Financial risks

12 Months Ended

Dec. 31, 2022

Text block [abstract]

Financial risks

4 Financial risks

General

As an insurance group, Aegon is exposed to a variety of risks. Aegon’s largest exposures are to changes in financial markets (e.g. foreign currency, interest rate, credit and equity market risks) that affect the value of the investments, liabilities from products that Aegon sells, deferred expenses and value of business acquired. Other risks include insurance related risks, such as changes in mortality, morbidity, bond credit spread and liquidity premium, which are discussed in note 34 Insurance contracts. Aegon manages risk at local level where business is transacted, based on principles and policies established at the Group level. Aegon’s integrated approach to risk management involves similar measurement of risk and scope of risk coverage to allow for aggregation of the Group’s risk position.

To manage the risk from changes in financial markets, Aegon’s products are priced using a market-consistent framework and comprehensive asset liability management (ALM) programs are implemented to ensure that the assets backing policyholder benefits are invested prudently over the long term. A range of ALM techniques are used across the Group. These range in terms of sophistication and complexity from cash-flow matching (for traditional fixed annuities) to duration matching (for the Universal Life range of products) to derivative-based semi-static and dynamic hedges (to match variable annuities).

To manage its risk exposure, Aegon has risk policies in place. Many of these policies are group-wide while others are specific to the unique situation of local businesses. For ALM specifically, the Enterprise Risk Management (ERM) framework includes several risk policies that govern ALM strategies, such as the Investment and Counterparty Risk Policy (ICRP). The ICRP governs the management of investment risks associated with credit, equity, property, alternative asset classes, interest rate and currency risk in addition to option markets, implied volatility risk, interest rate options and swaptions. As well as product-level ALM programs, subsidiary businesses are required by the ICRP to maintain overarching entity-level ALM strategies that set

the direction and limits for the aggregated product-level programs. Significant or complex ALM strategies are approved at group level, and all programs are subject to Group Risk oversight.

Together with the ICRP, which guides ALM strategy, several other ERM policies govern concentration risk, liquidity risk, use of derivatives and securities lending and repos. As Aegon uses derivatives extensively, collateral calls can be significant depending on market circumstances. Liquidity is managed at legal entity level in the first instance with central coordination by Aegon N.V. The large US and Dutch units may use external market solutions to match projected liquidity requirements with funding.

Next to guidance, the Group level policies also provide limits to the Group’s exposure to major risks such as equity, interest rates, credit, and currency. The limits in these policies in aggregate remain within the Group’s overall tolerance for risk and the Group’s financial resources. Operating within this policy framework, Aegon employs risk management programs including ALM processes and models and hedging programs (which are largely conducted via the use of financial derivative instruments). These risk management programs are in place in each country unit and are not only used to manage risk in each unit, but are also part of the Group’s overall risk strategy.

Aegon operates a Derivative Use Policy to govern its usage of derivatives. This policy establishes the control, authorization, execution and monitoring requirements of the usage of such instruments. In addition, the policy stipulates necessary mitigation of credit risk created through derivatives management tools. For derivatives, counterparty credit risk is normally mitigated by requirements to post collateral via credit support annex agreements or through a central clearing house.

As part of its risk management programs, Aegon takes inventory of its current risk position across risk categories. Aegon also measures the sensitivity of net result and shareholders’ equity under both deterministic and stochastic scenarios. Management uses the insight gained through these ‘what if?’ scenarios to manage the Group’s risk exposure and capital position. The models, scenarios and assumptions used are reviewed regularly and updated as necessary.

Results of Aegon’s sensitivity analyses are presented throughout this section to show the estimated sensitivity of net result and shareholders’ equity to various scenarios. For each type of market risk, the analysis shows how net result and shareholders’ equity would have been affected by changes in the relevant risk variable that were reasonably possible at the reporting date. For each sensitivity test the impact of a reasonably possible change in a single factor is shown. Management action is taken into account to the extent that it is part of Aegon’s regular policies and procedures, such as established hedging programs. However, incidental management actions that would require a change in policies and procedures are not considered.

Each sensitivity analysis reflects the extent to which the shock tested would affect management’s critical accounting estimates and judgment in applying Aegon’s accounting policies. Market-consistent assumptions underlying the measurement of non-listed assets and liabilities are adjusted to reflect the shock tested. The shock may also affect the measurement of assets and liabilities based on assumptions that are not observable in the market. For example, a shock in interest rates may lead to changes in the amortization schedule of DPAC or to increased impairment losses on equity investments. Although management’s short-term assumptions may change if there is a reasonably possible change in a risk factor, long-term assumptions will generally not be revised unless there is evidence that the movement is permanent. This fact is reflected in the sensitivity analyses.

The accounting mismatch inherent in IFRS is also apparent in the reported sensitivities. A change in interest rates has an immediate impact on the carrying amount of assets measured at fair value. However, the shock will not have a similar effect on the carrying amount of the related insurance liabilities that are measured based on locked-in assumptions or on management’s long-term expectations. Consequently, the different measurement bases for assets and liabilities lead to increased volatility in IFRS net result and shareholders’ equity. Aegon has classified a significant part of its investment portfolio as ‘available-for-sale’, which is one of the main reasons why the economic shocks tested have a different impact on net result than on shareholders’ equity. Unrealized gains and losses on these assets are not recognized in the income statement but are booked through other comprehensive income to the revaluation reserves in shareholders’ equity, unless impaired. As a result, economic sensitivities predominantly impact shareholders’ equity but leave net result unaffected. The effect of movements of the revaluation reserve on capitalization ratios and capital adequacy are minimal. Aegon’s target ratio for the composition of its capital base is based on shareholders’ equity excluding the revaluation reserve.

The sensitivities do not reflect what the net result for the period would have been if risk variables had been different because the analysis is based on the exposures in existence at the reporting date rather than on those that actually occurred during the year. Nor are the results of the sensitivities intended to be an accurate prediction of Aegon’s future shareholders’ equity or earnings. The analysis does not take into account the impact of future new business, which is an important component of Aegon’s future earnings. It also does not consider all methods available to management to respond to changes in the financial environment, such as changing investment portfolio allocations or adjusting premiums and crediting rates. Furthermore, the results of the analyses cannot be extrapolated for wider variations since effects do not tend to be linear.

Concentration risk for financial risks are measured and managed at the following levels:

◆ Concentration per risk type: Risk exposures are measured per risk type as part of Aegon’s internal economic framework. A risk tolerance framework is in place which sets risk limits per risk type to target desired risk balance and promote diversification across risk types;

◆ Concentration per counterparty: Risk exposure is measured and risk limits are in place per counterparty as part of the Counterparty Name Limit Policy; and

◆ Concentration per sector, geography and asset class: Aegon’s investment strategy is translated in investment mandates for its internal and external asset managers. Through these investment mandates limits on sector, geography and asset class are set. Compliance monitoring of the investment mandates is done by the insurance operating companies.

Moreover, concentration of financial risks are measured in Aegon business planning cycle. As part of business planning, the resilience of Aegon’s business strategy is tested in several extreme event scenarios. In the Adverse Financial scenario, financial markets are stressed without assuming diversification across different market factors. Within the projection certain management actions may be implemented when management deems this necessary.

Aegon’s significant financial risks and related financial information are explained in the order as follows:

◆ Credit risk

◆ Equity market risk and other investment risks

◆ Interest rate risk

◆ Currency exchange risk

◆ Liquidity risk

Certain information in this note is presented per segment, please refer to note 5 Segment information for the definition of Aegon’s segments.

Credit risk

As premiums and deposits are received, these funds are invested to pay for future policyholder obligations. For general account products, Aegon typically bears the risk for investment performance which is equal to the return of principal and interest. Aegon is exposed to credit risk on its general account fixed-income portfolio (debt securities, mortgages and private placements), over-the-counter derivatives and reinsurance contracts. Some issuers have defaulted on their financial obligations for various reasons, including bankruptcy, lack of liquidity, downturns in the economy, downturns in real estate values, operational failure and fraud. During financial downturns, Aegon can incur defaults or other reductions in the value of these securities and loans, which could have a materially adverse effect on Aegon’s business, results of operations and financial condition. Investments for account of policyholders are excluded as the policyholder bears the credit risk associated with the investments.

The table that follows shows the Group’s maximum exposure to credit risk from investments in general account financial assets, as well as general account derivatives and reinsurance assets, collateral held and net exposure. Please refer to note 45 and 46 for further information on capital commitments and contingencies and on collateral given, which may expose the Group to credit risk.

2022 1)	Maximum exposure to credit risk		Cash		Securities		Letters of credit / guaran- tees		Real estate property		Master netting agree- ments		Other		Total collateral		Surplus collateral (or overcol- lateraliza- tion)		Net exposure
Debt securities - carried at fair value		53,647		-		-		96		-		-		-		96		-		53,551
Money market and other short-term investments - carried at fair value		5,613		-		312		-		-		-		-		312		23		5,324
Mortgage loans - carried at amortized cost		10,441		40		-		22		24,822		-		-		24,883		14,442		1
Private loans - carried at amortized cost		27		11		-		-		-		-		-		11		-		15
Other loans - carried at amortized cost		2,088		-		-		-		-		-		3,510		3,510		1,470		47
Other financial assets - carried at fair value		4,562		-		-		-		-		-		-		-		-		4,562
Derivatives		2,707		246		426		-		-		2,174		-		2,846		173		33
Reinsurance assets		21,184		-		14,162		103		-		-		-		14,265		-		6,919
At December 31		100,269		297		14,900		221		24,822		2,174		3,510		45,923		16,108		70,453

1 2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

2021	Maximum exposure to credit risk		Cash		Securities		Letters of credit / guaran- tees		Real estate property		Master netting agree- ments		Other		Total collateral		Surplus collateral (or overcol- lateraliza- tion)		Net exposure
Debt securities - carried at fair value		97,195		-		-		221		-		-		-		221		-		96,974
Money market and other short-term investments - carried at fair value		4,910		-		330		-		-		-		-		330		21		4,601
Mortgage loans - carried at amortized cost		39,991		2,684		-		32		75,412		-		-		78,128		38,197		60
Private loans - carried at amortized cost		4,883		33		-		-		-		-		-		33		-		4,850
Other loans - carried at amortized cost		1,949		-		-		-		-		-		1,872		1,872		1,346		1,423
Other financial assets - carried at fair value		4,245		-		-		-		-		-		-		-		-		4,245
Derivatives		8,780		2,555		107		-		-		5,921		-		8,583		66		263
Reinsurance assets		20,992		-		3,784		77		-		-		-		3,861		-		17,131
At December 31		182,945		5,272		4,221		330		75,412		5,921		1,872		93,028		39,630		129,547

Investment exposure to Russia

In 2022, following the Russian invasion of Ukraine, Aegon has reduced its general account investment exposure to Russia from EUR 27 million to almost nil per December 31, 2022. The remaining investment positions currently cannot be sold as these investments are in companies which are in scope of international sanctions imposed on Russia following the invasion of Ukraine. Aegon has no operations in Russia.

Debt securities

Several bonds in Aegon’s Americas’ portfolio are guaranteed by Monoline insurers. This is shown in the table above in the column ‘Letters of credit / guarantees’.

Money market and short-term investments

The collateral reported for the money market and short-term investments are related to tri-party repurchase agreements (repos). Within tri-party repos Aegon invests under short-term reverse repurchase agreements and the counterparty posts collateral to a third party custodian. The collateral posted is typically high-quality, short-term securities and is only accessible for or available to Aegon in the event the counterparty defaults.

Mortgage loans

The real estate collateral for mortgages includes both residential and commercial properties. The collateral for commercial mortgage loans in Aegon Americas is measured at fair value. At a minimum on an annual basis, a fair value is estimated for each individual real estate property that has been pledged as collateral. When a loan is originally provided, an external appraisal is obtained to estimate the value of the property. In subsequent years, the value is typically estimated internally using various professionally accepted valuation methodologies. Internal appraisals are performed by qualified, professionally accredited personnel. International valuation standards are used and the most significant assumptions made during the valuation of real estate are the current cost of reproducing or replacing the property, the value that the property’s net earning power will support, and the value indicated by recent sales of comparable properties. Valuations are primarily supported by market evidence. For Aegon the Netherlands, collateral for the residential mortgages is measured as the foreclosure value which is indexed periodically.

Cash collateral for mortgage loans includes the savings that have been received to redeem the underlying mortgage loans at redemption date. These savings are part of the credit side of the statement of financial position, but reduce the credit risk for the mortgage loan as a whole.

A substantial part of Aegon’s Dutch residential mortgage loan portfolio benefits from guarantees by a Dutch government-backed trust (Stichting Waarborgfonds Eigen Woning) through the Dutch Mortgage loan Guarantee program (NHG). With exception of NHG-backed mortgage loans originated after January 1, 2014, for which a 10% lender-incurred haircut applies on realized losses on each defaulted loan, these guarantees cover all principal losses, missed interest payments and foreclosure costs incurred upon termination and settlement of defaulted mortgage loans when lender-specific terms and conditions of the guarantee are met. When not fully met, the trust may pay claims in part or in full, depending on the severity of the breach of terms and conditions. For each specific loan, the guarantee amortizes in line with an equivalent annuity mortgage loan. When the remaining loan balance at default does not exceed the amortized guarantee, it covers the full loss under its terms and conditions. Any loan balance in excess of this decreasing guarantee profile serves as a first loss position for the lender.

Derivatives

The master netting agreements column in the table relates to derivative liability positions which are used in Aegon’s credit risk management. The offset in the master netting agreements column includes balances where there is a legally enforceable right of offset, but no intention to settle these balances on a net basis under normal circumstances. As a result, there is a net exposure for credit risk management purposes. However, as there is no intention to settle these balances on a net basis, they do not qualify for net presentation for accounting purposes.

Reinsurance assets

The collateral related to the reinsurance assets include assets in trust that are held by the reinsurer for the benefit of Aegon. The assets in trust can be accessed to pay policyholder benefits in the event the reinsurers fail to perform under the terms of their contract. Further information on the related reinsurance transactions is included in note 26 Reinsurance assets.

Other loans

The collateral included in the other column represents the policyholders account value for policy loans. The excess of the account value over the loan value is included in the surplus collateral column. For further information on the policy loans refer to note 22.1 Financial assets, excluding derivatives.

The total collateral includes both under- and over-collateralized positions. To present a net exposure of credit risk, the over-collateralization, which is shown in the surplus collateral column, is extracted from the total collateral.

Credit risk management

Aegon manages credit risk exposure by individual counterparty, sector and asset class, including cash positions. Normally, Aegon mitigates credit risk in derivative contracts by entering into credit support agreement, where practical, and in ISDA master netting agreements for most of Aegon’s legal entities to facilitate Aegon’s right to offset credit risk exposure. Main counterparties to these transactions are investment banks which are typically rated ‘A’ or higher. The credit support agreement will normally dictate the threshold over which collateral needs to be pledged by Aegon or its counterparty. Transactions requiring Aegon or its counterparty to post collateral are typically the result of derivative trades, comprised mostly of interest rate swaps, equity swaps, currency swaps and credit swaps. Collateral received is mainly cash (USD and EUR). The credit support agreements that outline the acceptable collateral require high-quality instruments to be posted. Over the last three years, there was no default with any derivatives counterparty. The credit risk associated with financial assets subject to a master netting agreement is eliminated only to the extent that financial liabilities due to the same counterparty will be settled after the assets are realized. Eligible derivative transactions are traded via Central Clearing Houses as required by EMIR and the Dodd-Frank act. Credit risk in these transactions is mitigated through posting of initial and variation margins.

Aegon may also mitigate credit risk in reinsurance contracts by including downgrade clauses that allow the recapture of business, retaining ownership of assets required to support liabilities ceded or by requiring the reinsurer to hold assets in trust. For the resulting net credit risk exposure, Aegon employs deterministic and stochastic credit risk modeling in order to assess the Group’s credit risk profile, associated earnings and capital implications due to various credit loss scenarios.

Aegon operates a Credit Name Limit Policy (CNLP) under which limits are placed on the aggregate exposure that it has to any one counterparty. Limits are placed on the exposure at both group level and individual country units. The limits also vary by a rating system, which is a composite of the main rating agencies (S&P, Moody’s and Fitch) and Aegon’s internal rating of the counterparty. If an exposure exceeds the stated limit, then the exposure must be reduced to the limit for the country unit and rating category as soon as possible. Exceptions to these limits can only be made after explicit approval from Aegon’s Group Risk and Capital Committee (GRCC). The policy is reviewed regularly.

At December 31, 2022, there was no violation of the Credit Name Limit Policy at Group level (2021: one).

At December 31, 2022, Aegon’s largest corporate credit exposures are to American United Mutual Insurance, Reinsurance Group of America, Bank of America and Berkshire Hathaway. Aegon had large government exposures, the largest being to the United States, the Netherlands and Germany. Highly rated government bonds and government exposure domestically issued and owned in local currency are excluded from the Credit Name Limit Policy.

Aegon group level long-term counterparty exposure limits are as follows:

Group limits per credit rating
Amounts in EUR million	2022	2021
AAA	900	900
AA	900	900
A	675	675
BBB	450	450
BB	250	250
B	125	125
CCC or lower	50	50

Credit rating

The ratings distribution of general account portfolios of Aegon’s major reporting units, excluding reinsurance assets, are presented in the table that follows, organized by rating category and split by assets that are valued at fair value and assets that are valued at amortized cost. Aegon uses a composite rating based on a combination of the external ratings of S&P, Moody’s, Fitch and National Association of Insurance Commissioners (NAIC which is for US only) and internal ratings. The rating used is the lower of the external rating and the internal rating.

	Americas				United Kingdom				International
Credit rating general account investments,excluding reinsurance assets 2022	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost			Fair value
AAA		1,488		12,124		-		55		-			91
AA		4,454		3,659		-		461		-			157
A		3,779		19,374		-		262		39			891
BBB		671		18,785		-		123		(5	)		745
BB		48		1,434		-		1		-			71
B		-		592		-		-		-			13
CCC or lower		-		445		-		-		-			4
Assets not rated		2,035		4,525		-		582		9			9
Total		12,475		60,938		-		1,483		43			1,980
Past due and / or impaired assets		-		2,239		-		-		-			22
At December 31		12,475		63,178		-		1,483		43			2,001

	Asset Management				Total 2022 1) 2)
Credit rating general account investments, excluding reinsurance assets 2022	Amortized cost		Fair value		Amortized cost		Fair value		Total carrying   value
AAA		-		135		1,488		12,404		13,892
AA		-		-		4,454		4,277		8,731
A		-		-		3,818		20,527		24,345
BBB		-		-		666		19,653		20,319
BB		-		-		48		1,505		1,553
B		-		-		-		605		605
CCC or lower		-		-		-		449		449
Assets not rated		-		1		2,081		5,235		8,167
Total		-		136		12,556		64,656		78,061
Past due and / or impaired assets		-		-		-		2,261		2,262
At December 31		-		136		12,556		66,917		80,323

1  Includes investments of Holding and other activities.

2  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

	Americas				The Netherlands				United Kingdom				International
Credit rating general account investments, excluding reinsurance assets 2021	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost			Fair value
AAA		1,383		15,537		2,607		11,832		-		74		-			738
AA		4,219		4,438		216		6,474		-		586		-			699
A		3,301		20,888		128		10,636		-		384		52			2,610
BBB		519		21,894		1,050		4,458		-		202		(4	)		3,311
BB		59		1,614		44		127		-		1		-			272
B		-		549		-		19		-		-		18			370
CCC or lower		-		441		-		19		-		-		-			13
Assets not rated		1,868		4,257		31,137		1,418		-		644		27			79
Total		11,349		69,618		35,182		34,983		-		1,893		93			8,093
Past due and / or impaired assets		2		2,044		176		17		-		-		-			116
At December 31		11,352		71,662		35,358		35,000		-		1,893		93			8,208

	Asset Management				Total 2021 1)
Credit rating general account investments, excluding reinsurance assets 2021	Amortized cost		Fair value		Amortized cost		Fair value		Total carrying   value
AAA		-		295		3,989		28,476		32,465
AA		-		-		4,436		12,197		16,633
A		-		-		3,481		34,530		38,011
BBB		-		-		1,564		29,866		31,431
BB		-		-		103		2,015		2,118
B		-		-		18		938		956
CCC or lower		-		-		-		473		473
Assets not rated		-		2		33,053		6,474		39,527
Total		-		296		46,644		114,968		161,613
Past due and / or impaired assets		-		-		178		2,176		2,355
At December 31		-		296		46,823		117,145		163,967

1  Includes investments of Holding and other activities.

The following table shows the credit quality of the gross positions in the statement of financial position for general account reinsurance assets specifically:

	Carrying value   2022 1)	Carrying value   2021
AAA	-		-
AA	2,156		9,084
A	18,105		11,087
Below A	6		7
Not rated	917		813
At December 31	21,184		20,992

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Credit risk concentration

The tables that follow present specific credit risk concentration information for general account financial assets.

Credit risk concentrations – debt securities and money market investments 2022	Americas		United Kingdom		International		Asset       Management		Total 2022 1)		Of which past   due and / or         impaired assets
Residential mortgage-backed securities (RMBSs)		1,136		-		-		5		1,141		479
Commercial mortgage-backed securities (CMBSs)		2,707		94		37		-		2,838		42
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp. bonds, Bank loans		438		-		3		-		440		2
ABSs - Other		2,400		53		15		9		2,478		26
Financial - Banking		3,957		168		318		-		4,443		39
Financial - Other		10,778		36		352		96		11,263		191
Capital goods and other industry		3,769		22		132		-		3,923		268
Communications & Technology		4,658		2		167		-		4,828		417
Consumer cyclical		3,742		28		106		-		3,877		223
Consumer non-cyclical		5,445		85		144		-		5,674		350
Energy		3,205		19		102		-		3,326		41
Transportation		1,728		-		43		-		1,771		19
Utility		4,319		69		80		-		4,469		110
Government bonds		7,962		323		488		17		8,790		43
At December 31		56,243		901		1,989		128		59,260		2,251

1  Includes investments of Holding and other activities.

2 2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Credit risk concentrations – Government bonds per country of risk 2022	Americas		United Kingdom		International		Asset Management		Total 2022 1) 2)
United States		7,209		-		80		-		7,290
Netherlands		-		-		-		-		-
United Kingdom		-		275		-		17		292
Austria		-		-		3		-		3
Belgium		-		-		3		-		3
Finland		-		-		-		-		-
France		-		27		2		-		29
Germany		-		-		-		-		-
Hungary		18		-		4		-		22
Indonesia		82		-		-		-		82
Luxembourg		-		-		1		-		1
Spain		-		-		152		-		152
Rest of Europe		48		-		229		-		277
Rest of world		604		21		13		-		638
Supranational		-		-		-		-		-
At December 31		7,962		323		488		17		8,790

1  Includes investments of Holding and other activities.

2  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Credit risk concentrations – Credit rating 2022 3)	Government bonds		Corporate bonds		RMBSs CMBSs ABSs		Other		Total 2022 1) 2)
AAA		5,980		724		2,997		2,780		12,482
AA		1,243		2,484		815		-		4,541
A		753		16,180		1,960		-		18,894
BBB		538		19,307		306		-		20,151
BB		206		1,204		102		-		1,513
B		65		519		23		-		607
CCC or lower		4		207		694		-		905
Assets not rated		-		15		-		152		167
At December 31		8,790		40,640		6,897		2,933		59,260

1  Includes investments of Holding and other activities.

2  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

3  CNLP Ratings are used and are the lower of the Barclay’s Rating and the Internal Rating with the Barclay’s rating being a blended rating of S&P, Fitch, and Moody’s.

There are no individual issuers rated below investment grade in the RMBS sector, CMBS sector and ABS sector which have unrealized loss position greater than EUR 25 million.

Credit risk concentrations – debt securities and money market investments 2021	Americas		The Netherlands		United Kingdom		International		Asset Management		Total 2021 1)		Of which past due and / or impaired assets
Residential mortgage-backed securities (RMBSs)		1,854		106		-		20		4		1,984		611
Commercial mortgage-backed securities (CMBSs)		3,005		3		122		517		-		3,647		13
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp. bonds, Bank loans		265		1,576		-		37		-		1,878		2
ABSs – Other		1,972		1		74		267		8		2,321		27
Financial - Banking		5,597		3,146		177		1,035		-		9,956		9
Financial - Other		9,916		854		68		783		257		11,877		175
Capital goods and other industry		4,048		1,078		33		501		-		5,661		144
Communications & Technology		6,190		1,561		3		732		-		8,485		411
Consumer cyclical		3,159		741		43		342		-		4,286		152
Consumer non-cyclical		6,138		1,900		121		825		-		8,984		177
Energy		4,177		143		26		635		-		4,980		91
Transportation		2,151		815		-		197		-		3,163		130
Utility		5,356		707		105		590		-		6,757		153
Government bonds		11,663		14,321		477		1,649		18		28,127		4
At December 31		65,490		26,951		1,248		8,130		286		102,105		2,101

1  Includes investments of Holding and other activities.

Credit risk concentrations – Government bonds per country of risk 2021	Americas		The Netherlands		United Kingdom		International		Asset Management		Total 2021 1)
United States		10,897		-		-		463		-		11,360
Netherlands		-		4,691		-		-		-		4,691
United Kingdom		-		3		413		-		18		433
Austria		-		1,175		-		6		-		1,181
Belgium		-		1,132		-		5		-		1,137
Finland		-		41		-		-		-		41
France		-		1,618		34		2		-		1,654
Germany		-		4,309		-		-		-		4,309
Hungary		-		-		-		302		-		302
Indonesia		75		39		-		28		-		141
Luxembourg		-		873		-		1		-		875
Spain		-		144		-		197		-		341
Rest of Europe		85		65		-		503		-		654
Rest of world		587		230		31		131		-		979
Supranational		19		-		-		11		-		29
At December 31		11,663		14,321		477		1,649		18		28,127

1  Includes investments of Holding and other activities.

Credit risk concentrations – Credit rating 2021 2)	Government bonds		Corporate bonds		RMBSs CMBSs ABSs		Other		Total 2021 1)
AAA		19,740		754		5,779		1,882		28,155
AA		5,476		4,099		1,125		-		10,700
A		1,228		25,470		1,648		-		28,345
BBB		1,094		28,855		338		-		30,286
BB		238		1,700		63		-		2,001
B		348		553		26		-		927
CCC or lower		5		183		826		-		1,014
Assets not rated		-		3		24		649		676
At December 31		28,127		61,617		9,830		2,531		102,105

1  Includes investments of Holding and other activities.

2 CNLP Ratings are used and are the lower of the Barclay’s Rating and the Internal Rating with the Barclay’s rating being a blended rating of S&P, Fitch, and Moody’s.

There are no individual issuers rated below investment grade in the RMBS sector, CMBS sector and ABS sector which have unrealized loss position greater than EUR 25 million.

Credit risk concentrations – mortgage loans 2022	Americas		United Kingdom		International		Asset Management		Total 2022 1)		Of which past due and / or impaired assets
Agricultural		49		-		-		-		49		-
Apartment		5,519		-		-		-		5,519		-
Industrial		402		-		-		-		402		-
Office		1,521		-		-		-		1,521		-
Retail		1,475		-		-		-		1,475		-
Other commercial		1,469		-		-		-		1,469		-
Residential		5		-		1		-		5		-
At December 31		10,441		-		1		-		10,441		-

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Credit risk concentrations – mortgage loans 2021	Americas		The Netherlands		United Kingdom		International		Asset Management		Total 2021		Of which past due and / or impaired assets
Agricultural		59		-		-		-		-		59		-
Apartment		5,085		-		-		-		-		5,085		2
Industrial		1,349		-		-		-		-		1,349		-
Office		1,560		-		-		-		-		1,560		-
Retail		1,425		6		-		-		-		1,432		-
Other commercial		-		23		-		-		-		23		1
Residential		6		30,476		-		1		-		30,483		139
At December 31		9,485		30,505		-		1		-		39,991		142

The fair value of Aegon Americas commercial and agricultural mortgage loan portfolio as per December 31, 2022, amounted to EUR 9,224 million (2021: EUR 10,161 million). The loan to value (LTV) amounted to approximately 50.4% (2021: 53%). Of the portfolio 0% (2021: 0%) is in delinquency (defined as 60 days in arrears). In 2022, Aegon Americas recognized EUR 0 million of net impairments (2021: EUR 1 million net impairments) on this portfolio. In 2022, there were no foreclosures (2021: EUR 0 million) and no impairments or recoveries associated with foreclosed loans (2021: EUR 0 million).

Unconsolidated structured entities

Aegon’s investments in unconsolidated structured entities such as RMBSs, CMBSs and ABSs and investment funds are presented in the line item ‘Investments’ of the statement of financial position. Aegon’s interests in these unconsolidated structured entities can be characterized as basic interests, Aegon does not have loans, derivatives, guarantees or other interests related to these investments. Any existing commitments such as future purchases of interests in investment funds are disclosed in note 45 Commitments and contingencies.

For debt instruments, specifically for RMBSs, CMBSs and ABSs, the maximum exposure to loss is equal to the carrying amount which is reflected in the credit risk concentration table regarding debt securities and money market investments. To manage credit risk Aegon invests primarily in senior notes of RMBSs, CMBSs and ABSs. The composition of the RMBSs, CMBSs and ABSs portfolios of Aegon are widely dispersed looking at the individual amount per entity, therefore Aegon only has non-controlling interests in individual unconsolidated structured entities. Furthermore these investments are not originated by Aegon.

Except for commitments as noted in note 45 Commitments and contingencies, Aegon did not provide, nor is required to provide financial or other support to unconsolidated structured entities. Nor does Aegon have intentions to provide financial or other support to unconsolidated structured entities in which Aegon has an interest or previously had an interest.

For RMBSs, CMBSs and ABSs in which Aegon has an interest at reporting date, the following table presents total income received from those interests. The Investments column reflects the carrying values recognized in the statement of financial position of Aegon’s interests in RMBSs, CMBSs and ABSs.

	Total result 2022								December 31, 2022
2022 1)	Interest income		Total gains and losses on sale of assets			Total			Investments
Residential mortgage-backed securities		92		(84	)		9			1,141
Commercial mortgage-backed securities		120		(715	)		(595	)		2,838
Asset-backed securities		24		(34	)		(10	)		440
ABSs - Other		92		(416	)		(324	)		2,478
Total		328		(1,249	)		(921	)		6,897

1 2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

	Total result 2021							December 31, 2021
2021	Interest income		Total gains and losses on sale of assets			Total		Investments
Residential mortgage-backed securities		83		(28	)		55		1,980
Commercial mortgage-backed securities		113		(31	)		82		3,647
Asset-backed securities		29		-			29		1,878
ABSs - Other		70		(11	)		59		2,323
Total		295		(69	)		226		9,829

Additional information on credit risk, unrealized losses and impairments

Debt instruments

The amortized cost and fair value of debt securities, money market investments and other, included in Aegon’s available-for-sale (AFS) portfolios, are as follows as of December 31, 2022, and December 31, 2021.

2022 1)	Amortized cost		Unrealized gains		Unrealized losses			Total fair value		Fair value of instruments with unrealized gains		Fair value of instruments with unrealized losses
Debt securities, money market instruments and other
United States government		8,386		135		(1,294	)		7,226		1,435		5,791
Dutch government		-		-		-			-		-		-
Other government		1,700		23		(239	)		1,484		266		1,218
Mortgage-backed securities		4,218		160		(439	)		3,939		578		3,362
Asset-backed securities		3,269		12		(376	)		2,905		183		2,722
Corporate		42,507		449		(5,419	)		37,538		7,428		30,110
Money market investments		5,511		4		(1	)		5,514		3,815		1,699
Other		863		105		(128	)		840		600		241
Total		66,455		888		(7,896	)		59,447		14,305		45,143
Of which held by Aegon Americas		63,213		837		(7,672	)		56,379		13,073		43,306

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

2021	Amortized cost		Unrealized gains		Unrealized losses			Total fair value		Fair value of instruments with unrealized gains		Fair value of instruments with unrealized losses
Debt securities, money market instruments and other
United States government		8,942		2,386		(11	)		11,317		10,938		379
Dutch government		3,456		1,238		(0	)		4,694		4,688		6
Other government		9,060		2,794		(84	)		11,769		10,414		1,356
Mortgage-backed securities		5,265		372		(56	)		5,581		3,832		1,749
Asset-backed securities		4,088		118		(16	)		4,189		2,334		1,855
Corporate		50,953		5,738		(343	)		56,348		45,363		10,985
Money market investments		4,790		-		(0	)		4,790		4,547		243
Other		876		34		(66	)		844		519		325
Total		87,431		12,679		(576	)		99,533		82,635		16,898
Of which held by Aegon Americas and NL		78,468		11,865		(475	)		89,859		74,954		14,905

Unrealized bond losses by sector

The composition by industry category of Aegon’s available-for-sale (AFS) debt securities, money market investments and other in an unrealized loss position at December 31, 2022, and December 31, 2021, is presented in the following table:

	December 31, 2022 1)					December 31, 2021
Unrealized losses - debt securities, money market investments and other	Carrying value of instruments with unrealized losses		Unrealized losses			Carrying value of instruments with unrealized losses		Unrealized losses
Residential mortgage-backed securities (RMBSs)		633		(70	)		810		(21	)
Commercial mortgage-backed securities (CMBSs)		2,690		(360	)		803		(27	)
Asset-backed securities (ABSs) - CDOs backed by ABS, Corp. bonds, Bank loans		434		(39	)		1,244		(9	)
ABSs - Other		2,253		(334	)		558		(7	)
Financial Industry - Banking		2,906		(412	)		1,669		(32	)
Financial Industry - Insurance		1,146		(199	)		368		(11	)
Financial Industry - Other		5,821		(878	)		1,092		(29	)
Industrial		17,249		(3,068	)		5,630		(179	)
Utility		3,564		(765	)		1,564		(68	)
Government		6,368		(1,418	)		842		(28	)
Other		240		(128	)		325		(66	)
Total held by Aegon Americas and NL 1)		43,306		(7,672	)		14,905		(475	)
Held by other segments		1,837		(224	)		1,994		(102	)
Total		45,143		(7,896	)		16,898		(576	)

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Impairment of financial assets

Aegon regularly monitors industry sectors and individual debt securities for indicators of impairment. These indicators may include one or more of the following: 1) deteriorating market to book ratio, 2) increasing industry risk factors, 3) deteriorating financial condition of the issuer, 4) covenant violations by the issuer, 5) high probability of bankruptcy of the issuer, or 6) downgrades by internationally recognized credit rating agency. Additionally, for asset-backed securities, cash flow trends and underlying levels of collateral are monitored. A security is impaired if there is objective evidence that a loss event has occurred after the initial recognition of the asset that has a negative impact on the estimated future cash flows.

For details on impairments on financial assets, including receivables, refer to note 15 Impairment charges / (reversals).

Past due and impaired assets

The tables that follow provide information on past due and individually impaired financial assets for the whole Aegon Group. An asset is past due when a counterparty has failed to make a payment when contractually due. Assets are impaired when an impairment loss has been charged to the income statement relating to this asset. After the impairment loss is reversed in subsequent periods, the asset is no longer considered to be impaired. When the terms and conditions of financial assets

have been renegotiated, the terms and conditions of the new agreement apply in determining whether the financial assets are past due.

Aegon’s policy is to pursue realization of the collateral in an orderly manner as and when liquidity permits. Aegon generally does not use the non-cash collateral for its own operations.

	2022 1)					2021
Past due but not impaired assets		0-6 months	6-12 months	> 1 year	Total		0-6 months	6-12 months	> 1 year	Total
Debt securities - carried at fair value		1,155	572	25	1,751		1,171	255	40	1,466
Mortgage loans		-	-	-	-		129	1	1	131
Other loans		-	-	-	-		19	5	10	35
Accrued interest		28	22	-	50		30	10	3	42
Other financial assets - carried at fair value		-	-	-	-		-	-	-	-
At December 31		1,183	593	25	1,802		1,350	271	54	1,675

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Impaired financial assets	Carrying amount 2022	1)	Carrying amount 2021
Shares	10		62
Debt securities - carried at fair value	500		635
Mortgage loans	-		10
Other loans	-		2
Other financial assets - carried at fair value	1		14
At December 31	510		723

1  2022 excludes the assets of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Equity market risk and other investments risk

Fluctuations in the equity, real estate and capital markets have affected Aegon’s profitability, capital position and sales of equity related products in the past and may continue to do so. Exposure to equity, real estate and capital markets exists in both assets and liabilities. Asset exposure exists through direct equity investment, where Aegon bears all or most of the volatility in returns and investment performance risk. Equity market exposure is also present in insurance and investment contracts for policyholders where funds are invested in equities, backing variable annuities, unit-linked products and mutual funds. Although most of the risk remains with the policyholder, lower investment returns can reduce the asset management fee earned by Aegon on the asset balance in these products. In addition, some of this business has minimum return or accumulation guarantees.

In 2021, Transamerica expanded its dynamic hedge program to variable annuities with guaranteed minimum death benefit riders (GMDB) and remaining policies with guaranteed minimum income (GMIB) riders. This builds on the effective dynamic hedge program of policies with guaranteed minimum withdrawal benefits (GMWB). The dynamic hedge program covers the equity risks (and interest rate risk) embedded in the guarantees of its entire variable annuity portfolio. Dynamic hedging stabilizes cash flows and reduces sensitivities to changes in equity markets (and interest rates) on an economic basis.

The general account equity, real estate and other non-fixed-income portfolio of Aegon is as follows:

Equity, real estate and non-fixed income exposure	Americas	United Kingdom	International	Asset Management	Holding and other activities	Total 2022	1)
Equity funds	141	-	3	7	-	151
Common shares 2)	148	25	5	-	1	179
Preferred shares	56	-	-	-	-	56
Investments in real estate	42	-	17	-	-	59
Hedge funds	10	-	-	-	-	10
Other alternative investments	2,168	-	-	-	-	2,168
Other financial assets	1,848	531	5	1	-	2,385
At December 31	4,414	556	30	9	1	5,009

1  2022 excludes the exposures of the disposal group, which are separately disclosed in note 51 Discontinued operations.

2  Common shares in Holding and other activities includes the elimination of treasury shares in the general account for an amount of EUR nil million.

Equity, real estate and non-fixed income exposure	Americas		The         Netherlands		United               Kingdom		International		Asset             Management		Holding and other activities		Total 2021
Equity funds		175		34		-		63		9		-		280
Common shares 1)		190		-		29		5		-		1		226
Preferred shares		128		-		-		-		-		-		128
Investments in real estate		39		2,588		-		16		-		-		2,643
Hedge funds		35		-		-		-		-		-		35
Other alternative investments		1,934		432		-		-		-		-		2,366
Other financial assets		1,595		1,023		598		7		2		-		3,225
At December 31		4,097		4,076		628		91		10		1		8,903

1  Common shares in Holding and other activities includes the elimination of treasury shares in the general account for an amount of EUR nil million.

Market risk concentrations – shares	Americas		United Kingdom		International		Asset             Management		Total 2022 1) 2)		Of which         impaired assets
Communication		2		-		-		-		2		-
Consumer		13		-		-		-		13		-
Financials		184		-		5		-		189		7
Funds		19		25		-		-		45		1
Industries		4		-		-		-		4		-
Other		123		-		4		7		135		-
At December 31		345		25		10		7		388		10

1  Includes investments of Holding and other activities.

2  2022 excludes the market risk concentrations of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Market risk concentrations – shares	Americas		The         Netherlands		United               Kingdom		International		Asset         Management		Total 2021 1)		Of which impaired assets
Communication		1		-		-		-		-		1		-
Consumer		5		-		-		-		-		5		1
Financials		411		4		-		5		-		420		39
Funds		-		1,406		29		62		-		1,498		17
Industries		42		-		-		-		-		42		5
Other		35		-		-		5		9		49		-
At December 31		493		1,410		29		72		9		2,015		62

1  Includes investments of Holding and other activities.

The table that follows sets forth the closing levels of certain major indices at the end of the last five years.

	2022		2021		2020		2019		2018
S&P 500		3,840		4,766		3,756		3,231		2,507
Nasdaq		10,466		15,645		12,888		8,973		6,635
FTSE 100		7,452		7,385		6,461		7,542		6,728
AEX		689		798		625		605		488

The sensitivity analysis of net result and shareholders’ equity to changes in equity prices is presented in the table below. The sensitivity of shareholders’ equity and net result to changes in equity markets reflects changes in the market value of Aegon’s portfolio, changes in DPAC amortization, contributions to pension plans for Aegon’s employees and the strengthening of the guaranteed minimum benefits, when applicable. Aegon generally has positive income benefits from equity market increases and negative impacts from equity market declines as it earns fees on policyholder account balances and provides minimum guarantees for account values. Aegon uses options and other equity derivatives to provide protection against the negative impact of equity market declines.

Sensitivity analysis of net result and shareholders’ equity to equity markets

Immediate change of	Estimated approximate effects on net result			Estimated approximate effects on shareholders’ equity
2022 1)
Equity increase 10%		168			202
Equity decrease 10%		(237	)		(288	)
Equity increase 25%		358			456
Equity decrease 25%		(551	)		(666	)
2021 1)
Equity increase 10%		151			341
Equity decrease 10%		(212	)		(221	)
Equity increase 25%		322			660
Equity decrease 25%		(529	)		(685	)

1  Includes the approximate effects of the disposal group

Interest rate risk

Aegon bears interest rate risk with many of its products. In cases where cash flows are highly predictable, investing in assets that closely match the cash flow profile of the liabilities can offset this risk. For some Aegon country units, local capital markets are not well developed, which prevents the complete matching of assets and liabilities for those businesses. For some products, cash flows are less predictable as a result of policyholder actions that can be affected by the level of interest rates.

In periods of rapidly increasing interest rates, policy loans, surrenders and withdrawals may increase. Premiums in flexible premium policies may decrease as policyholders seek investments with higher perceived returns. This activity may result in cash payments by Aegon requiring the sale of invested assets at a time when the prices of those assets are adversely affected by the increase in market interest rates; this may result in realized investment losses. These cash payments to policyholders result in a decrease in total invested assets and a decrease in net result. Among other things, early withdrawals may also require accelerated amortization of DPAC, which in turn reduces net result.

During periods of sustained low interest rates, Aegon may not be able to preserve margins as a result of minimum interest rate guarantees and minimum guaranteed crediting rates provided on policies. Also, investment earnings may be lower because the interest earnings on new fixed-income investments are likely to have declined with the market interest rates. Mortgage loans and redeemable bonds in the investment portfolio are more likely to be repaid as borrowers seek to borrow at lower interest rates and Aegon may be required to reinvest the proceeds in securities bearing lower interest rates. Accordingly, net result declines as a result of a decrease in the spread between returns on the investment portfolio and the interest rates either credited to policyholders or assumed in reserves.

Aegon manages interest rate risk closely, taking into account all of the complexity regarding policyholder behavior and management action. Aegon employs sophisticated interest rate measurement techniques and actively uses derivatives and other risk mitigation tools to closely manage its interest rate risk exposure. Aegon operates an Investment & Counterparty Risk policy that limits the amount of interest rate risk to which the Group is exposed. All derivative use is governed by Aegon’s Derivative Use Policy. A detailed description on the use of derivatives within Aegon is included in note 24 Derivatives.

In 2020 Transamerica commenced a multi-year plan to gradually reduce its economic interest rate risk, primarily by lengthening the duration of the assets to provide a closer match to the liability duration and extending the existing forward starting swap program. The program has been completed in 2022.

Furthermore, in 2021, Transamerica expanded its dynamic hedge program to variable annuities with guaranteed minimum death benefit riders (GMDB) and remaining policies with guaranteed minimum income (GMIB) riders. This builds on the effective dynamic hedge program of policies with guaranteed minimum withdrawal benefits (GMWB). The dynamic hedge program covers the interest rate (and equity risks) embedded in the guarantees of its entire variable annuity portfolio. Dynamic hedging stabilizes cash flows and reduces sensitivities to changes in interest rates (and equity markets) on an economic basis.

The following table shows interest rates at the end of each of the last five years.

	2022		2021			2020			2019			2018
3-month US LIBOR		4.77%		0.21%			0.24%			1.91%			2.81%
3-month EURIBOR		2.13%		(0.57%	)		(0.55%	)		(0.38%	)		(0.31%	)
10-year US Treasury		3.83%		1.78%			0.91%			1.91%			2.69%
10-year Dutch government		2.91%		(0.03%	)		(0.48%	)		(0.06%	)		0.39%

The sensitivity analysis in the table below shows an estimate of the effect of a parallel shift in the yield curves on net result and shareholders’ equity arising from the impact on general account investments and offset due to liabilities from insurance and investment contracts. Timing and valuation differences between assets and liabilities may cause short-term reductions in net result as rates rise. Rising interest rates would also cause the fair value of the available-for-sale bond portfolio to decline and the level of unrealized gains could become too low to support recoverability of the full deferred tax asset triggering an allowance charge to income. The offsetting economic gain on the insurance and investment contracts is however not fully reflected in the sensitivities because many of these liabilities are not measured at fair value. The short to medium term reduction in net result due to rising interest rates would be offset by higher net result in later years, all else being equal. Therefore, higher interest rates are not considered a long-term risk to the Group. However, a long sustained period of low interest rates will erode net result due to lower returns earned on reinvestments and due to lower long term returns from decreased overall portfolio yields.

Parallel movement of yield curve	Estimated approximate effects on net result			Estimated approximate effects on shareholders’ equity
2022 1)
Shift up 100 basis points		(257	)		(3,966	)
Shift down 100 basis points		(1,166	)		1,993
2021 1)
Shift up 100 basis points		296			(3,591	)
Shift down 100 basis points		(594	)		2,906

1  Includes the approximate effects of the disposal group

Aegon’s sensitivity to interest rate risk has changed per December 31, 2022 compared to December 31, 2021 and is mainly the result of the improvements in the LAT deficit in the Netherlands, refer to note 51 Discontinued operations. The impact from increasing interest rates on the result before tax is capped to the net LAT deficit position in the Netherlands. The impact from decreasing interest rates on result before tax is changed as there is no revaluation reserve available for shadow loss recognition in the net LAT deficit.

The hedge strategy targets minimal mismatch according to the Aegon economic framework (which broadly aligns with Solvency II Own Funds) and stabilizes Solvency II ratio volatility to a large extent.

Risks and risks management arising from financial instruments subject to interest rate benchmark reform

The future of IBORs (Interbank Offered Rates) such as EURIBOR, EONIA and LIBOR has been a major topic on the global agenda since the G20 asked the Financial Stability Board (FSB) to undertake a fundamental review of leading interest rate benchmarks in 2013. The FSB proposed new standards to reform interest rate benchmarks and the use of transaction-based input data instead of non-transactional/panel input data.

To prepare for the IBOR transition all Aegon units have written transition plan containing among others project solutions and actions, timelines and ownership to ensure timely preparation and implementation. We are currently implementing the actions as described in the transition plans.

There are no plans for the discontinuation for EURIBOR and appropriate fallback language has been implemented for derivatives via the International Swaps and Derivatives Association (‘ISDA’) fallback protocol and rulebook changes by the clearing houses.

In the US the relevant USD LIBOR benchmark rates are expected to remain available for existing contracts until mid 2023 and these instruments are expected to either be transitioned actively to Secured Overnight Funding Rate (‘SOFR’) before the 2023 deadline, via the ISDA fallback protocol or via a legislative solution.

In July 2020 the discount rates of EUR cleared derivatives switched from EONIA to €STR which impacted the valuation of derivatives for which compensation was exchanged. All EUR Credit Support Annex (‘CSA’) which have positions outstanding have been amended from EONIA to €STR discounting. In the US, the cleared market has switched discount rates from Fed Funds to SOFR in October 2020. The switch in discount rates is expected to lead to increased liquidity in the new risk free rates.

Aegon recognizes that the reform of IBORs and any transition to replacement rates entail risks for all our businesses across our assets and liabilities. These risks include, but are not limited to:

◆ Legal risks, as Aegon is required to make changes to documentation for new and existing transactions, such as funding instruments issued with an IBOR reference and derivatives held with an IBOR reference;

◆ Financial risks, arising from any changes in the valuation of financial instruments linked to benchmark rates, such as derivatives and floating rate notes, issued by, or invested in by Aegon;

◆ Pricing risks, as changes to benchmark indices could impact pricing mechanisms on some funding instruments or investments;

◆ Operational risks, due to the potential requirement to adapt informational technology systems, trade reporting infrastructure and operational processes; and

◆ Conduct risks, relating to communication with potential impact on Aegon’s customers, and engagement during the transition period.

Various supranational institutions, central banks, regulators, benchmark administrators and industry working groups play a role in the benchmark reform and the preparation for the replacement of IBORs. Although a lot of work has been done, there is still significant uncertainty around liquidity development, and the timetable and mechanisms for implementation, including application of spread adjustments to the alternative reference rates. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect Aegon. However, the implementation of alternative reference rates may have a material adverse effect on Aegon’s business, financial condition, customers, and operations.

The table below summarize the exposures of non-derivative financial assets and non-derivative liabilities that yet have to transition to alternative benchmark rates.

	2022 1)				2021
Non derivative financial instruments to transition to alternative benchmark	Financial assets non-derivatives		Financial liabilities non-derivatives		Financial assets non-derivatives		Financial liabilities non-derivatives
By benchmark rate
GBP LIBOR		27		-		19		-
USD LIBOR		814		1,218		822		1,143
Euribor		34		1,200		3,095		1,200
Fed Funds		-		-		102		-
Total		875		2,418		4,038		2,343

1  2022 excludes the non derivative financial instruments of the disposal group, which are separately disclosed in note 51 Discontinued operations.

The table below summarize the exposures of derivatives that yet have to transition to alternative benchmark rates.

	2022 1)		2021
Derivative financial instruments to transition to alternative benchmark	Nominal Value		Nominal Value
By benchmark rate
GBP LIBOR		-		-
USD LIBOR		39,752		54,232
Euribor		563		113,593
Fed Funds		-		3,574
Total		40,315		171,399

1  2022 excludes the derivative financial instruments of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Currency exchange rate risk

As an international group, Aegon is subject to foreign currency translation risk. Foreign currency exposure exists mainly when policies are denominated in currencies other than the issuer’s functional currency. Currency risk in the investment portfolios backing insurance and investment liabilities is managed using asset liability matching principles. Assets allocated to equity are kept in local currencies to the extent shareholders’ equity is required to satisfy regulatory and self-imposed

capital requirements. Therefore, currency exchange rate fluctuations will affect the level of shareholders’ equity as a result of translation of subsidiaries into euro, the Group’s presentation currency. Aegon holds the remainder of its capital base (perpetual capital securities, subordinated and senior debt) in various currencies in amounts that are targeted to correspond to the book value of the country units. This balancing mitigates currency translation impacts on shareholders’ equity and leverage ratios. Aegon does not hedge the income streams from the main non-euro units and, as a result, earnings may fluctuate due to currency translation. As Aegon has significant business segments in the Americas and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences between the US dollar and the euro and between the UK pound and the euro. Aegon may experience significant changes in net result and shareholders’ equity because of these fluctuations.

Aegon operates an Investment & Counterparty Risk Policy which applies currency risk exposure limits both at Group and regional levels, and under which direct currency speculation or program trading by country units is not allowed unless explicit approval has been granted by the Group Risk and Capital Committee and the Management Board. Assets should be held in the functional currency of the business written or hedged back to that currency. Where this is not possible or practical, remaining currency exposure should be sufficiently documented and limits are placed on the total exposure at both group level and for individual country units.

Information on Aegon’s three year historical net result and shareholders’ equity in functional currency are shown in the table below:

	2022			2021		2020
Net result
Americas (in USD)		(1,486	)		1,195		(611	)
United Kingdom (in GBP)		146			104		60
Equity in functional currency
Americas (in USD)		6,228			18,324		19,127
United Kingdom (in GBP)		1,108			1,260		1,391

The exchange rates for US dollar and UK pound per euro for each of the last five year ends are set forth in the table below:

Closing rates	2022		2021		2020		2019		2018
USD		1.07		1.14		1.22		1.12		1.14
GBP		0.89		0.84		0.90		0.85		0.90

Aegon Group companies’ foreign currency exposure from monetary assets and liabilities denominated in foreign currencies (that is, other than the entity’s functional currency), is not material.

The sensitivity analysis in the following table shows an estimate of the translation effect of movements in the exchange rates of functional currencies of foreign subsidiaries against the euro presentation currency of the Group’s financial statements, on net income and shareholders’ equity.

Sensitivity analysis of net result and shareholders’ equity to translation risk

Movement of currency exchange rates 1)	Estimated approximate effects on net result			Estimated approximate effects on shareholders’ equity
2022 2)
Increase by 15% of USD currencies relative to the euro		(230	)		1,342
Increase by 15% of GBP currencies relative to the euro		188			2,125
Increase by 15% of non-euro currencies relative to the euro		(220	)		1,590
Decrease by 15% of USD currencies relative to the euro		169			(1,024	)
Decrease by 15% of GBP currencies relative to the euro		141			1,497
Decrease by 15% of non-euro currencies relative to the euro		163			(1,175	)
2021 2)
Increase by 15% of USD currencies relative to the euro		205			3,249
Increase by 15% of GBP currencies relative to the euro		152			1,900
Increase by 15% of non-euro currencies relative to the euro		244			3,541
Decrease by 15% of USD currencies relative to the euro		(153	)		(2,441	)
Decrease by 15% of GBP currencies relative to the euro		107			1,315
Decrease by 15% of non-euro currencies relative to the euro		(179	)		(2,616	)

1  The effect of currency exchange movements is reflected as a one-time shift up or down in the value of the non-euro currencies relative to the euro on December 31.

2  Includes the approximate effects of the disposal group

Liquidity risk

Liquidity risk is inherent in much of Aegon’s business. Each asset purchased and liability incurred has its own liquidity characteristics. Some liabilities are surrenderable while some assets, such as privately placed loans, mortgage loans, real estate and limited partnership interests, have low liquidity. If Aegon requires significant amounts of cash on short notice in excess of normal cash requirements and existing credit facilities, it may have difficulty selling these investments at attractive prices or in a timely manner. Liquidity risk is also affected by the use of collateralized financial derivatives to mitigate other risks.

Aegon operates a Liquidity Risk Policy under which country units are obliged to maintain sufficient levels of highly liquid assets to meet cash demands by policyholders and account holders over the next two years. Potential cash demands are assessed under a stress scenario including spikes in disintermediation risk due to rising interest rates and concerns over Aegon’s financial strength due to multiple downgrades of the Group’s credit rating. At the same time, the liquidity of assets other than cash and government issues is assumed to be severely impaired for an extended period of time. All legal entities and Aegon Group must maintain enough liquidity in order to meet all cash needs under this extreme scenario.

Aegon held EUR 13,392 million of general account investments in cash, money market products and government bonds that are readily saleable or redeemable on demand, which excludes the investment of the disposal group (2021: EUR 31,101 million and includes the disposal group). The Group expects to meet its obligations, even in a stressed liquidity event, from operating cash flows and the proceeds of maturing assets as well as these highly liquid assets. Further, the Group has access to back-up credit facilities, as disclosed in note 37 Borrowings, amounting to EUR 3,435 million which were unused at the end of the reporting period (2021: EUR 3,399 million).

The maturity analysis below shows the remaining contractual maturities of each category of financial liabilities (including coupon interest). When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to be paid. Financial liabilities that can be required to be paid on demand without any delay are reported in the category ‘On demand.’ If there is a notice period, it has been assumed that notice is given immediately and the repayment has been presented at the earliest date after the end of the notice period. When the amount payable is not fixed, the amount reported is determined by reference to the conditions existing at the reporting date. For example, when the amount payable varies with changes in an index, the amount disclosed may be based on the level of the index at the reporting date.

To manage the liquidity risk arising from financial liabilities, Aegon holds liquid assets comprising cash and cash equivalents and investment grade investment securities for which there is an active and liquid market. These assets can be readily sold to meet liquidity requirements. For this reason, Aegon believes that it is not necessary to disclose a maturity analysis in respect of these assets to enable users to evaluate the nature and extent of liquidity risk.

Maturity analysis – gross undiscounted contractual cash flows (for non-derivatives)	On demand		< 1 yr amount		1 < 5 yrs       amount		5 < 10 yrs       amount		> 10 yrs       amount		Total amount
2022 2)
Trust pass-through securities		-		10		114		17		60		200
Subordinated loans		-		113		370		242		3,068		3,792
Borrowings		-		1,312		3,130		94		500		5,036
Lease liabilities		-		35		99		63		55		251
Other financial liabilities		4,263		795		355		34		47		5,495
Total financial liabilities (excluding investment/insurance contracts)		4,263		2,265		4,067		450		3,729		14,775
Investment contracts 1)		9,642		1,445		385		186		141		11,798
Investment contracts for account of policyholders 1)		22,748		31,186		7		4		2		53,948
Total investment contracts		32,389		32,631		392		190		143		65,746
2021
Trust pass-through securities		-		9		113		16		60		197
Subordinated loans		-		108		377		246		2,964		3,695
Borrowings		-		901		7,651		956		1,052		10,559
Lease liabilities		-		37		86		67		70		259
Other financial liabilities		4,993		1,749		325		154		224		7,444
Total financial liabilities (excluding investment/insurance contracts)		4,993		2,803		8,551		1,439		4,368		22,154
Investment contracts 1)		17,254		2,681		2,114		1,101		655		23,804
Investment contracts for account of policyholders 1)		34,756		34,571		10		6		4		69,347
Total investment contracts		52,009		37,252		2,124		1,107		659		93,151

1  Excluding investment contracts with discretionary participating features.

2  2022 excludes the liabilities of the disposal group, which are separately disclosed in note 51 Discontinued operations.

Aegon’s liquidity management is based on expected claims and benefit payments rather than on the contractual maturities. The projected cash benefit payments in the table below are based on management’s best estimates of the expected gross benefits and expenses, partially offset by the expected gross premiums, fees and charges relating to the existing business in force. Estimated cash benefit payments are based on mortality, morbidity and lapse assumptions based on Aegon’s historical experience, modified for recently observed trends. Actual payment obligations may differ if experience varies from these assumptions. The cash benefit payments are presented on an undiscounted basis and are before deduction of tax and before reinsurance.

Financial liabilities relating to insurance and investment contracts 1)	On demand		< 1 yr amount		1 < 5 yrs amount		5 < 10 yrs amount		> 10 yrs amount		Total amount
2022 2)
Insurance contracts		-		3,432		11,364		11,946		116,169		142,911
Insurance contracts for account of policyholders		-		7,456		30,877		29,565		113,346		181,245
Investment contracts		-		1,737		4,814		2,581		4,379		13,511
Investment contracts for account of policyholders		-		6,107		23,626		26,970		89,126		145,829
		-		18,732		70,681		71,062		323,021		483,496
2021
Insurance contracts		-		4,260		16,215		18,438		127,344		166,257
Insurance contracts for account of policyholders		-		11,494		41,638		39,941		131,667		224,740
Investment contracts		-		8,324		7,975		3,847		4,438		24,584
Investment contracts for account of policyholders		193		14,011		27,637		31,715		84,825		158,381
		193		38,089		93,465		93,941		348,274		573,962

1  The liability amount in the consolidated financial statements reflects the discounting for interest as well as adjustments for the timing of other factors as described above. As a result, the sum of the cash benefit payments shown for all years in the table exceeds the corresponding liability amounts included in notes 34 Insurance contracts and 35 Investments contracts.

2  2022 excludes the liabilities of the disposal group, which are separately disclosed in note 51 Discontinued operations.

The following table details the Group’s liquidity analysis for its derivative financial instruments, based on the undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

Maturity analysis relating to derivatives 1) (Contractual cash flows)	On demand	< 1 yr amount		1 < 5 yrs amount		5 < 10 yrs amount		> 10 yrs amount		Total amount
2022 2)
Gross settled
Cash inflows	-	15,301		575		675		1,741		18,293
Cash outflows	-	(15,242	)	(443	)	(633	)	(1,600	)	(17,919	)
Net settled
Cash inflows	-	1,552		4,255		3,812		6,227		15,846
Cash outflows	-	(1,937	)	(4,222	)	(3,700	)	(14,214	)	(24,072	)
2021
Gross settled
Cash inflows	-	4,300		3,728		5,034		104,335		117,396
Cash outflows	-	(4,895	)	(7,080	)	(9,499	)	(105,376	)	(126,850	)
Net settled
Cash inflows	-	683		3,442		3,640		5,375		13,140
Cash outflows	-	(780	)	(3,032	)	(3,102	)	(12,591	)	(19,505	)

1 Derivatives includes all financial derivatives regardless whether they have a positive or a negative value. It does not include bifurcated embedded derivatives. These are presented together with the host contract. For interest rate derivatives only, cash flows related to the pay leg are taken into account for determining the gross undiscounted cash flows.

2 2022 excludes the derivatives of the disposal group, which are separately disclosed in note 51 Discontinued operations.

For maturity information on other obligations, please refer to note 45 Commitments and contingencies.