AEGON’S 2011 REVIEW PURSUING STRATEGIC OBJECTIVES A year of transition THE BENEFITS OF AGE How global aging brings opportunities as well as challenges LIFE INSURANCE PENSIONS ASSET MANAGEMENT 2011 REVIEW Interview with our CFO Jan Nooitgedagt explains why he believes integrated reporting is here to stay. Loyal Customers AEGON provides life insurance, pensions and asset management services to nearly 47 million people around the world. Financial performance Focusing businesses on new opportunities for growth in a year 30 of difficult market conditions. Financial targets Increasing fee-based earnings, reducing costs and improving operating cash flow are all key parts of company strategy. Year in review From restructuring of businesses, to the full repayment of the Dutch State, 2011 was a year This is what we do of transformation for AEGON. AEGON helps customers throughout their lives as they build a solid financial future. Transamerica and AEGON brands give us high visibility in our leading markets. WE ARE AEGON OUR GOVERNANCE 2011: year in review 2 AEGON’s Management Board 36 Photo contest 4 AEGON’s Supervisory Board 38 This is AEGON 5 Corporate governance 40 Interview with AEGON’s CEO Alex Wynaendts 6 Relating pay to performance 42 This is what we do 8 Managing risk and capital 43 Investing responsibly 48 50 OUR STRATEGY Community support Engaging with our stakeholders 51 How our business is changing 10 How we are changing 12 FINANCIAL INFORMATION Optimize Portfolio 14 Loyal Customers 16 Consolidated income statement 56 Operational Excellence 18 Consolidated statement of fi nancial position 57 Empower Employees 20 Consolidated cash fl ow statement 58 Performance data 60 62 OUR BUSINESSES About this Review Contact information 63 Interview with AEGON’s CFO Jan Nooitgedagt 22 Disclaimer 64 The benefi ts of age 24 Rebranding America 26 Our fi nancial targets 28 Financial performance 30 AEGON’s businesses worldwide 32 Interview with our CEO Trust is the single most critical factor to a financial services company, and fulfilling the promises we make is part of everything we do. 2 2011 REVIEW FULLY REPAID DUTCH STATE AEGON completes repayment of capital received from the Dutch State at the height of the 2008 financial crisis; repayment honors commitment made to the Dutch government and the European Commission. Jaime Kirkpatrick is appointed CEO of AEGON’s operations in Spain, succeeding AEGON announces target to reduce CO2 emissions by 10% Jesus Quintanal, who retires in June over a three-year period from 2009 to 2012; reductions will after 30 years at the post. come from AEGON’s businesses in the United States, the Netherlands and the United Kingdom. AEGON announces new financial targets aimed at increasing earnings and improving returns. AEGON completes 10% equity issue, raising just over EUR 900 million – another important step toward the company’s goal of repaying the Dutch State in full by June 2011. JAN FEB MAR MAY JUN RESTRUCTURING IN THE UK AEGON announces closure of company offices in Nieuwegein Further steps announced in restructuring and restructuring of AEGON Bank in the Netherlands to in the United Kingdom, with a target of 25% increase focus on key products such as mortgages and reduction in costs by the end of the year. savings accounts. AEGON becomes a founding member of the Global Coalition on Aging, an alliance of leading international companies aimed at raising awareness of the social, economic and Adrian Grace is appointed CEO of AEGON’s financial impact of global aging. operations in the United Kingdom; Mr. Grace succeeds Otto Thoresen, who becomes Director AEGON establishes new headquarters in Hong Kong to General of the Association of British Insurers. support AEGON’s growth across Asia. WE ARE AEGON 2011: YEAR IN REVIEW 3 AEGON groups together US and Canadian retail businesses under a common brand name, Transamerica; decision is part AEGON launches Responsible Investment of efforts to create a stronger, more consistent global Policy, outlining environmental, social portfolio of brands. and governance standards for company investments. AEGON brings together global IT activities under a single operation – AEGON Global Technology – strengthening IT infrastructure and improving efficiency. AEGON divests life reinsurance activities to French group SCOR for a total of EUR 1.4 billion. Transaction is part of AEGON’s broader efforts to focus on core businesses life insurance, pensions and asset management. AEGON sells Guardian life insurance and pension business in the United Kingdom 2011 to private equity group Cinven for GBP 275 million; Guardian has been closed to new business since 2001. JUL AUG SEP OCT NOV DEC CEO Alex Wynaendts reaffirms AEGON’s financial AEGON Asset targets and ambitions for 2015 while speaking Management’s third at the company’s Analyst & Investor Conference party business in in New York. the United Kingdom is renamed Kames Capital, highlighting the distinctive nature of AEGON’s asset management AEGON announces further activities in restructuring in the Netherlands the country. and the United Kingdom to AEGON forms a new Management Committee reduce costs and refocus to increase coordination between the company businesses. Management Board and other senior managers within the company. Along with health insurer Menzis, AEGON introduces a new long-term care savings 100 account for customers in the Netherlands. EUR MILLION AEGON conducts global Employee Survey; COST SAVINGS results will be used as the basis of an action plan in 2012 to help improve employee engagement. 4 2011 REVIEW Many of the photographs in this Review have been taken by we gave our employees a straightforward brief: to find AEGON employees. We wanted to show the diversity of our subjects that would illustrate our four strategic objectives. company. With businesses in the Americas, Europe and Asia, Over the next few months, we received almost 300 photos we have a presence in more than 20 countries around the from around the AEGON world – everything from weddings world. More importantly, we wanted to show what a difference and sporting events to families on the beach. The top a company like AEGON can make – in helping millions of people choices are in this Review – and we’ll also be using some build a more secure financial future. Last year, we held a of the photographs throughout the year – in presentations competition to find photographs for the Review – and on our websites. WE ARE AEGON THIS IS AEGON 5 AEGON is an international provider of life insurance, pensions and asset management. Formed in 1983 through the merger of two Dutch insurers, AGO and Ennia, AEGON today employs over 25,000 people, serving nearly 47 million customers in more than 20 countries around the world. Our company headquarters are in The Hague, the Netherlands. AEGON has three main markets: the United States, the Netherlands and the United Kingdom. We have established new and growing businesses in emerging markets in Asia, Latin America and Central & Eastern Europe, and we are also a significant provider of life insurance in Spain. In North America, AEGON operates as Transamerica. AEGON had more than EUR 420 billion in revenue-generating investments around the world at the end of 2011. UNDERLYING EARNINGS BEFORE TAX In EUR million 212 New Markets 298 1,310 The Netherlands Americas 5 United Kingdom 20+ 47MILLION 424 BILLION markets in the Americas, customers globally euros in revenue-generating Europe and Asia investments 6 2011 REVIEW INTERVIEW WITH AEGON’S CHIEF EXECUTIVE OFFICER ALEX WYNAENDTS This has been an extremely challenging year management, and we are much better able to leverage our for the global economy. How has AEGON been considerable resources and expertise across our business and affected? country units to support our growth ambitions. In June 2011, Without question, 2011 was a very challenging year for the world we fulfilled a critical objective of fully repaying the capital economy. We saw a crisis in the euro zone, which delayed growth support AEGON received from the Dutch State in 2008. and further undermined consumer confidence. And, in the Our ability to do so – and in the time frame we promised – is an United States – our largest market – the economic recovery indication that our strategy is delivering its intended benefits, was very slow throughout most of the year. At the same time, as well as evidence of the strength of our financial position. our business continues to be challenged by historically low Moreover, AEGON’s continued strong capital position has also interest rates. Naturally, these factors impact our business enabled us to reaffirm our intention to pay a dividend to and financial results. Despite these challenges, however, we common shareholders related to the second half of 2011. delivered on a number of AEGON’s strategic objectives. And so, yes, AEGON has been transformed. We have closed a difficult chapter of our past and begun a new chapter focused Our highest priority continues to be restoring the trust that on growth and realizing our ambitions for the future. has been shaken as a result of the severe economic turmoil over the past few years. No single factor is more critical to a The work of restructuring continues, however. financial services company than the trust of its customers and What is the focus of these efforts? clients. For AEGON, it all comes down to fulfilling the promises The environment for our business has changed drastically over we make each and every day and over the longer-term. This is the past few years. This requires a more disciplined approach why we have strengthened our balance sheet and taken the in everything we do. In order for our businesses to continue to broad range of actions across our businesses to realign our be successful, we have to make choices.