Our operating environment

Economic conditions, geopolitics and social factors can have an effect on our profitability, operations and reputation. We cannot always control what happens in our operating environment but we can be prepared. This starts with identifying the biggest issues affecting our business. We call these our material issues.

The world economy has continued to improve over the past year. Growth has picked up in the US and Europe; it's also accelerating in China and Japan. Economic growth, generally, is good news for our business. But growth in some parts of the world is still uncertain. And wages haven't kept pace with this growth everywhere, which means many consumers aren't yet feeling the benefits of the economic recovery.

Financial markets have performed well. During the past year, stock markets have been trading at all-time highs. Again, that's good news for investors like us and many of our customers. Interest rates are still a concern despite recent increases in the US and UK. In Europe, the European Central Bank's (ECB) benchmark refinancing rate has been at 0% now for almost two years. Low interest rates are a challenge for insurers. In the past, the industry earned much of its money from interest rate spreads.

Regulation is becoming increasingly complex. New capital requirements, known as Solvency II, have been in force since the start of 2016, bringing significant change to the industry. In Europe, we're also seeing a step-up in data privacy controls, with the EU's new General Data Protection Regulation (GDPR), as well as new rules on insurance distribution, financial reporting and MiFID II1, which is aimed at increasing transparency and offering investors greater security. New regulations can add to operating costs, but they also help protect consumers and strengthen confidence in financial markets.

Political uncertainty makes investment harder, and may pose a threat to longer-term economic growth. In the past year, we've seen an increase in political uncertainty in several key Aegon markets, including the UK, Spain, Turkey and the US. More generally, we've seen an increase in protectionism in some parts of the world, but also, promisingly, the emergence of a new international development agenda, with the Paris Climate Agreement and the adoption of new UN Sustainable Development Goals.

Our society is also changing rapidly, beyond politics and the economy. Most of us are living longer, healthier lives; this is increasingly true of developing countries, as well as Europe, the US and Japan. At the same time, new technologies are having a profound effect on the way we work, the way we interact with others and, ultimately, the way we organize our economies.

Materiality matrix

Ability to control or influence

As part of our materiality assessment, we also look at our ability to control or influence the economic, social or regulatory issues affecting our business. In each case, we assess our impact – whether decisions we take can directly affect the underlying issue. It's clear that some lie within our control, such as our internal risk culture. Others – like interest rates or regulation – we have very little or no direct influence, but can manage, or mitigate, the effect on both our business and our stakeholders.

Direct control
Issue is entirely within the company's control.

Shared control
Control of the issue is shared with, or exercised through, another company, organization or third-party.


Strong influence
Company has ability to influence the issue within its own businesses and value chain.


Some influence
Company has ability to influence, but only within its own businesses (not its wider value chain).


No influence
Company has little or no meaningful control or influence over the issue.

Materiality is an important concept in integrated and sustainability reporting. It helps ensure that this report reflects Aegon's main economic, environmental and social impacts, as well as those issues most likely to impact the company's stakeholders. The materiality assessment is an integral part of Aegon's strategy review cycle, which begins in the first quarter and runs through to the end of each year.