Capital & liquidity

• To promote strong capital adequacy in Aegon's businesses and operating units;
• To manage and allocate capital efficiently in support of the strategy and in line with its risk tolerance;
• To maintain an efficient capital structure with an emphasis on optimizing Aegon's cost of capital;
• To ensure adequate liquidity in the operating units and at the holding to make sure that the Company is able to meet its obligations by enforcing stringent liquidity risk policies; and
• To maintain continued access to international capital markets on competitive terms.

Aegon believes these guiding principles together strengthen the Company's ability to withstand adverse market conditions, enhance its financial flexibility and serve both the short-term and the long-term interests of the Company, its customers and other stakeholders.

Management and monitoring of capital and liquidity is firmly embedded in Aegon's ERM framework, and is in line with Aegon's risk tolerance. Aegon's risk tolerance focuses on financial strength, continuity, steering the risk balance and the desired risk culture. Its core aim is to assist management in carrying out Aegon's strategy within the Group's capital and liquidity resources.

Management of capital

The Company's overall capital management strategy is based on adequate solvency capital, capital quality and the use of leverage.

Capital adequacy

Aegon's goal for both its operating units and for the Aegon Group as a whole is to maintain a strong financial position and to be able to sustain losses from adverse business and market conditions. The capitalization of Aegon and its operating units is managed based on the most stringent of local regulatory requirements and self-imposed criteria.

Solvency II

To calculate its Group Solvency Ratio, Aegon applies a combination of the group consolidation methods available under Solvency II which are the Accounting Consolidation and Deduction & Aggregation based methods.

Solvency II capital requirements are mainly used for the EEA-based insurance and reinsurance entities, applying the Accounting Consolidation method. Local requirements are used for insurance and reinsurance entities in (provisionally) equivalent third-country jurisdictions.

Most notably, the local regulatory requirements of the US life insurance companies are included in the Group Solvency Ratio using a conversion methodology. Aegon Bank was included in the Group Solvency ratio in 2020.

For regular updates on our Solvency II ratio, please see our press releases and our most recent Integrated Annual Report.