SUSTAINABILITY REPORT 2009 LIFE INSURANCE / PENSIONS / INVESTMENTS About AEGON Throughout their working lives and into retirement, millions of people around the world rely on AEGON to help them secure their long-term financial futures. As an international life insurance, pension and investment company, AEGON has businesses in over twenty markets in the Americas, Europe and Asia. AEGON companies employ approximately 28,000 people and serve some 40 million customers across the globe. AEGON uses its strength and expertise to create added value for customers, employees, shareholders and the wider community. AEGON does this by encouraging innovation and by growing its businesses profitably and sustainably. AEGON’s ambition is to be a leading force in global financial ervices.s Contents � 6 Message from CEO Alex 36 Our shareholders Wynaendts 37 Importance of clear communications 37 Share performance 7 Who we are and what we do 38 Managing risk 43 Corporate governance 7 AEGON’s role in the world economy 8 Business and market environment 9 Refining AEGON’s long-term strategy 48 Our employees 9 AEGON’s financial performance in 2009 48 AEGON’s global workforce 50 Recruitment, training & performance appraisals 11 Our approach to sustainability 12 Defining sustainability 53 Employee representation 13 Our stakeholders 15 Our business principles 53 Salaries, costs and benefits 15 Governance and decision-making 55 Executive Board remuneration 16 Progress report 2009 22 Looking forward: our objectives for 2010 60Our business partners 60 AEGON’s supply chain 23 Investing responsibly: AEGON 62 Distribution as a shareholder 62 Governments & regulators 23 AEGON’s approach to investments 28 Socially responsible investments 66 The wider community 66 Protecting the environment 69 Community support 27 Our customers 28 Products and services 73 Economic, social and 39 Customer satisfaction environmental indicators 31 Online services 31 The AEGON brand 74 About this report 74 Scope of this report 74 Global Reporting Initiative 77 Assurance 77 Forward-looking statements 79 Contact information 80Appendices 80 Appendix I: Statement of the auditor 81 Appendix II: AEGON’s global workforce 2009 82 Appendix III: AEGON’s policy on human rights 83 Appendix IV: AEGON statement on SOMO report 85 Appendix V: AEGON statement regarding Sinopec investment 86 Appendix VI: AEGON’s business principles 88 Appendix VII: Global Reporting Initiative (G3) 94 Appendix VIII: AEGON’s portfolio of brands Message from CEO Alex Wynaendts � Without question, our most significant achievement in 2009 was our ability to safeguard the trust of AEGON’s many customers around the world during the period of unprecedented turmoil and uncertainty in world financial markets. Our business is, by nature, long-term and is only impact in a way that sustains the stakeholder confidence sustainable if we maintain the confidence and trust of which is critical to our success. We invite and welcome our customers, business partners, shareholders and your input as we pursue our ambition of being a global employees. The financial crisis exposed serious and leader in helping customers secure their financial extensive weaknesses in the systems and functions of futures. major financial institutions. Consequently, there is now Thank you for your ongoing interest in AEGON. even greater focus on essential issues such as transparency of products, effective risk management Sincerely, and corporate governance. We welcome this focus and the opportunity to detail the steps we have taken during the past year to strengthen AEGON’s position, reduce Alex Wynaendts, market risk, lower costs and invest in our businesses to CEO ensure that they are responsive to customer needs and market developments. AEGON recognizes that profit alone cannot be the measure of a company’s success. How we manage our business and resources and put them to work for the benefit of our many stakeholders is of critical importance for AEGON’s long-term sustainability. We are working in a number of areas across our businesses to further improve AEGON’s proposition to our stakeholders and the communities in which we operate and serve. A few examples: Our global Green Team is examining ways to reduce the impact of AEGON’s operations on the environment. In asset management, we are developing a company-wide policy to ensure that AEGON’s investments are not only financially beneficial but responsive to broader concerns. Furthermore, our businesses are working to simplify the products and services our customers rely on to plan effectively for their long-term financial security. In 2010, we will bring forward a new remuneration policy for members of the Executive Board that links pay not only to financial performance but also, for the first time, to sustainability criteria. AEGON remains committed to its broader responsibilities as a company operating in an increasingly inter- connected global arena. Even as we pursue our strategy to achieve long-term profitable growth, we are equally determined to develop our businesses and manage their 6 Who we are and what we do � AEGON was formed in 1983, the result of a merger will be over the age of 65. In Western Europe, that figure between two Dutch insurance companies, AGO and is higher – more than one in four – while in Japan, by the Ennia. But AEGON’s roots in the Netherlands can be middle of the current century, those over 65 will account traced back much further, to the first half of the for nearly 40% of the country’s total population. nineteenth century. AEGON companies in the United States and the United Kingdom also have long histories. Rising retirement populations Monumental Life, one of AEGON’s US subsidiaries, has in % been insuring people since 1858, while AEGON’s history Western Europe 18.4% in the United Kingdom stretches back almost 180 years 28.9% to the foundation of Scottish Equitable in 1831. United States 13.0% 21.6% Today, after more than a century and a half, AEGON is an Japan 22.6% international company, with operations in over twenty 37.8% countries around the world, employing approximately China 8.2% 28,000 people and serving some 40 million customers in 23.3% the Americas, Europe and Asia. India AEGON’s main operations are located in the United States, 4.9% 13.7% the Netherlands and the United Kingdom. Traditionally, 2010 2050 these three markets have generated most of the company’s Source: United Nations World Population Prospects earnings. In recent years, however, AEGON has also expanded its presence elsewhere, establishing new businesses in growth markets in the Americas, Central & At the same time, new markets are opening up, Eastern Europe and Asia. particularly in Asia, Central & Eastern Europe and Latin Freedom House, the non-governmental organization that America. In many of these areas, economic growth and promotes democracy and human rights, lists eight rising levels of personal wealth have resulted in an countries as the ‘least free’ in the world: Burma, Equatorial increase in long-term demand for pensions, life insurance Guinea, Libya, North Korea, Somalia, Sudan, Turkmenistan and investment products. In Central & Eastern Europe, and Uzbekistan. AEGON has no operations in any of these reforms have led to the widespread introduction of countries. Of the countries listed as ‘not free’ by Freedom mandatory private pensions, while in both China and India House, AEGON has businesses in just one: China. economic growth in recent years has brought greater prosperity and a rapid expansion of the urban middle AEGON’s role in the world economy class in these countries. In 2010, India’s middle class is AEGON believes that its main businesses – life insurance, expected to exceed 500 million people3 – more than the pensions and investments – have significant potential for combined populations of AEGON’s three main markets, growth in the years ahead. AEGON also believes that the the United States, the Netherlands and the United insurance industry as a whole has a vital economic and Kingdom. social role to play protecting living standards and ensuring the long-term viability of pension systems Over the past several years, AEGON has expanded its around the world. In 2008, life insurance premiums international presence to capitalize on opportunities for worldwide totaled almost USD 2.5 trillion1. growth in these new markets. Currently, the company In many countries – particularly in Western Europe, the has operations in six countries in Central & Eastern United States and Japan – people are living longer, Europe – Hungary, the Czech Republic, Slovakia, Poland, healthier lives. At the same time, workforces available to Romania and Turkey. In addition, AEGON has businesses finance pension systems are shrinking and governments in both France and Spain, as well as China, India and are increasingly shifting the burden of retirement Japan in Asia, and Mexico and Brazil in Latin America. In funding to individuals and private sector providers like China, AEGON has operations in provinces across the AEGON. By 2050, according to the latest estimates from country, giving it access to a potential market of some the United Nations2, more than one in five Americans 450 million people. 1 Source: Swiss Re. 3 Source: PriceWaterhouseCoopers: ‘Entering the Indian 2 Source: United Nations World Population Prospects. Financial Services Market’. AEGON SUSTAINABILITY REPORT 2009 7 Business and market environment the second half of 2008, aimed at reducing financial Economic and financial market conditions continued to risk, lowering operating costs and freeing up capital be extremely difficult during the first quarter of 2009. from the company’s existing businesses. The remainder of the year, however, saw a significant These short-term measures, known collectively as the improvement, particularly in higher equity markets and ‘Three Cs’ – Capital, Cost and Contingency – significantly narrower corporate credit spreads. This had a positive strengthened AEGON’s financial position, improved effect on AEGON’s earnings and capital position. efficiency and ensured the company would be well- Despite the improvement after the first quarter, financial placed to take advantage of future opportunities.