Aegon Ltd. (AGN) Earnings Call Transcript & Summary

Ladies and gentlemen, on behalf of Aegon's Executive Board and Supervisory Board, I welcome you to Aegon's 2023 Annual General Meeting of Shareholders. This meeting will be chaired in English. Simultaneous translation into Dutch is offered. Headphones for the simultaneous translation were provided to you when you enter the room and are still available outside this room. For English, please choose Channel 1. For Dutch, please choose Channel 2. I now open the meeting and welcome our shareholders. We're pleased to see you again, and I see many familiar faces here as well. Next to the shareholders who are here in the Hague, we welcome the shareholders who are participating virtually through a live webcast. They also have the possibility to ask questions and to vote in real time during the meeting. To accommodate live voting and keeping in mind the short delay in the webcast, the voting is now opened and will remain open until the last voting item on the agenda. The voting results will therefore be shown at the end of the meeting. Our shareholders have also been able to cast their votes prior to this meeting, either by granting a proxy or by using the e-voting system. Present with me on stage are the following members of the Supervisory Board. Corien Wortmann-Kool, Vice Chair of the Supervisory Board; Ben Noteboom, Chair of the Remuneration Committee; and Caroline Ramsay, Chair of the Audit Committee. I also welcome Dona Young who is nominated for reappointment as member of the Supervisory Board and who is participating virtually. The other Supervisory Board members attend a meeting in a virtual manner as well. Also present with me on stage are the members of the Executive Board: Lard Friese, Matt Rider as well as Bieke Debruyne, Company Secretary. Furthermore: Joyce Leemrijse, our notary from Allen & Overy; and Rogier van Adrichem, our external auditor of PwC, are present here in the room. On the front row, in the room, the following members of the Management Board are present: Allegra van Hövell-Patrizi, Astrid Jäkel, Onno van Klinken, Bas NieuweWeme. The other management Board members are following the AGM through the live webcast. Before we continue, I have a few general remarks. For our shareholders present here in person, please note that audio or video recordings are not allowed throughout the building. For the voting, please note that you can already use the link to the Lumi web page. In case you experience any difficulties, please notify our staff. Upon registration, you have received a voting card. This card will only be used in the voting web page and does not work due to technical -- I'm sorry, the card will only be used if the voting web page is -- does not work due to technical issues. I'm sorry, just to be clear, you only use the card if the voting web page does not work. Then I establish the following. This meeting was convened in accordance with the required formalities. The agenda with explanatory notes and further meeting documents were put on Aegon's corporate website on April 13, 2023. The meeting documentation was also made available for review at Aegon's head office in The Hague. The attendance list of this meeting is currently being drawn up. We will come back later -- we'll come back later on this point. The final minutes of our previous Annual General Meeting of Shareholders held on May 31, 2022, have been made available as of November 29, 2022, at our head office in The Hague and on Aegon's corporate website. Also, the draft minutes of our extraordinary general meeting of shareholders held on January 17, 2023, have been made available for comments on Aegon's corporate website for 3 months as of April 17, 2023. The final minutes of this meeting will be made available as of July 17, 2023. The minutes of today's meetings will be kept in English by the Company Secretary. The draft minutes of this meeting will be available for comments on the website for 3 months as of August 25, 2023. The final minutes will be available as of November 24, 2023. I wish you all a good and interesting meeting. We will now move to agenda Item 2, the annual report and annual accounts of 2022. Lard Friese, Aegon's CEO, will give a presentation on the course of business in 2022, including financial results. After the presentation, we will address your questions regarding agenda items 2.1 and 2.4. Lard, the floor is yours.

Thank you, Bill, and good afternoon, everyone. Dear ladies and gentlemen, dear fellow stockholders, 2022 will be remembered as a pivotal year for Aegon and its stakeholders. We made significant progress with the implementation of our strategy, and we delivered on several of our financial targets ahead of schedule. We remain focused on helping our customers navigate a highly volatile economic and geopolitical landscape that has presented significant challenges. It was also a testing time for investors, given the instability in equity and bond markets and uncertainty around inflation expectations. Against this challenging backdrop, we continued to execute our strategic agenda that we first announced at our Capital Markets Day in late 2020. In 2022, we took further steps to deliver on our ambition to be a high-performance company that is a leader in its chosen markets guided by our purpose of helping people live their best lives. We maintained a high pace in transforming Aegon by optimizing our portfolio of businesses. In October of last year, we took an important step and announced the decision to combine our Dutch pension, life and non-life insurance banking and mortgage origination activities with ASR, creating a leader in the Dutch insurance industry. Also, we have exited various businesses that are subscale or active in small or in niche markets. A key example is the divestment of our businesses in Central and Eastern Europe, which have been sold to the Vienna Insurance Group. This transaction is being closed in several stages. The sale of the businesses in Hungary and Turkey was completed in 2022, and allowed us to return EUR 300 million to our stockholders and reduce our leverage. We expect to complete the sale of the remaining businesses in Poland and Romania shortly. Furthermore, we created value by reallocating capital from our financial assets to our strategic assets, which are businesses with a greater potential for an attractive return on capital and where we are well positioned for growth. We also made important progress on our operational improvement plan. By further strengthening our balance sheet and improving our risk profile, we delivered on our financial commitments. So please allow me now to provide more details on how we delivered on our improvement plans. In 2020, we began taking steps to transform the company to improve our performance and ensure that we create value for our stakeholders. Through a rigorous company-wide operational improvement plan, initially comprising of over 1,100 initiatives, we introduced new ways of working to improve Aegon's operating performance by reducing costs, by expanding margins and by growing profitably. While executing on all the initiatives, we embedded a focus on efficiency and operational execution in the organization. And we also established a routine offsetting ambitious, yet realistic expense savings and growth targets with a clear focus to deliver. All in all, we created a culture of transparency, early escalation and focus on developing talent to support new ways of working and to build a lasting execution muscle. From a financial perspective, the operational improvement plan already resulted in an operating result uplift of EUR 627 million as of year-end 2022. We have, therefore, outperformed our expectations of achieving a benefit of EUR 550 million from the program, not only in numbers, but also 1 year earlier than expected. In October 2022, we announced the agreement to combine our Dutch businesses with ASR. And with that accelerating our strategy of releasing capital from mature businesses and becoming a leader in markets where we are well positioned for growth. Through this transaction, we are creating the #2 Dutch insurance company. The new combination will lead to substantial synergies and benefits for customers, business partners, employees and shareholders. We also established an attractive long-term asset management partnership with ASR, which will strengthen Aegon Asset Management's capabilities in the focus areas. As part of the transaction, we will receive a cash consideration and a 29.99% strategic stake in the company through which we will benefit from ASR's improved operating capital generation and capital synergies over time. It is our intention to use the cash proceeds for capital return to stockholders and deleveraging consistent with our disciplined capital management approach. In 2022, we realized strong commercial growth in most of our chosen markets. However, we also saw outflows in our asset management business and in the U.K. retail channel as a result of an uncertain macroeconomic environment. In Spain and Portugal, China and Brazil as well as in the U.S., we achieved profitable growth in our life insurance businesses. The workplace channel in the U.K. recorded the highest level of net deposits in the past 4 years, demonstrating the improvements we are making to our U.K. franchise. Our commercial results underscore the importance of offering customers a broad range of products. Supported by the commitment of our employees across the company, we will continue to introduce new products, improve the customer experience and further build on our distribution strength. We furthermore made good progress maximizing the value of our financial assets. Our active approach to risk and capital management has improved the risk profile of these activities and reduced the volatility of our capital position. Now as you can see, Transamerica, in particular, has taken several actions to strengthen its capital position and increase the predictability of its capital ratio. This includes setting up a voluntary reserve for variable annuities, achieving additional long-term care rate increases and freeing up capital by reinsuring the legacy universal life portfolio of Transamerica Life Bermuda, our Asian high net worth business. Furthermore, the dynamic hedging program, which we expanded in 2021 to include all variable annuity guarantees continue to perform well in difficult markets during 2022. In line with our strategy, we will continue to maximize the value of our financial assets and use the capital released from these businesses to further accelerate our transformation. The actions that we have taken have supported the financial results that we have achieved since our Capital Markets Day in 2020 because at that time, we set the targets for the years 2021 to 2023. Through a rigorous operational improvement plan, we have achieved expense savings, which contributed EUR 366 million to our operating results in 2022. As mentioned earlier, the overall benefits from the operational improvement plan from both expense savings and growth initiatives have exceeded our expectations and 1 year earlier than expected. Now it goes without saying that we're not done. That improving efficiency and driving commercial momentum remains a key focus area for us going forward. Our free cash flow amounted to EUR 780 million in 2022. In the last 2 years combined, we achieved EUR 1.5 billion of free cash flow. This means that we have delivered 1 year early on our cumulative free cash flow target of EUR 1.4 billion to EUR 1.6 billion for the period '21 to '23. Our gross financial leverage is in line with the target we set ourselves 2 years ago, and we intend to further reduce our leverage by up to EUR 700 million using part of the cash proceeds from the ASR transaction. Our proposal for the final dividend, which is, of course, on the agenda today, brings the total dividend over the year 2022 to EUR 0.23. For the full year 2022 -- 2023, we target a step up to around EUR 0.30 per share, which is well above the level we targeted at the 2020 Capital Markets Day. And we also announced a new share buyback program of EUR 200 million in February 2023, after having completed last year's $300 million buyback program. On top of all this, we intend to return EUR 1.5 billion of the cash proceeds to stockholders once the ASR transaction has closed. This is a testimony of our commitment to offer attractive stockholder returns. Aegon has had a good start to this year. In the first quarter, we demonstrated strong commercial momentum and advanced on our strategic priorities. And I'm especially pleased with our progress in light of the continued global volatility specifically in financial markets. Our strong balance sheet and our disciplined investment approach put us in a strong position to navigate the current macroeconomic environment and execute further on our strategy. We have significant financial flexibility with strong capital positions in the units and cash capital at the holding near the upper end of the operating range. Additionally, Aegon maintains a conservative and well-diversified fixed income portfolio. Our U.S. corporate bond portfolio is defensively positioned with an overweight to higher-rated bonds relative to the benchmark and is diversified across industries. In the Netherlands as well as in the U.S., we are invested in mortgages. Now the Dutch mortgage book is focused on residential housing and has a low loan-to-value ratio and is known for its very low delinquencies, even in unfavorable economic environments. Similarly, the commercial mortgage loan portfolio in the United States has a low loan-to-value ratio of 50%. More than half of the book is invested in multifamily residential properties and the book has limited near-term maturities. In addition, Aegon owns about EUR 6 billion direct real estate in the Netherlands and in the U.S. combined with just EUR 200 million exposure to offices. So let's now move to our sustainability agenda. By the way, the last week when we published our trading update, we gave an appendix and in the appendix, we gave more detail of the quality of our investment portfolio, which is a next sort of that I just shared with you, but if you're interested, that's where you can find it. Moving to our sustainability agenda. In 2022, we strengthened our governance and our reporting and we took steps to further embed sustainability in the business and made good progress towards our commitments on climate change and inclusion and diversity. As a member of the Net Zero Asset Owner Alliance, we have made a commitment to transition Aegon's investment portfolio to Net Zero emissions by 2050. We are well on our way towards the intermediate target to reduce the carbon intensity of our corporate fixed income and listed equity general account assets by 25% in 2025 versus the 2019 baseline. Additionally, we have set a target to reduce the carbon footprint of our own operational activities and realized a significant reduction in our carbon emissions. A large part of that reduction is due to changing work practices with more people working from home. And as a result, we have globally reduced quite a lot of footprint -- physical footprint. Office square meters. We're also making progress on our vision for Aegon to be a fair and inclusive company. We adopted a global inclusion and diversity strategy in 2022, and we appointed a Global Head of Inclusion and Diversity and are steadily increasing the number of women in senior leadership positions. We continue to further enhance our sustainability agenda with additional commitments, including: number one, investing $2.5 billion in activities to help mitigate climate change or adapt to the associated impacts by 2025; number two, engaging with at least the top 20 corporate carbon emitters in our portfolio by 2025; and number three, continuing the trend of increasing female representation in senior management. Embedding sustainability into our day-to-day activities is a key element of being a high-performance company, and it creates value for all our stakeholders. Now to wrap it all up, in 2022, we have significantly accelerated our strategy execution. And equally important, we have delivered on our financial commitments. We created new ways of working at Aegon and are delivering on our sustainability agenda. Looking ahead, we remain fully focused on executing our strategy. We are continuing to improve the performance of the company. We are investing in profitable growth by introducing new products and expanding our distribution footprint. We remain disciplined in our capital and risk management, and we continue to provide attractive returns to our shareholders. Therefore, I am confident in delivering on our financial and strategic commitments for the year 2023 and beyond. Above all, I am very proud of all our colleagues who work hard to make our strategy a success and who continue to support our customers' needs every day. And I look forward to provide more details on our strategy at our Capital Markets Day in London on June 22. Thank you very much. Bill?

Thank you, Lard. Before addressing your questions, I will inform you about the attendance list of this meeting. In this meeting are present, 35 holders of common shares and common shares fee. They represent, together with shareholders who have voted through the e-voting or via proxy voting, a total of 1,338,324,410 shares -- votes, sorry. That this number represents 69.15% of the 1,935,434,808 voting shares and of the issued and outstanding capital as at record date of this meeting. We will now address your questions regarding agenda items 2.1 and 2.4, the adoption of the annual accounts 2022. Prior to this meeting, our shareholders were able to ask questions in writing. We received one question writing prior to this meeting. We will address this question under agenda item 7, any other business. We will first answer the questions from our shareholders present here in the room. Thereafter, we will address questions from our shareholders who are participating virtually. They can ask their questions through the chat function. As this function is open throughout the meeting, I mandated our Head of Investor Relations, Jan Willem Weidema, to moderate these questions. I invite virtually participating shareholders to enter the questions now so we can address them immediately after answered the questions from our shareholders in the room. We believe that this approach will ensure a constructive dialogue with all our shareholders.

May I now invite shareholders present here to ask their questions. Please go to the nearest microphone and clearly state your name for the minutes. To give all our shareholders the opportunity to ask questions, I would ask you to limit your number of questions or comments to 3 at the time. Questions that cannot be answered during the meeting will be answered afterwards. These questions and answers will be added to the minutes. May I please remind you that questions should be related to the agenda items. You can ask your questions in Dutch if preferred. They will be answered in English with a simultaneous translation into Dutch. I can see a hand someone who's ready to start. Please proceed. Thank you.

[Foreign Language] [Interpreted] I'm Alexander [indiscernible]. I'm a private investor. I have 2 questions about this item. The first is the value creation that Aegon always envisages. And by value, I mean, the value of the company and the market capitalization, so the stock market value of Aegon. By creating value the stock market value of Aegon over time but consistently rise. Moreover, that higher level can generally be retained. And at that point, one would expect a share price with higher peaks and that less would also indicate that the share price has much deeper trials. And for years, Aegon has addressed long-term value creation and presentations and annual reports. I would advise you to stop using these terms for the time being since I believe that you have made a laughing stock of yourselves, I apologize for these words, but that's the truth. These are fine stories, but the critical leader will see right through them. Even the announced sale of Aegon Netherlands has yielded nothing because on the stock market. The stock market looks ahead, but investors apparently don't see this as such a wonderful option and yielding value. If the deal with ASR was such a wonderful move for Aegon. The Aegon share price would have increased far more for years. There has been no actual value creation at Aegon. And Aegon is mistakenly continuing to use these terms. Humble apology to shareholders for the reduction value, in my view, would be in order. We've been waiting for that value creation for years but it has not been forthcoming. I don't know how you understand this term, perhaps these are simply words to fill the presentations and reports and are meaningless, but somebody who reads or hears the [indiscernible] now find them laughable. As long as you have not created significant value, I suggest that you abstain from these terms. And for a long time, this has not been something to be taken seriously. And do you admit that Aegon has failed miserably in creating value? My second question concerns Aegon's specific strategy. At the extraordinary general meeting at the beginning of this year, I also asked critical questions about this, but it remains somewhat unclear to me. Since Mr. Friese is CEO, Aegon has emphatically communicated that there are 3 focus countries: the Netherlands, the United Kingdom and the United States. Those are set to be the core markets: The Netherlands, the United Kingdom and the United States. In the most recent annual report published, we see that again on Page 18, core markets: the Netherlands, United Kingdom and United States at the Extraordinary Shareholders' Meeting at the start of this year, I indicated that the sale of Aegon Netherlands, in my view, does not align with the vision previously communicated. Recently, Aegon announced that some of the operations in the United Kingdom would be sold and that the sale of the Netherlands would be followed by a sale in the United Kingdom. So that's another divestment from a core market. Where will the investment be that will be highly profitable is my question, what does Aegon intend to do for the future? Given the deplorable share price, I hope that Aegon is not preparing behind the scenes to be taken over. Is Aegon being secretly prepared to be sold?

Yes. Thank you very much. Thank you, Mr. [indiscernible]. The -- let's start with the value creation. The -- so when I started on May 2020, the stock price was EUR 2.08.

[Foreign Language]

No, it wasn't. I mean that's the stock price, EUR 2.08.

[Foreign Language] [Interpreted] That was a distorted impression. [Foreign Language]

That's true. Over the longer time but I'm just trying to give you some facts. So when I started, the stock started at EUR 2.08, stock now is EUR 4.29. In the meantime, we have improved the quality of the free cash flows. And as a result, the dividends per share, hopefully has been, by the way, approved today as well, will go up and actually faster up than that we had anticipated when we started. The third fact that I can give you is that we also provided additional returns to stockholders in the form of buybacks, the $300 million buyback that we have announced last year, a $200 million buyback that we have announced a couple of months ago, and we are busy buying in those stocks. Now you're -- so those are facts from the last couple of years that I can oversee. What is also a fact is that a stock price and with that the market capitalization of the company, is also -- need also to be seen in the context of the markets. So how are you performing versus peers, right? Because we are one kind of a company. We're not a tech firm, we're not a consumer goods firm, so we need to compare ourselves on how we are doing. And we are doing that, obviously. We're doing it actually on a daily basis. And if you look at the relative performance versus our peers over the last couple of years, you will find that you need to look for the peers, which are number one, those who are in life insurance, pensions and in asset management. Do not -- our peers are not companies who are in property and casualty, [indiscernible]. Those are not our peers. And if you would make that analysis, you would find that we have been outperforming U.S. peers for quite a bit, and save 1 or 2, but we're in the top quartile of that. And also in the last period, you can see that we've been performing well in line with European peers with a similar business model that as we have. So you're not alone. The third element to how the stock price moves is, of course, the market in general. And as you -- as an investor know very well, the market over the last couple of years has been quite volatile given inflation, given the macroeconomic backdrop, given topical issues like the debt ceiling discussions right now in the U.S. that provide temporary volatility and the interest rates, of course, which have gone up quite substantially in a very short period of time. All these things are inputs in the way the company is being valued by investors. But the most important input is what management is doing to ensure that the company performs better relative to its peers. Now when I started in 2020, I made it clear that I agreed with you and I agree with you that the company's long-term performance was not what it should be and that we have launched the program in a number of areas to improve the performance in the longer term. And there were 4 areas: first one was that we said our strategy is not clear and we should make it clear, and we have. And this goes to your second point. We have said indeed that our core markets are the U.S., the U.K., the Netherlands and that we will focus on Spain and Portugal, China and Brazil and the Global Asset Management business. And that all the other companies and the other -- because we were in 22 markets or something, all these other companies, we would either run very tight capital meaning that they don't consume a lot of capital or we would divest them over time, which we have done. The second thing is that we have said we need to perform better from a cost perspective and from a margin perspective. And we have launched an operational improvement program to improve it. We set targets for it. We overachieved it. And I -- in my opening statements, I made that -- I gave you an accountability of that on account of that. The third element was that we would reduce the risk profile of the company because the company had a lot of volatility in its capital positions, and you will have observed over the last couple of years that every quarter, we were able to report very solid comm capital positions with the operating units above their target ranges, operating ranges and with the group also in good solvency positions. Free cash flows have increased and are of better quality. The fourth and final element was that we said we need the operating of the model to be tighter, more disciplined and quicker and keep a good pace. Also there, I think we've made a lot of progress. So your assessment that the overall performance over a longer period has not been great, I agree with. I agree with. We have done a lot of work over the last years to start repairing that. I can only conclude that if I look at the scorecard that I keep that we first on my peers, et cetera, that we are on the right track. Now in order for it to get to levels where you are more happy with, we need to have more time, and we need to do much more work and there is much more work needed. So that's on the first piece. On strategy, yes, you were -- we indeed had this exchange, I think, at the EGM, Mr. [indiscernible], where you said, look, you're saying that the U.S., U.K., the Netherlands are your core markets, but you've done a deal with ASR, and you've sold your Dutch business to ASR. How can it be a core market for you? And now you're adding to that, you just sold the protection business in the U.K. That's not the core market. So let me respond to that. The first one is about the U.K. Let's see -- let me do that first because it's a new element of it. In the U.K., we are focused on 2 core business lines. One is retirement plans, pension plans to companies and their staff. We call that the Workplace Solutions business. That business is growing. And in the fourth quarter of last year, they had the best quarter in 4 years and also this quarter, which we reported last week, they have continued good momentum. So that business is really starting to grow well. The second line of business is the retail business. That's a platform that we operate, where advisers advise their clients on their investment portfolios, and we take those assets on our platform. And for that, we take a fee. That is a business, which has not done very well yet, and we have conceded already 2 years ago when it started. That needs more investments to get right. Another business is the protection business. That is a business which was not selling new products hardly and was also not core to our U.K. team in the U.K. So in order to improve their management focus on the 2 big business lines that they have, they have decided with, of course, we have decided that on their proposal to divest that book of business to Royal London, which is just increasing their focus on the 2 business lines that really need to grow. So my view is a portfolio optimization that we did in the U.K. Going back to the Netherlands. In the Netherlands, we have done the transaction with ASR. We will -- we were or we are still, by the way, but let's say, post closing, we are a 30% owner, nearly 30% owner of a very large, diversified, very strong #2 insurance group in the Netherlands. That stake represents billions of value for us. We also have asset management activities post closing in the Netherlands that are still part of our group in the Netherlands. And that asset manager is going to have a long-term partnership with the combined new insurance group. So the Netherlands is indeed core to our group and remains core to our group. The way we extract value in the Netherlands, we are going to do differently, we own 100% of some of the business that was smaller. Now we own 30% of the business that is much, much bigger, better diversified and through integration, we can create a lot of value. So the Netherlands will remain to be core to our group.

[Interpreted] Thank you for your reply back to items 1 and 2. As for Item 1, if you increase a very low share price, it's quickly a strong increase, but it's not really that impressive. So I would suggest that the value creation Aegon mentions should be properly visualized at some point. And as for Item 2, I had another question. Where are you investing to obtain the high yield?

We invest in a number of things. We invest a lot in growth, for instance, in the United States. In product lines in the United States that we have identified, the light business, the Workplace Solutions business in the U.S. And you've seen over the last quarters, the growth also coming through. and that requires a lot of investments. Don't forget that when we started, the U.S. was repatriating every year, $900 million of cash to the holding company. And we have said, "No, no, no, no. That's too much. We need to reinvest in that business. And the level that they're currently at $550 million is the level that is, of course, much lower than the $900 million that they did in the past because we invest in the new business to make it grow, et cetera, which is now also generating the right returns. That's 1 example. We also make bolt-on acquisitions, like we did in the U.S. last year. We also invested in the U.K. business. We invest in our markets in Brazil, and we invest in China in order for these markets to grow and they have.

[Interpreted] Yes, I hope that the value creation will be visible, and that we'll notice what we're talking about here.

We will continue to work. There's someone in -- 2, please.

My name is [indiscernible], and I'm speaking on behalf of the Dutch Association for Investors in Sustainable Development. For each year, we engage with Dutch companies on sustainability-related issues. And I would like to thank you for the constructive dialogue prior to this AGM. We have compiled 3 questions relating to biodiversity, lobbying and labor conditions. My first question relates to biodiversity. It's positive to see that Aegon is aware of the increasing importance of biodiversity. For example, Aegon Netherlands has signed the Finance for Biodiversity pledge. At the same time, Aegon has announced its merger that will merge its Dutch operations with ASR. Since only Aegon Netherlands has signed the Finance for Biodiversity pledge [indiscernible] wonders if the biodiversity ambitions of Aegon after the transaction with ASR will be as ambitious as we are now. Especially since Aegon will be more active in markets that are generally less focused on sustainability topics such as the U.S. [indiscernible] understands that the challenges that come along with operating in markets that are less focused on sustainability topics. But we also believe that Aegon can and so be a sustainability front runner in those markets. Therefore, [indiscernible] has the following question. Is Aegon willing to commit to the Finance for Biodiversity Pledge? And second of all, will -- which steps will Aegon take to ensure that group-wide, the sustainability strategy of Aegon will not lose its stakes? And my second question relates to labor conditions. The trade union CMV has shared its concerns about the merger of ASR in Home Netherlands with such new flavors. It's not clear yet how many employees will lose of ASR and Aegon will lose their jobs. But since ASR states that the combination will save costs, CMV views it likely that there will be layoffs. How will Aegon ensure the position of its employees is well taken care of. And then my third question, which relates to lobbying. This is a new theme that we introduced as engagement team. We find it very positive that Aegon is already reporting on the cost of its political efficacy. And it's also engaging with policymakers in EU and USA. We are also pleased that the lobby objectives are focused on addressing climate change. However, we could not find information about Aegon's lobbying activities with -- through industry associations. And as a result, we are not able to determine to what extent the objectives of Aegon are in line with material sustainability objectives, such as the Paris Agreements. Studies have shown that around 89% of industry associations do not always lobby in line with the Paris Agreement. Therefore, real risk exists that Aegon perhaps unintentionally is supporting unsustainable lobby practices, even in the absence of concrete evidence of such practices. Therefore, my final question is, is Aegon during the coming year, willing to disclose a detailed overview of the lobby activities of its aligned industry associations and to engage with those associations that do not lobby in line with the various agreements?

Thank you. Clear questions. Lard?

Yes. Thank you very much. Thank you for your questions. Let me start with the last one. You're at the lobby. We had no objection to disclosing what association's memberships we have. But we cannot guarantee that we can give you an exhaustive list of all lobby activities conducted by all these associations from whom we are a member. We also believe that there is a difference between what you can call real economy companies and financial services companies, if I may make the difference that way. Real economy companies like companies that are, for instance, heavily emitting industries, et cetera, we are a financial services company. We do have a footprint. We're working hard to bring that back. But it is a very different kind of exposure. So I think for those kind of companies that are heavily emitting, it may be more -- make more sense to hold that company account from membership of associations that do not lobby in line with the Paris agreements. I could imagine that for financial service companies like ours that will be less relevant. Again, no objection to disclose in the memberships with an exhaustive list. I cannot guarantee that we will be able to do so. Then on your second question, this is around our employees in the context of the transaction with ASR. Well, first of all, we have not closed that transaction. So until such time as we've closed it, nothing will change for our employees. Everything remains as is. After closing, under the leadership of Jos Baeten and his team at ASR, the integration will start. The integration of the activities aims at maximizing the potential that the company created by putting the activities together and fully benefit from its scale and reach. First of all, that integration process is led by ASR. So I cannot -- I don't know their plans for that, and you should ask it there, I think. But in general, I can say that the integration process is expected to take a number of years. This is not something that's done in a very short period of time. And ASR has publicly stated that I cannot exclude that the integration will also lead to redundancies. They cannot exclude it. But at the same time, ASR has also said, details of the integration needs to be worked out, [indiscernible] councils need to be asked advice over this, et cetera, so that will happen on a step-by-step basis. And I think we also need to point out that the integration efforts and the potential loss of jobs is mitigated by a number of things. First of all, that ASR and Aegon the Netherlands are very complementary in many business lines. So while there are overlap in some business lines, there's also a lot of complementary nature of these business lines that will mitigate it. And also, both companies have currently quite a number of vacancies. It's quite a tight labor market. So that will also help to mitigate this risk. And then there is time. Time always helps because natural attrition is always a helpful dynamic here to ensure that this can be done in a mitigated manner. Now in the long run, we believe that the combination of this company is actually good for jobs because it's a well-positioned company. It will be very strong. And as a result, for the future, will be sustainably a very attractive employer. Then your first question to take them from last to first on biodiversity. As you have noticed, and Aegon has no specific biodiversity commitments. And we also have no plans to make those additional commitments on the topic. It doesn't mean we don't find it important, but we have chosen to focus on priority themes of how we can play our part, and that's climate change and inclusion and diversity. We recognize there is a great deal of crossover, of course, because we talk climate change biodiversity, protecting the environment. These are all elements, of course, that are hanging together, and Aegon Asset Management, for instance, and Bas is the CEO there who's present here, is part of a collaborative engagement initiative, such as actually your initiatives that you're leading on mining and biodiversity. And we also engaged with companies on the topic of biodiversity through the active engagement, active ownership philosophy that we have with the companies we invest in. So with that, I think I have answered your question. Yes. There was one sub-question maybe.

Yes, mainly which steps you will take to ensure that the...

That was it. Thank you very much. Thanks very much. Yes, we believe that -- so this was, by the way, the question what steps we will take to ensure that a group-wide the sustainable strategy of Aegon will not lose its pace and certainly not in the context of the transaction that we discussed. Now first of all, we believe that Aegon -- that the combination that we create will be very well positioned for the future to extend the role the Dutch insurance market when it comes to ESG and sustainability. ASR is a company with a very clear commitment in that area. And therefore, we believe that the combination will also continue its pace there. At a group level, our sustainability approach remains the same, also post that transaction. We have carried out a review of our commitments that we've made in the context of the disentanglement and we have assessed that there will not be a significant impact on our ability to deliver on the commitments that we have made.

Thank you. Gentleman number one, please?

Yes. I'm Mr. [indiscernible], private investor in Aegon. I have the following question regarding the annual integrated report 2022. Page 216 regarding other charges. Other charges are related to settlements. In 2022, I read in the annual report that there are settlements this time in 2022, I only see that the United States is mentioned. If we go to the annual report of 2021, we also see that there is a discussion about other charges, which took place like settlements in the U.S. but also in Europe. So my question is what has changed in 2022 report that the Netherlands is not mentioned or maybe I read it wrong. I don't know. And this comes also to the following point because I follow the annual reports since a couple of years. Oftentimes, this is related to, for example, in the U.S., in the past, there have been made settlements with 99% of policyholders. And sometimes, with 1% of the policyholders, there were special settlements or it took longer. In the Netherlands, there have been also settlements, and I would like to discuss the following because in 2022, in the annual report, you mentioned that you, Aegon, have settled, for example, in some settlements for 90% with the Sprintplan investors. And you repeat that actually from the previous year. So my question is, what has happened there regarding those settlements. And also, what can we expect from settlements for the future? Because when we look into the annual report, we see there the other charges, it's -- the numbers are going up here. Sometimes they remain very low. But in the end, if you open a report, then yes, the other charges -- the numbers are growing then. So my question is what can we expect there? And when it comes to the settlements, for example, what I know is that you mentioned in the report, that you talk like you have made settlements with 90%, but there is also information that there is a lot of cases, which we believe it can never be 90%. So could you maybe explain more about how many settlements we have made over the last years with, for example, the Sprintplan [Foreign Language] for example. So yes, I would like to address this question. And I also would like to say that I think it would be fair for Aegon to settle in the right way also with people who have invested in the past with Aegon and not give them some pocket change like EUR 750 if they have lost money by investing actually in an investment fund, which later looked like it was just like a loan, and they paid it off, they paid actually, they paid interest instead of a monthly payment. So my question in the end is what is -- what kind of other charges can we expect? And what can -- because this is really important because as a stockholder, I think that it's not clear in the annual report with the 90% is that -- how has that been done? Secondly, you also mentioned that in the year 2021, you made an agreement with 90% of the investors, although a large group pickup after that day, they were asked to settle and they have not settled at all yet. So my question is, is the annual report really reflecting the reality?

Okay. Thank you very much. That was more than 3 questions, I think. So we'll make sure -- I'll just say that because we want to make sure that we answer all those. Matt?

Yes, maybe I can take your first one on Page 216 of the annual report. We are generally talking about settlements of lawsuits that have come to come our way. As a consequence of what we call monthly deduction rate increases on life insurance contracts in the United States. These are increases generally to cost of insurance charges on existing life insurance contracts that we are allowed to make under the terms of the contract. However, in some cases, we've been the subject of a class action lawsuit by policyholders who have thought we had applied, let's say, the mechanism that we apply to make those rate increases was inappropriate. And in these cases, for example, we make a general class action settlement with that group. There are people that opt out of that settlement, and then we deal with those on a -- let's say, on an individual basis or an institutional basis. So these things can be lumpy. But maybe to go to your last comment about is the -- are the annual accounts a fair reflection of what our liabilities are. The answer is yes because if we were able to size the amount of the claim and assess the probability that we would have to pay the claims that we would be putting it as a provision in the accounts. But in many cases, we cannot do that. We cannot do that. In terms of your question about what can we expect going forward? What could -- we never -- we would never make comments about what can we expect going forward. We're always -- we are always in active negotiations in these things. If we could make a provision for it, we would, but in general, we can't.

I would like to comment to that because sometimes in every year, we see that, especially in 2019 financial report, then you use the word resurface? So something resurfaces. That means that people come together and will start or will start a class action suit. So then the reports as well, we were able to deflect the Dutch courts Judge dismiss it. And then later, in 2022, we read again that, yes, well, we had to make settlements and we had to pay them out. So of course, we -- you have a lot of products out there, which are sometimes for multiple explanations or how do you say that for me, [Foreign Language], how you say that in English? It is explainable often in multiple different ways. So I hope you guys don't lose the overview because what for us is important as investors that you -- that we don't end up always with a lot of settlements because it's out there in the news all the time. And Aegon is known there now that there are a lot of lawsuits and cases where people trying to get their money back. So how is this for us as investors? How can we trust you that we get good value like our colleague behind me says, well, we want to see that the stock goes to EUR 10 and not stays around EUR 4. So please have comment to that.

Okay. Last comment, and then we'll move.

Yes. So with respect to having an overview of the various litigation settlement activity and so on, please do rest assured that is our responsibility to indeed have that overview and our dear auditor friends what I think agree with that one. So we do have that overview. Thank you.

Okay. Please.

My name is [indiscernible]. I speak on behalf of VEB. I want to go back to the first shareholder ask questions. Ms. Pista or ask some questions about strategy, the performance and so all -- and actually, I recognize a lot of his words, but he presented them in a very polite way. I recognize some of those words in early years like I've been criticizing Aegon. Having said that, also, I think I said last year, I think there's a higher sense of urgency within Aegon at this very moment. So there's more reason for optimism than just a couple of years ago. So let me start with that. Having said that as well, I've got some very interesting questions, which I'm sure Mr. Friese will love.

3, right? No more than 3.

We've got plenty of -- I also got a question to the auditor.

Okay, but that...

On the point...

No. Next point. We'll move that later. So the 3 points, please.

Good. It is related to the strategy. I think I understand it. You make choices, you focus, efficiency, returns and so on and so on. I'm wondering what is so interesting about China. I would have understood it 2, 3 years ago. But in the meantime, we've become more -- less relaxed about China. That is not just opportunity. But at some point, we may not be able to do any business there anymore. So is it wise to consider that as a main growth market for Aegon. A similar question I can ask about Brazil. Brazil is in continuous political turmoil. There's maybe half year of stability, and then there's a big issue with the government. So is it so wise to consider that as a key market for Aegon? That's the second question. Third question, relates to the asset management. I remember last year that Mr. Friese was very positive about the asset management, EUR 1 trillion, which Aegon is managing either directly or indirect, you're having it managed. And Aegon is not so afraid that a big portion of this EUR 1 trillion book management competitors. Instead, you want to increase your share of those assets that you're managing or you're having managed for your customers. I was wondering how it's progressing. Last year, between 35%, 40% and EUR 1 trillion you managing yourself. The rest is competition is doing it better or cheaper. Have you progressed a lot because at the same time, I see seeing that operating profit and asset management has dropped a lot, actually, a lot more than the market had dropped. So can you explain if I should be worried about that? Those are my comments and my questions about strategy or performance. And later on, I'll come back with the questions to your auditor.

We'll wait for those. Thank you. Lard?

Yes. Thank you very much, Mr. [indiscernible]. Geopolitical risk is up, unfortunately. We have in our backyard, a massive war, a horrific situation, and we see growing tensions and especially the relationship between China and the U.S. is, of course, a very big concern. China is, as we all know, a vast country with a huge amount of population where there has been -- until recent years, a very strong economic growth. Hence, a very attractive potential opportunity for us to further our businesses and grow and take the benefits of a growing market, a growing middle class, a more prosperous country that over time needs more advice, more demand for life insurance products and also more money to be managed in the form of asset management. And we have seen our 2 joint ventures that we have there. One business is a life insurance business, selling traditional life insurance products to retail households. And the other one, a separate company, is an asset management company, which we have -- both companies we have in joint ventures with local partners. Their trajectory has been strong over the last years. And I would argue the asset management business has done it better in the last years than the life insurance business. The reason for that is that in the life insurance space, there has been a lot of regulatory change in China, which has hit the entire industry and has temporarily lowered the demand for those products. We are now seeing in the first quarter that the demand is picking up. Also post the reopening of China after the COVID pandemic. Now the geopolitical risk is there, and we are acutely aware of it. And therefore, we are cautious in the way we operate in China. The good news is that the partners that we have, especially on the asset management side, is a very strong and well-respected partner, and we have seen continued growth in the asset management area, which is good. On the life insurance side, the growth has been more choppy due to the points that I made early on it. So in China, we are acutely aware of the geopolitical risk of other risks associated with, let's say, on many different fronts, which we -- in China internally. So we are acutely aware of it. But at the same time, we are there with strong partners. There is a growing middle class, a massive population and a lot of opportunity to capture for us, but tread cautiously. On Brazil, it is, in our view, slightly different. In Brazil, we have already seen with our partner for the last 12 years, continuous double-digit growth in the development of the business. Through a combination of good product innovation and build-out of distribution channels. For instance, 2 years ago, we launched a joint venture partnership with one of the largest banks there, which has helped to propel the business forward. Now the geopolitical risk is obviously also in that market present. However, please note that we are following that acutely, but please note that the change in the top leadership of, let's say, that country does not necessarily mean that the infrastructure and the political dynamics in the provinces and in parliament have fundamentally shifted, not much, quite frankly. So in that sense, for us, the environment remains conducive, it is an economy that is growing. We have a very strong and good partner there, and our business has continued to demonstrate resilience and growth. So we're very pleased with that. Finally, your point on asset management. Yes. The asset management results over 2022 were not good. The asset manager was not alone in that. The entire industry has been suffering from the overall market -- macroeconomic backdrop. Our asset manager has relatively in its product mix and in its investment mandates, a higher percentage in fixed income asset classes given the rate rises that we have seen, the rises in interest rates, we have seen those bond values coming down. And as a result, the fees that we gain are on the back of the values of the assets. Now the value of the assets have come down. As a result, our fees have come down as well, and that goes straight to the bottom line. So indeed, you have seen, number one, that effect at the asset manager. The second effect is that we've also seen in China that the performance fees that we -- that were outperformance is at the Chinese asset manager, the year before, we're not returning to the same extent in 2022. That was an add-on effect to it. So I concur with you that the asset management business last year had a tough year. We are addressing it in 2 ways. The first one is we are implementing a new technology platform globally for the asset management business, which will allow us post that implementation, which we aim to close in the course of this year, post that implementation to increase our efficiency and improve our margins. That's number one. Number two, we are focusing to manage the asset management business more on those strategies that are allowing us for protecting the fee levels and also those are strategies that we're really good at and have a competitive edge in versus others. So real assets, private debt, alternative fixed income strategies is what we go for and responsible investments, and those are the areas that we go for. Now as to the percentage that our asset manager takes from the overall money that needs to be managed, I would say it's been relatively stable. It's not grown much. So we still have the dynamic that opportunity there. We will never be all things to all people. So do not expect us to take materially larger share of that, but we do believe there is still areas where we can grow our share of that wallet.

Good. Thank you. Any other questions in the room? Yes, sir.

[Foreign Language] [Interpreted]. My name is [ Dekker ], Mr. Chairman, and I'm a miniature shareholders. I'm only speaking on my own behalf. Three questions. First and foremost, I'd just like to highlight that I'm very pleased about the fact that after quite a number of rather complex years at Aegon, you decided to adequately streamline the organization. The way I see it, you've reduced the risk that were there for a while. So I'm very pleased about that. But of course, Aegon still is a company that is still dealing with the legacy of a long, long time ago sometimes even, and this is something we always have to keep in mind. I have 3 questions. First question, regarding the closing of the ASR agreement. Is the timing still as you predicted it to be? And is there a certain point in time which you really think that you'll be able to achieve the closing? And then a question linked to this, and I have rather remarkable statement that I'd like to refer to the argument. The reason why for many years, I didn't want to be a shareholder of Aegon. I always coined this strange sentence. And it said that we have to be very careful for what you wish for because before you know it, all of a sudden, you can be faced with this storm. So this brings me to a detail. Now the assessment of the problems and the fact that Aegon was never really willing to engage in settlements is something that plays a part here. But my question is, since we can't really get an overview of this situation, what about these claims, these litigations as far as the Netherlands is concerned, will they be incorporated into the agreement with ASR? Or will the claims remain behind at Aegon? So this is another issue to be taken into account since not all of them have been settled. Risk mitigating measures now that they have been taking. Do you believe that with Transamerica, you are getting there? Or do you think that you still have to take important risk mitigating measures. Would they still be desirable? Could you say something about the exposure? Now the interest situation in the U.S. is changing rapidly. For a company such as Aegon or Transamerica, that doesn't have to be detrimental. But it's very difficult to assess what the effects of the interest rates could be. It's not about the level of the interest, but interest rate changes, of course, have led to quite a number of problems. And we've seen that a couple of banks also collapsed on the back of that.

Thank you for those questions. Lard, can you take that?

Thank you very much, Mr. Dekker. To start with the last piece, interest rates up are good for Aegon, are good for Transamerica because our products will become more attractive to our customers and the guarantees that we gave to our customers and options in the back book of our portfolio and the capital that we need to hold for that if you discount the liabilities against a higher interest rate, they weigh less than the balance sheet. So that is good news for us. But you are very right that if interest rates rise very quickly, that there is not an immediate effect that you are seeing in the P&L, if you will, or in your returns and that you also need to use a lot of the cash flow that you have to manage liquidity risk in your company. The good news is that we have, of course, been tested on that in 2022 as interest rates in the U.S., but also in Europe have very quickly increased from nearly 0 to more than 5% in the U.S. and more than 3 in Europe. And at all times, we've been able to manage the liquidity demands for our hedging portfolios in our derivative portfolio, for instance, very, very well. So in that sense, that is good. We believe that the improvement of the higher interest rates will become more visible in our financial results over time. So first, when interest rates stabilize at a higher level, and then over time, you will see that coming through because the money that we get in, we need to reinvest that against higher rates, and that is positive for us as a company. When it comes to Transamerica's risk profile, we have changed a lot in that risk profile by introducing and broadening a hedge strategy around our variable annuity book, which has provided already a number of quarters of very high hedge effectiveness, more than 97%. And we just comped down the entire financial profile of the company. And the same goes for the volatility of the capital positions. You can just look at the capital positions that we reported over the last 1.5 years, and you will see that in spite of all the volatility, it's been a very calm picture. And that is, I think, proof testament to all the underlying risk mitigation that we have taken. And we will continue, Mr. Dekker to mitigate further where we can and where you find opportunity because we believe that predictability and quality of cash flows as that increases, it will help the value -- the valuation of the company. When it comes to closing of the ASR transaction, we have said at the time that we aim to close the transaction with our regulators in the second half of this year, and we still maintain that view. And the second half is a wide range. It can be Christmas. It can be summer. Let's hope that it's more to the earlier end than the later end. But we are progressing very well and working very hard with our regulators and with ASR to do that. Then where it pertains to legal risk. I think my colleague, Mr. Matt Rider has shared some of that in his comments on the earlier question. Some of these cases take longer, as we know, and we are disclosing that in our annual report. We have been able to resolve many of them, a lot of them, but some cases are still under litigation because we have a different view than the people are litigating us, and that just needs to go through the legal process, and those processes can take a lot of time, as you know, depending on the jurisdiction but depending on the workload that many of the legal magistrates have. So we just have to await the outcome of those. And we are disclosing that adequately and well in our annual report on where that stands.

The question was whether those liabilities will go on to ASR?

And they will -- yes. So the as we -- Aegon the Netherlands, any claims or rights for policyholders are with Aegon the Netherlands and its subsidiaries. That legal entity that moves to ASR but it does not change the rights of our policyholders that they have so that they have vis-a-vis ASR in that sense. In the business combination agreement, we have provided some reps and warranties around that. But the main thrust of it is that all the policyholder rights and the liabilities we have for them moves to the new one.

Good. Any other question in the room? Yes, sir?

My name is [indiscernible], I'm a private investor. I've a question around the annual report, quite a big report 450 pages, up 50 pages from last year.

Has full disclosure.

Why is it so big? Can there be anything done to make it more concise? It's also a reflection of the internal complexity.

We discussed this in the Supervisory Board all the time, believe me. Matt, do you want to answer that one?

I wish that would be the case we have to produce and read and analyze all those 450 pages and that is a giant task. However, it is likely with the introduction of IFRS 9 in '17 in 2023 and that I'm sorry to say the disclosure will get even more robust shall we say. So we look forward to -- at least we're only printing 150 copies of the thing now. You can get it online, but it's likely to actually increase in size given the complexity of the disclosure.

Okay. Do you have a follow-up question or...

Yes, I have a follow-up question for Lard Friese. So you took over work from another CEO who left something behind for you. So are you satisfied with the results of the settlements, which have been made over the last 2 years in regards of that the company is able to get a better reputation here? That's my question. Because there are still a lot of people I know who have not a good resolution. So and it continues. And as I said, I think I do not have not received a real good answer from Matt because as I say, as I repeat here on the...

We got the question.

There's nothing said about the Netherlands here about the settlements in the annual report. So that is not finished, I believe.

We have -- in the Netherlands, we've had a number of issues that we've addressed over time in different ways. And we were able to mitigate a lot and to resolve a lot, which I'm very pleased with. They're still -- by the way, not done by me necessarily because it's been a long period, as you know. So I think we can be pleased with that. At the same time, we still have difference of agreement with a number of people and a number of our clients, unfortunately. And unfortunately, in some of these cases, they are still being discussed in court. I cannot go into these individual cases as you would expect. But I'm happy and pleased to see that we've been able over the years to mitigate a lot of these complaints and to be able to bring them to a proper resolution. But unfortunately, we still have disagreements with some of our clients. And in some cases, these are being litigated, and that has to go through the [ proper ] court process and will lead to an outcome that we need to await. If I look at the overall reputation of Aegon in general, we operate in multiple markets. So -- and we also do not use the Aegon brand in every market. In the U.S., we are called Transamerica, for instance. But I would say that our reputation has increased over the years. And I think the way we run the company, the way we ensure we bring our purpose to life. And if we do that continuously for a long period of time, it will have no doubt a positive effect on the overall reputation.

Okay. Any other question in the room? I'm looking -- I'm sorry, did you have another question? Yes. That comes later. That comes later. Don't worry, you'll have a chance. I'm looking at the moderator, anything else? Good. Okay. Thank you.

We now move to agenda Item 2.2. The Chair of the Remuneration Committee, Ben Noteboom, will present the 2022 remuneration report. Ben, please proceed.

Good afternoon, everybody. Thank you, Bill. Ladies and gentlemen. Before we ask you to cast your advisory vote on the 2022 remuneration report, I would like to share a summary of what was disclosed in the 2022 report and answer your questions. remuneration policy that applies to the Supervisory Board members in 2022 was approved by our shareholders, you in 2020. There were no deviations from this policy in 2022. As announced last year, the Supervisory Board has decided in line with our policy to index the base fee, attendance fees and travel fees with 5% as of 2022. These fees are not indexed automatically, and this was the first update since 2019. The increase of these fees as well as an increase in the number of meetings and travel movements resulted in a higher total remuneration level compared to last year. Similar to the Supervisory Board, the remuneration policy that applied to the Executive Board members in 2022 was approved by the shareholders in 2020. There were no deviations from this policy in 2022. For the 2022 performance year, Lard Friese was allocated EUR 1,559,000 in fixed compensation and EUR 3.6 million in total compensation. Matt Rider was allocated EUR 988,000 in fixed and EUR 2.3 million in total compensation. In accordance with the Executive Board remuneration policy, the fixed compensation levels of Mr. Friese and Mr. Rider have been increased by 5% as of January 2023. These increases will keep both aligned with internal and external compensation levels, economic developments like inflation and changes to the compensation of other senior managers in the Netherlands. The variable compensation of our executive Board members for 2022 was based on the mix of business and individual performance results. Aegon's overall business performance result was 113% on a performance scale with 100% as target and 150% as a max. This result was driven by strong results on several indicators, as we already shared by a lot is free cash flows, addressable expense savings and the execution of the transformation program. Converted to the performance scale that applied to our Executive Board members, the Aegon business performance result of 113% resulted in a score of 85% for the Executive Board. You can see this on the first line of the table. This result has 70% weight in the calculation of the total variable compensation. The other 30% was based on individual performance results. As you can see in the other lines in the table, this was measured by performance indicators related to the development of the strategic road map, the execution of capital initiatives in line with the strategic road map sustainability integration and execution, the proportion of women in senior management positions and [indiscernible] format finance strategy execution. Based on a total result of 88%, Lard Friese was allocated to EUR 1,368,000 in variable compensation. Matt Rider, based on a total result of 85% was allocated EUR 837,000 in variable compensation. A 1/3 of these amounts have been paid in cash, while 2/3 will be paid in Aegon shares after a deferral period of 3 years. That concludes my summary of the remuneration. Back to you, Bill.

Thank you, Ben. Thank you, Ben. We will now address the questions regarding agenda item 2.2. Any questions in the room? I'm looking at the moderator. Any questions from the chat? No? Okay.

Thank you.

Thank you. Okay. Just on this point, please note that agenda Item 2.2 about the remuneration report, 2022 is subject to an advisory vote. Ladies and gentlemen, prior to this meeting, our shareholders have been able to cast their votes either by granting a proxy or using the e-voting system. Furthermore, the option to vote live during the meeting is enabled. Let me briefly explain how you can vote via the app. The voting app displays the options: for, against and withheld. After having voted, the display will show your vote. If you want to change your vote, you can do so until the voting is closed. For our shareholders in the room, if you have questions about the voting app, please raise your hand and someone will assist you. The voting results will be shown at the end of the meeting before the last agenda item, any other business. We now move to agenda Item 2.3. Matt Rider will give an explanation of Aegon's dividend policy. Matt, the floor is yours.

Thank you, Bill. We have decided to transition to a cash-only dividend as from the 2022 final dividend and have therefore updated our dividend policy accordingly. This decision was made for several reasons: first, it removes the need to buy back shares to neutralize the dilutive effect of the stock dividend; second, it provides more room to execute the planned share buyback in relation to the ASR transaction and to ensure that these capital distributions to shareholders are done in a tax-efficient manner. The remainder of the dividend policy and our approach to returning capital to shareholders remain unchanged. We are committed to paying a sustainable dividend to shareholders, which can grow over time if Aegon's performance so allows. That is evidenced by the increase in our dividends from EUR 0.17 per common share over the financial year 2021 to the EUR 0.23 per common share over the financial year 2022 we are proposing today. We are targeting a dividend of around EUR 0.30 per common share over 2023 barring unforeseen circumstances and subject to shareholder approval at next year's Annual General Meeting. Back to you, Bill.

Thank you, Matt. We will now address questions regarding agenda Item 2.3. Are there any questions in the room? If there -- I would like to ask the moderator, any questions? Good, so we can continue. We now move to agenda item 2.4, the adoption of the annual accounts 2022. We already discussed the financials of 2022 and the related questions. I, therefore, now would like to ask Rogier van Adrichem, our independent auditor from PwC to make a few comments. Please note that Aegon has released PwC from the obligation to observe confidentiality to allow them to comment on the audit of and the auditor's report on the financial statements of Aegon N.V. Rogier, the food is yours -- the floor is yours. You'll get the food afterwards.

Thank you, Mr. Chairman, and good afternoon, dear shareholders. I'm happy to provide you with some insights into our 2022 all of the Aegon's financial statements. I would like to use this opportunity today to provide you with the comfort that we have performed a robust and independent audit. Just to give you an idea, we spent roughly 200,000 audit hours reviewing the quarters and auditing Aegon's consolidated financial statements. 2022 was a challenging year in which the increase of interest rate and the inflation impacted Aegon's equity, income statements and collateral position. A year in which Aegon signed a business combination agreement with ASR to combine the business of Aegon Netherlands and ASR and the last year of IFRS 4, turning into IFRS 17 from the 1st of January 2023 onwards. Now both to defense deal with ASR as well as are disclosed in the financial statements and described in our key audit matters. But before I explain our key audit matters and our conclusions around internal controls and audit matters, let me first start with the outcome of our audits. So we issued an unqualified audit opinion on the consolidated financial statements dated March 15. And that means that these financial statements give a true and fair view of the financial position of Aegon as at 31 December 2022. That also means that the integrated annual reports of Aegon contains all information required by law. Now let me go to the key audit matters. And a key audit matter is the matter which is most important, which we have identified in our work during the year. And these matters often include critical accounting estimates and management judgment. I will highlight the following 4 key audit matters. The first of all is the impact of the agreement between Aegon and ASR, already mentioned earlier in this meeting. Now given the impact of the agreement on the disclosures of rights and obligations, but also on the classification as held for sale and the significance of the impairment had a EUR 1.8 billion, we determined this as a key audit matter. And management has determined that in Quarter 4 of 2022, Aegon is committed to a sale involving the future loss of the control of Aegon Netherlands. That, that qualifies for held for sale. Now based on our own assessment, we concur that the disposal of Aegon Netherlands met the criteria for held-for-sale classification in Quarter 4, 2022. We tested management calculations of the impairment loss. And we found the calculation of the impairment loss as well as the disclosures to be appropriate. The second key audit matter I would like to highlight is the valuation of certain assets and liabilities arising from insurance contracts. The assets and liabilities arising from insurance contracts are: the deferred policy acquisition cost; the value of business acquired, VOBA; the insurance contract liability, that's EUR 190 billion; and then the embedded derivatives in insurance contracts. The valuation of these items involve the use of valuation models that use judgmental inputs and assumptions. Think of assumptions around mortality, morbidity, future expenses, surrender, lapses, utilization rates and own credit spreads. In Note 34, you can find the sensitivities of these inputs on equity and net income. We involved our actuarial and valuation specialists to test models, process the inputs and the assumptions. And we concluded that the valuations are within a range we consider acceptable based on our own industry experience. Well balanced was our point in the range. The third key element I would like to highlight is the valuation of certain Level 3 investments. Just for clarity purposes, a Level 3 investment is an investment without observable independent references. In the investments for general account of EUR 131 billion, roughly EUR 2.9 billion of investments are categorized as Level 3. That's primarily debt securities and investments in Dutch real estate. We developed our independent valuation for these level 3 investments, as we considered that the Aegon valuation of these investments was within the bandwidth that we consider acceptable, actually on the prudent side of the bandwidth. None the last key audit matter, and that's around the disclosure of the estimated impact of IFRS 17 and IFRS 9. As I said, from the 1st of January 2023, both IFRS 17 and IFRS 9 has become actually effective for the annual reporting. As the adoption of both standards have a significant impact on IFRS equity, Aegon provided in Note 2.1, the best estimate of the impact. Now please note that Aegon stated that the impact on the opening balance sheet is indicative and can be subject to change. But based on all the procedures we have performed, as we have outlined in our key audit matter, we found the estimated impact on group reported equity to be reasonable and that the disclosure note was appropriate. So let me go further and tell you a little bit about the internal controls around financial reporting and the work we did. So management explains in their integrated annual report the design of the internal control system and confirms in their in-control statement that the financial reporting does not contain any material inaccuracies. Now we have audited Aegon's internal controls over financial reporting as of 31 December 2022. And in our opinion, Aegon maintained in all material respects, effective internal controls over financial reporting as of the date. We did not notice any material weaknesses in Aegon's control environment around financial reporting. Then let me touch on the climate risk and the way we have approached it in our audit assessment. Now Aegon work with Ortec Finance to conduct an extensive and systematic climate risk assessment for its general and separate account assets across all business units. Modeling results continue to indicate that Aegon's general account portfolio remains resilient against key systemic climate risk drivers across all model climate scenarios over 40 years horizon. Just the asset side. We considered the impact on the 2022 financial statements resulting from the risk of climate change on the insurance activities limited. Due to, among others, the related limited size and nature of the property and casualty portfolio of Aegon, it's primarily life insurance business. As the investment portfolio is largely valued at market value, the risk of climate change on this portfolio will also not lead to a material risk from a financial statement perspective. Then the last topic I would like to address, and that's about our approach towards fraud risk and going concern. On the request of stakeholders, we summarized in our reports our old approach towards the risk of fraud and the applied going concern assumption. We identified as potential fraud risk, the risk of management of right of controls. And based on our old work done, as we have described in detail in our reports, we did not notice any indications of fraud potentially resulting in material misstatements. Management prepared the consolidated financial statements on the assumption that the group is a going concern that it will continue its operations for the foreseeable future. And we reviewed management going concern assessment where it included all relevant information, we evaluated the adequacy of the solvency position and free cash flows, and we evaluated the stress testing of liquidity and capital requirements. Our procedures performed did not result in outcomes contradicting management's assumptions and judgments. Now with that, I would like to thank you very much for your attention. And I'm, of course, happy to take any questions relating to our audit of the financial statements. But before that, I will now give the floor back to the Chairman.

Thank you, Rogier. Questions with respect to the annual accounts 2022 have already been addressed. Let me check if there are any additional questions, and I know there's certainly one here. Please proceed.

My name is [indiscernible] on behalf of VEB. It's very difficult for outsiders to judge, to interpret the numbers that a company like Aegon is presenting. It's not you to blame. That's the -- it's a very complicated business. So therefore, we have to rely on the competence of the management teams and all the founders of people working within Aegon to in the companies of the Supervisory Board, especially the Audit Committee. And certainly, last instance, we have to rely on the competence of the external auditor. And I'm sure that also the management team and the Supervisory Board rely also. So that's, of course, all trying to make sure that the data, which are presented to us indeed realistic and not major mistakes are happening. Now we've established the importance of your role, and I'll come back to some questions I'm having. First, to how much we can rely on the risk management because insurance is about risk management, how strong risk management structures are and effort how strong PwC is in order to judge how strong these risk management approaches are, are really sure that we can rely on the data. Now first thing, I recently read that there are some issues, there have been some issues for longer period with the Dutch National Bank [indiscernible]. [indiscernible] is not very relevant or important number-wise. But how is it possible that for a longer period these kind of structural risk management issues have been occurring in 1 company and lots and lots of business units you're having, lots and lots of daughter companies that you have. How can we be sure there are no similar issues appear in more relevant business units or more relevant companies, daughter companies that Aegon is having because if there are risk management issues in some of the larger parts of Aegon, that will have an impact on the numbers. So how can we rely that the risk management is indeed up to speed in every single part of Aegon? The first question, and I'm really interested how PwC sees this and whether they detected the issues themselves and ever worn you listen, you have to do something also Dutch National Bank is following you. Second thing that has to do with China. A couple of weeks ago, I read in the financial times that the PCAOB for those who don't know, it's something like a worldwide organization of accountants. All the big accountants companies are a member of or listen to. It's a very knowledgeable organization who tend to communicate in a very diplomatic way and they said literally the following, "The Chinese arms of KPMG and PwC, those orders in China carry unacceptable number of laws." In normal words, it's a crappy check of the books in China. So I was wondering, what have you done, what has PwC done to make sure that the numbers you're getting and you're consolidating from your joint venture in China, a very important part as we just discussed today as well, that we can rely on those numbers. Have you asked help from Deloitte, for instance, did you go yourself into China, were you allowed to get access to all the data and so on and so on. So how was [indiscernible] wondering how you're going to mitigate the kind of fundamental flaws that your representative in China appears to be having in doing the audit. So those are my 2 very fundamental questions.

Just to make sure I have got it right between the questions that you're asking are the ones that are directed to Aegon's management and which ones are addressed to the auditor.

So questions are at least directed towards the auditor. The first question is related to both you.

Okay. So should we allow him to respond to the auditor points and then we can then deal with risk management. Okay. Rogier, do you want to deal with that?

Sure. Sure. Absolutely. Well, thank you for your question. Let me take the first question about the regulation on -- you mentioned the example of Knab and indeed not from a group perspective is not material at all. However, as you know, we as auditors do need to apply what we call the ISAT-250 requirements. And the ISE-250 requirements means that we need to make sure that we have a good understanding of the regulation relevant for the organization and that, that regulation is adopted. You need to split it into 2 things. One is a regulation which has a direct impact in the financial statements being IFRS, tax law. That's, of course, will be audit, and you can see our opinion on those kind of elements in the audit opinion. The second element is the element around indirect regulation. Indirect regulation is regulation around anti-money laundering. In the case of [indiscernible] talk about credit risk management, that's more indirect, has not a direct impact to the financial statement. For that, of course, we take a good look. We have discussions with management. We make sure that we understand that management will do everything possible to adhere to those regulations. It's not audited, but it is what we look into -- do you know the rules, do you hear it? Is there a good process in place? Is there reporting? And that's included in our orders. And that's also included in the -- for all the components relevant to the group audit. So that is the way we audit indirect regulation.

Do you agree with me that those indirect things in the end will and very often do have an impact directly with some delay. So if your internal control mechanisms are not right. For instance, you do not make sure that you invoice your customers in time or you collect the invoices in time that at some point, you have to take the hit, and you do feel the pain maybe 1 or 2 years later, so those indirect things are not for luxury. In the end, they will often have a financial impact but some delay. Do you agree with that? Or do I misunderstand that?

Now I agree that you need to adhere to all a regulation because that will have potentially an impact later on. And then you end up in the [ professional ] cycle, which was just one of the other questions. If you talk about controls around revenue recognition, the ones you just mentioned, that's not indirect. That's direct. And I just mentioned to you that we all the internal controls around the financial reporting, which includes revenue recognition and that we issue an unqualified opinion on the internal controls.

The -- as far as the more indirect elements, which I say at some point, may have an impact, at least with some delay. If you see that in some daughter companies, some business units, there are some potential issues in there. Should we be afraid as shareholders that those things may appear also in the larger, more relevant business units? Or are you sure that we don't need to worry about them. I don't care about up at all, actually.

So I was going to make sure your question is...

Can we trust relevant business units that the direct, but especially also the indirect controls, regulators and swap that the organization is well managed and the risk management is under control. That's my key question.

Okay, well, the auditors can provide our view, and we will respond in terms of the management but go ahead.

The answer to your question is we do not allot the indirect regulations. We evaluate, we discuss it. There's no alt opinion on it. So if you ask me to give you comfort or alt comfort I can't give you that. It is not in scope of [indiscernible] for the financial statements.

Okay. So maybe in terms of responding to your question, management?

Yes. So thank you very much for your question, Mr. [ Keyner ]. First of all, situation around Knab, obviously, not comfortable. We were not happy with it. And let me give you a bit of facts around that. In December 2019, D&B issued concerns around the controls and risk management for a particular credit book that had to do with credits that were originated through lending platforms in a number of markets. What we have done is 2 things: one, since 2019, the team has worked on remedying those risks and those controls. We have not increased the book. We have started to divest the book. The book came from an end of year 2019, EUR 1.5 billion number to today, EUR 250 million, which is less than 2% of the balance sheet of the bank. None of the loans have -- none of that book has been loss-making and has been sold at a lot. So there have been no financial ramifications of it. Now the let's say, obviously, the concerns we've tried to remedy in the company, the concerns that D&B had. They were also, to a certain extent, around, for instance, the ability to have controls around the documentation on those loans that were generated at the time that they were generated. So that has led to quite some discussion, which we have disclosed in our annual reports from Knab over the years. And recently, that came out on that to some news flow that you're referring to. Was that good? No, that was not good. Have we tried to amend it? Yes, we've amended it now. has it been -- has it led to financial implications? No, because the books were good, the loans were good. We have divested them over time, by the way. That's on Knab itself. Then your general question about can -- so risk management frameworks and can risks happen. We have an elaborate risk management practice throughout our company where we look at many risk types, financial risk management, compliance risk and operational risk and a raft of risk management types that we are looking at. It is being led by the way, by our CRO, Dr. Jacob. The practice is an intense practice in which our regular reports, regular audits, regular second-line and third-line views that are being done on a regular scheduled basis, and they are being reported out to the Board of the company, but also overseen by our risk management -- sorry, by the risk committee of the Supervisory Board in quite some detail. Next to that, there is, of course, the internal audit of the control environment that we have, which is done through our internal audit practice that we have and, of course, a close consultation with our external auditor. So we believe that we have a very mature and very extensive risk management practice that we continuously evaluate and rigorously control with the right checks and balances. And we have, on the back of that, many discussions, which are regular by the way, and normal with all our local supervisors to make sure that also they are properly informed about our risk management practice. That's how we're...