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Role of the Supervisory Board
The duties of the Supervisory Board, which consists of ten non-executive members, are to supervise the Executive Board’s management and advise the Executive Board. With the active assistance of its four specialized committees, the Supervisory Board decides on nominations, resignations and the compensation of Executive Board members, the quarterly and annual accounts, including accounting principles, dividends, funding, internal control procedures and risk management, and corporate strategy. We carried out our responsibilities in 2002 in close cooperation with the Executive Board, holding five regular and two extra meetings. All Board members attended the Annual General Meeting of Shareholders (AGM) held in 2002.
Corporate governance
We spent significant time reviewing corporate governance issues, in particular AEGON N.V.'s status as a company governed by the so called ‘Structure Regime’ under Dutch corporate law. For the outcome of these discussions we refer to the proposals to be made to the Annual General Meeting of shareholders on April 17, 2003, as explained in more detail in our ‘Letter to shareholders’ dated March 20, 2003.
Supervisory Board meetings
In accordance with the Board’s Rules and Regulations, preparatory meetings attended by the Chairman and Vice-Chairman of the Supervisory Board, as well as the Chairman and a member of the Executive Board, preceded the regular meetings. All Executive Board members attended the regular meetings. The directors of the Group Finance and Corporate Actuarial departments, as well as representatives from Ernst & Young, AEGON’s external auditor, attended the discussion regarding the results for 2001. As usual, special meetings of the Supervisory Board were dedicated to AEGON’s budget for 2003 and its business strategy.
Among the many other topics discussed in our meetings in 2002 were embedded value and fair value, the dividend policy and capital issues. We discussed and supported the Executive Board’s intention to disclose AEGON’s embedded value in mid-2003 and we endorsed and approved the transaction with Vereniging AEGON that resulted in a capital realignment and a reduction of Vereniging AEGON’s shareholding.
We also devoted attention to acquisitions, joint ventures and alliances. We reviewed and supported the acquisition of several independent financial advisory firms in the UK and TKP Pensioen (an administrator of pension funds) in the Netherlands, as well as the alliance with La Mondiale in France and the joint venture with China National Offshore Oil Corporation in China.
Supervisory Board committees
The Supervisory Board relies upon four committees to prepare specific issues for decision by the Board. Each committee has four members, drawn from the Supervisory Board. All the members of each committee are independent.
The Audit Committee, active since 1983, with Mr. Eustace as Chairman and Mrs. Rembe and Messrs. De Ruiter and Posthumus as members, held four meetings in 2002. In accordance with the Audit Committee Charter, the members are experienced and competent in financial and accounting matters. The Executive Board members and representatives from Ernst & Young also attended the Audit Committee meetings. Special items on the agenda in 2002 were discussions with internal and external auditors of several country units, who gave an insight into their audit work at these units.
Discussions in 2002 were dominated by the Committee’s permanent agenda: the quarterly results, annual accounts and the auditing of these by Ernst & Young, accounting principles, internal control systems, the group-wide risk report as well as Ernst & Young’s independence and fees. The Audit Committee subsequently reported to the Supervisory Board on its findings. It also considered the consequences of the USA’s Sarbanes-Oxley Act, especially for the current procedures within AEGON, the Supervisory Board and its committees as well as for the external auditor. We will continue to keep the subject under review.
The Compensation Committee, active since 1989, with Mr. Tabaksblat as Chairman and Messrs. De Ruiter, Stevens and De Wit as members, held one meeting in 2002, also attended by the Executive Board’s Chairman. Discussions concentrated on the remuneration of the Executive Board members.
The Nominating Committee, active since 1993, with Mr. Tabaksblat as Chairman and Mrs. Peijs and Messrs. De Ruiter and Olcay as members, held two meetings in 2002, also attended by the Executive Board’s Chairman. The Committee discussed the composition of the Executive Board following Mr. Storm’s retirement and the composition of the Supervisory Board following Mr. Posthumus’ retirement as a member of the Board in 2003.
The Strategy Committee, established in 2002, with Mr. Tabaksblat as Chairman and Messrs. De Ruiter, Olcay and De Wit as members, held two meetings, also attended by the Executive Board members. The purpose of the Strategy Committee is to review the major features of AEGON’s strategy, to look at alternative strategic approaches and to consider material factors related to the implementation of the strategy.
Supervisory Board changes
Mr. Storm was appointed a member of the Supervisory Board as of July 1, 2002, after his retirement as Chairman of the Executive Board. The Dutch Central Works Council supported his appointment.
Mr. Posthumus will reach the retirement age of 70 in 2003 and will step down at the end of the AGM to be held on April 17, 2003. We intend to fill this vacancy by appointing Mr. L.M. van Wijk as of that date. Shareholders have not recommended another candidate, but they have the right to object to this appointment at the AGM in 2003. The Dutch Central Works Council has raised no objections to Mr. Van Wijk’s appointment.
In 2004, Mr. De Ruiter will reach the retirement age of 70 and will step down at the end of the AGM in that year. We intend to fill this vacancy. Shareholders have the right to recommend candidates during the AGM in 2003.
Also in 2004, the four-year terms of office of Mrs. Peijs, Mrs. Rembe and Messrs. Olcay and De Wit will end. They are eligible for reappointment and are willing to remain on the Supervisory Board. We intend to reappoint them.
Executive Board changes
Upon Mr. Storm’s retirement, Mr. Shepard was appointed Chairman of the Executive Board and Mr. Van der Werf a member of the Executive Board, both as of April 18, 2002.
The Dutch Central Works Council had given its support and shareholders were duly notified of our intention to appoint Mr. Van der Werf.
Annual accounts and dividend
This annual report includes the annual accounts for 2002, as submitted by the Executive Board, advised upon by the Audit Committee and adopted by us. We recommend that shareholders approve these accounts. Upon approval of the 2002 annual accounts, a total dividend for 2002 of EUR 0.74 per common share will be declared.
Acknowledgement
We will remember 2002 as a difficult year marked by continuing depressed equity markets, poor credit markets and low interest rates. These unusually persistent factors – not only affecting AEGON but the whole of the life insurance industry – were the unfortunate cause of the decrease in net income in 2002, the first in AEGON’s history.
We would like to express our gratitude to the Executive Board and all other members of the AEGON community worldwide for their continuing strong commitment and dedication towards growing AEGON’s business. We thank them for their unabated energy and professionalism in responding to difficult and rapidly changing markets.
The Hague, March 5, 2003
On behalf of the Supervisory Board,
Morris Tabaksblat, Chairman
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