Notes to the consolidated financial statements of Aegon N.V.  Note 49 268 49 Capital and solvency Aegon’s total capitalization reflects the capital employed in insurance activities and consists of shareholders’ capital and total gross  financial leverage. Aegon aims to bring total gross financial leverage below 30% of total capitalization as measured by the gross  financial leverage ratio. The gross financial leverage ratio is calculated by dividing the total gross financial leverage by the total  capitalization. At December 31, 2013 the gross financial leverage ratio was 30.1%.  Additionally, Aegon manages capital adequacy at the level of its country units and their operating companies. The goal is to ensure  that Aegon companies maintain their financial strength. Aegon maintains its companies’ capital adequacy levels at which ever is  the higher of local regulatory requirements and the relevant local Standard & Poor’s requirements for very strong capitalization, and  any additionally self-imposed economic requirements. The following table shows the composition of the total capitalization and the calculation of the gross financial leverage ratio: Note 2013 2012 Total shareholders’ equity 32 19,966 23,488 Non-controlling interests and share options not yet exercised 34, SOFP  2) 109 115 Revaluation reserves 32 (2,998) (6,073) Remeasurement of defined benefit plans 32 706 1,085 Shareholders' capital 17,783 18,615 Junior perpetual capital securities 34 4,192 4,192 Perpetual cumulative subordinated bonds 34 454 453 Non-Cumulative Subordinate Note 34 271 271 Trust pass-through securities 35 135 155 Subordinated borrowings 36 44 42 Currency revaluation other equity instruments  1) (261) (123) Hybrid leverage 4,834 4,990 Senior debt 41  3) 2,683 3,304 Commercial paper and other short term debt 41 151 430 Senior leverage 2,834 3,734 Total financial leverage 7,668 8,724 Total capitalization 25,451 27,339 Gross financial leverage ratio 30.1% 31.9% 1  Other equity instruments that are denominated in foreign currencies are, for purpose of calculating the capital base, revalued to the period-end exchange rate. 2  Non-controlling interests are disclosed in the statement of financial position. 3  Senior debt for financial leverage calculation also contains swaps and other senior debt for an amount of EUR 33 million (2012: EUR 18 million). Aegon N.V. is subject to certain financial covenants in some of its financial agreements (such as issued debentures, credit facilities  and ISDA agreements). Under these financial covenants, an event of default may occur if and when any financial indebtedness of any  member of the Group is not paid when due, or not paid within any applicable grace period. The financial agreements may also include  a cross default provision which may be triggered if and when any financial indebtedness of any member of the Group is declared to be  or otherwise becomes due and payable prior to its specified maturity as a result of an event of default. All financial agreements are closely monitored periodically to assess the likelihood of a breach of any financial covenant and  the likelihood thereof in the near future. On the basis of this assessment, a breach of any such covenant has not occurred. Insurance, reinsurance, investment management and banking companies are required to maintain a minimum solvency margin based on  applicable local regulations. For managing Aegon’s capital, the life insurance and life reinsurance regulations in the EU and the United  States are of main importance. Aegon’s Insurance Group Directive ratio (IGD ratio) was 212% at the end of 2013 (2012: 228%).  The calculation of the IGD ratio is based on Solvency I capital requirements for entities within the EU (Pillar 1 for Aegon UK), and  local regulatory solvency measurements for non-EU entities. Specifically, required capital for the life insurance companies in the US is  calculated as two times the upper end of the Company Action Level range (200%) as applied by the National Association of Insurance  Commissioners in the US. The calculation of the IGD ratio excludes the available and required capital of the UK With Profits fund. Annual Report 2013