autoriteit Financiële Markten as at June 10, 2015, Franklin Resources, Inc. (FRI) stated to hold 81,510,408 shares, representing 3.0% of the issued capital and of the votes as of December 31, 2018. On January 25, 2019, the filing of Franklin Resources, Inc. (FRI), a US based investment management firm, with the SEC shows that FRI holds 61,141,668 common shares and voting rights, representing 2.3% of the issued and outstanding capital, as at December 31, 2018.

Special control rights

As a matter of Dutch corporate law, the common shares and the common shares B offer equal full voting rights, as they have equal nominal value (EUR 0.12). The Voting Rights Agreement entered into between Vereniging Aegon and Aegon provides that under normal circumstances, i.e. except in the event of a Special Cause, Vereniging Aegon is not allowed to exercise more votes than is proportionate to the financial rights represented by its shares. This means that in the absence of a Special Cause, Vereniging Aegon may cast one vote for every common share it holds and one vote only for every 40 common shares B it holds. In the event of a Special Cause, Vereniging Aegon may cast one vote for every common share and one vote for every common share B.

A Special Cause may include:

If Vereniging Aegon, acting at its sole discretion, determines that a Special Cause has arisen, it must notify the General Meeting of Shareholders. In this event, Vereniging Aegon retains full voting rights on its common shares B for a period limited to six months. Vereniging Aegon would, for that limited period, command 32.6% of the votes at a General Meeting of Shareholders.

Issue and repurchase of shares

New shares may be issued up to the maximum of the Company’s authorized capital, following a resolution adopted by the General Meeting of Shareholders. Shares may

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

Aegon is entitled to acquire its own fully paid-up shares, providing it acts within existing statutory restrictions. Shareholders usually authorize the Executive Board to purchase the Company’s shares under terms and conditions determined by the General Meeting.

Transfer of shares

There are no restrictions on the transfer of common shares. Common shares B can only be transferred with the prior approval of Aegon’s Supervisory Board.

Aegon has no knowledge of any agreement between shareholders that might restrict the transfer of shares or the voting rights pertaining to them.

Significant agreements and potential change of control