Report of the Supervisory Board


The Supervisory Board is entrusted with the task of supervising and advising the Executive Board on its management of the Group as well as overseeing AEGON’s general course of affairs and strategy.


In performing their duties members of the Supervisory Board shall be guided by the interests of AEGON and its businesses and shall take into account the relevant interests of AEGON’s stakeholders. The Supervisory Board is a separate corporate body, independent from the Executive Board. It currently consists of eleven members (further details on the composition of AEGON’s Supervisory Board may be found here).

The Supervisory Board makes recommendations to the General Meeting of Shareholders (AGM) concerning all appointments, reappointments and dismissals to and from both the Executive Board and the Supervisory Board itself. In addition, the Supervisory Board determines the remuneration of individual members of the Executive Board in line with the Remuneration Policy as adopted by the AGM.

In its meetings, the Supervisory Board regularly deals with the following issues:

  • Business strategy
  • Quarterly financial results
  • Embedded value
  • Accounting principles
  • Dividend policy
  • Capital position
  • Budget
  • Internal control procedures
  • Risk management

CORPORATE GOVERNANCE

Details of AEGON’s corporate governance structure as well as a summary of the Group’s compliance with the Dutch Corporate Governance Code may be found here. In 2007, there were no material changes to AEGON’s corporate governance structure. The full report on AEGON’s compliance with the Code is published on the Group’s website.

SUPERVISORY BOARD MEETINGS AND ACTIVITIES

Attendance

In 2007, the Supervisory Board held a total of seven meetings. The average attendance rate at the regular meetings was approximately 90%. No member of the Supervisory Board was frequently absent from the meetings.

In accordance with AEGON’s Supervisory Board Rules, all regular meetings in 2007 were preceded by preparatory meetings, attended by the Chairman and Vice-Chairman of the Supervisory Board as well as the Chairman and CFO from the Executive Board. The committees of the Board held their meetings either before or after these meetings of the full Supervisory Board.

Members of AEGON’s Executive Board attended all meetings held in 2007. Members of the Group’s formed Management Board attended the meetings held in March, August, November and December.

AEGON’s Director for Group Finance and Information also attended meetings during which the Supervisory Board discussed the annual results for 2006, interim and final shareholder dividends and all quarterly results and value of new business (VNB) figures published in 2007, as well as press releases related to these matters.

Representatives from Ernst & Young, AEGON’s independent auditor, also attended the discussion on the Group’s 2006 annual results.

In 2007, discussions within AEGON’s Supervisory Board focused on the following issues:

  • Strategy
  • Finance and accounting
  • Budget and capital
  • Partnerships and acquisitions
  • Appointments to both the Executive and Supervisory Boards
  • Legal and compliance

In addition, the Board took time to review its own composition and performance and to discuss AEGON’s risk management strategy in greater depth during its annual educational session.

Strategy

In May 2007, AEGON’s Supervisory Board held its annual strategy meeting in Shanghai, China. This meeting was part of a visit to AEGON-CNOOC, the Group’s life insurance joint venture in China, and to various government officials and regulators in Shanghai and Beijing. At the meeting the Supervisory Board discussed the Group’s strategy, risk management and other business developments. The Supervisory Board attaches great importance to AEGON’s recent efforts to expand its presence in Asia as a whole and in China in particular. Moreover, the Board also places value on regular meetings with AEGON’s international senior management.

Finance/accounting

In March 2007, the Supervisory Board discussed AEGON’s annual results for 2006 and the Group’s 2006 VNB figures. The Board also reviewed the Group’s annual accounts 2006 and a proposal to the AGM for a final dividend for the year 2006.

In July, following a recommendation from the Audit Committee, the Supervisory Board agreed to a proposed change in accounting principles as applied by AEGON The Netherlands. This change served to increase the transparency of AEGON’s financial results.

At meetings in August and November, the Supervisory Board reviewed the Group’s second and third quarter results as well as separate disclosures on the VNB.

At the August meeting, the Group’s interim dividend was approved, while in November the Board discussed a 2008 budget for VNB as well as a separate forecast covering the period 2009-2012. This forecast included the new VNB target for 2010, which was subsequently disclosed on November 26, 2007.

At several meetings held in the second half of 2007, the Supervisory Board and the Audit Committee were informed of developments in the US subprime market. Discussions focused both on market developments in general, and on AEGON’s subprime exposure in particular.

Budget/Capital

In August, the Board discussed and approved proposals for a EUR 1 billion share repurchase program in 2007. This program was completed as planned in November.

In its December meeting, the Supervisory Board’s Audit Committee reviewed and discussed AEGON’s Capital Plan 2008 as well as the Group’s overall approach to questions of risk and capital management. The Board also received a separate report on these issues from AEGON’s Audit Committee. The Board followed the recommendation of the Audit Committee to approve the budget and the budgeted Capital Plan for 2008 and to authorize the Executive Board to provide for AEGON’s funding needs as budgeted for 2008. In addition, the Board approved a long-term incentive plan for AEGON staff worldwide, setting out terms for the distribution of stock option rights to employees in March 2008.

Partnerships and acquisitions

During its meetings in 2007, the Supervisory Board discussed a number of proposed new partnerships and acquisitions. Those announced during the year include the following:

  • The partnership with Sony Life in Japan;
  • The acquisition of Clark Inc. in the United States;
  • The joint venture agreement with Taishin in Taiwan;
  • The acquisition of Dutch life insurer OPTAS;
  • The acquisition of US life insurance subsidiaries belonging to Merrill Lynch;
  • The merger between AEGON’s Polish pension fund management company with PTE Skarbiec-Emerytura.

Appointments to the Supervisory and Executive Boards

In March, the Supervisory Board agreed that shareholders be asked to approve:

  • A new four-year term for Mr. Alexander R. Wynaendts as a member of AEGON’s Executive Board;
  • A new four-year term for Mr. Leo M. van Wijk as a member of the Group’s Supervisory Board;
  • The appointment of Ms. Karla M.H. Peijs and Mr. Antony Burgmans to the Supervisory Board.

All proposals above were accepted by shareholders at their AGM in April 2007.

In November, AEGON’s Supervisory Board decided to appoint Mr. Alexander R. Wynaendts as successor to Mr. Donald J. Shepard as Chairman of the Group’s Executive Board. Mr. Wynaendts will take up his new position on April 23, 2008, the date of Mr. Shepard’s retirement from the Executive Board.

Legal and compliance

In 2007, the Supervisory Board again paid special attention to issues of compliance, in particular with regard to equity-linked insurance policies in the Netherlands as well as regulatory and other legal issues in Europe, the United States and Asia. The Board was also kept up to date with developments regarding AEGON’s E-learning program and the Group’s Code of Conduct.

In April, the AGM approved the amendment to the Articles of Incorporation, mainly dealing with facilitating electronic communications with shareholders and extending the locations for shareholders’ meetings.

In November, the Board approved an amendment to the Executive Board Charter. Besides some minor legal updates, the revised internal control procedure for acquisitions, divestitures and joint ventures (as already approved in 2006) was added to the Charter. This Charter is published on AEGON’s corporate website.

Board review and education

In December, the Supervisory Board reviewed and discussed its own composition and performance as well as that of the Executive Board, without Executive Board members being present.

Also in December, an annual educational session was held for members of the Supervisory Board. During this session, AEGON’s Group Risk Officer gave a presentation on the company’s approach to risk management, the implications of the new Solvency II capital adequacy requirements and AEGON’s own Economic Capital Framework. These issues are of the utmost importance to AEGON and the Supervisory Board considered the presentation and the discussion that followed as extremely valuable.

SUPERVISORY BOARD COMMITTEES

The Supervisory Board relies on its four committees, each made up of members selected from the Supervisory Board, to prepare specific issues for decision-making by the Board. In accordance with its Charter, each Committee reports its findings to the Supervisory Board during a subsequent Supervisory Board meeting.

In its December meeting the Board decided that the increasing importance of risk management warranted a separate committee to strengthen supervision of the Group’s overall risk management strategy. This committee, called the Risk Committee, will initially consist of Messrs. Olcay (Chairman), Bailey and Levy. It will meet for the first time in March 2008. At the same time, it was decided that the tasks of the Strategy Committee would be taken over by the full Board.

The Audit Committee

The Audit Committee held eight meetings in 2007, which also were attended by AEGON’s Chief Financial Officer as well as other members of the Executive Board, the Director of Group Finance & Information and representatives of Ernst & Young, AEGON’s independent auditor. AEGON’s Group Internal Auditor, the Group Risk Officer and the Group Actuarial Officer also periodically attended Audit Committee meetings.

Discussions focused on the following topics:

  • Quarterly results
  • AEGON’s annual accounts and the audit process
  • Actuarial analyses
  • Accounting principles as defined by IFRS and US GAAP
  • Financial reports filed with the Securities and Exchange Commission
  • AEGON’s Capital Plan
  • Reports on currency exposure
  • Internal control systems
  • Risk management
  • External Auditor’s Engagement Letter for 2007
  • Integrated Audit Plan

The Audit Committee also discussed the publication of AEGON’s 2006 Embedded Value Report and the Group’s annual VNB figures. In July, the Audit Committee convened to discuss a proposed change to the accounting principles used in the Netherlands (see above).

External auditor

The Audit Committee recommended that Ernst & Young be reappointed for the 2007 financial year. It also discussed the role of independent auditors and the consequences of recent changes to the regulatory environment in both the United States and the Netherlands. In addition, the Committee confirmed that Shemaya Levy qualifies as a financial expert within the terms and conditions of both the Dutch Corporate Governance Code and the Sarbanes Oxley legislation in the United States. In accordance with legal requirements, the Audit Committee approved and recommended to the Supervisory Board to amend the Pre-approval Policy.

Internal auditor

Each quarter, the Audit Committee received an update on the activities of the Group’s Internal Auditor as well as AEGON’s compliance with US SOX 404 legislation and an overview of fraud and general compliance issues. During these meetings, the Audit Committee held separate sessions with the Group’s Internal Auditor as well as with external auditors, to discuss their findings. Members of the Executive Board were not present at these sessions.

SEC filings

Two separate meetings, in March and September, were devoted to AEGON’s filings during the year with the US Securities and Exchange Commission. These comprise the Group’s:

  • 2006 Annual Report (Form 20-F)
  • Results for the first six months of 2007 (Form 6-K)

Risk management, capital and budget

During its meeting in December, the Audit Committee discussed AEGON’s Risk Management Report with the Group Risk Officer. The Committee also conducted a review of the Group’s 2008 budget, as well as the Group’s Capital Plan. It conveyed its findings and recommendations to the Supervisory Board. The Audit Committee also advised the Board to authorize members of AEGON’s Executive Board to provide for the Group’s funding requirements as set out in the 2008 Capital Plan.

The Strategy Committee

The Strategy Committee held two meetings in 2007, which were also attended by the members of AEGON’s Executive Board. The purpose of the Strategy Committee is to review AEGON’s overall business strategy, in addition to considering alternative strategies and material aspects relating to the realization of the Group’s strategic objectives.

The Strategy Committee held extensive discussions on AEGON’s corporate strategy and prepared a framework for the agenda of the Supervisory Board strategy meeting held in Shanghai in May. As required, all proceedings of the Strategy Committee’s meetings were reported to the Supervisory Board. During 2007, these minutes were a regular item on the agenda of the Supervisory Board meetings. As mentioned above, the Strategy Committee was discontinued at the end of 2007.

The Nominating Committee

AEGON’s Nominating Committee held four meetings in 2007. The Chairman of the Executive Board attended all meetings. During the year, the Nominating Committee discussed the composition of the Supervisory Board and its committees as well as existing and forthcoming vacancies. It also advised the Supervisory Board on nominations for two appointments and one reappointment. In addition, the Nominating Committee reviewed the composition of the Executive Board and subsequently advised the Supervisory Board on Mr. Wynaendts’ proposed new title of Chief Operating Officer. During the year, the Nominating Committee also discussed Mr. Shepard’s succession. At its meeting on November 6, the Committee decided to recommend the Supervisory Board to appoint Mr. Wynaendts as Chairman of the Executive Board, effective April 23, 2008.

The Compensation Committee

The Compensation Committee held four meetings in 2007, also attended at certain moments by either the Chairman of the Executive Board or the Group’s CFO. During the year, the Compensation Committee discussed Executive Board members’ 2006 Short-Term and Long-Term Incentive Plans and advised the Supervisory Board on incentive payments in 2007. In February and March, the main item of discussion during the Committee’s meetings was the new Remuneration Policy for the Executive Board. This new Remuneration Policy was proposed to and adopted by shareholders during their 2007 AGM in April and entered into effect January 1, 2007. The Committee also discussed AEGON’s worldwide stock option plan. In December, the Committee reviewed Supervisory Board remuneration, comparing AEGON’s arrangements with other leading Amsterdam-listed companies. The Committee decided to organize a benchmark assessment of AEGON’s executive remuneration based on the Group’s Dutch and international peers for the end of 2008. The Committee made use of the advice of Towers Perrin, external independent advisors.

REMUNERATION POLICY

The AGM adopted a new Remuneration Policy on April 25, 2007. Please use this link for the current Remuneration Policy and the full text of the Compensation Committee Remuneration Report and this link for further financial details.

COMPOSITION OF THE SUPERVISORY BOARD

All members of the Supervisory Board are considered independent according to the terms of the Dutch Corporate Governance Code with the exception of Mr. Storm.Mr. Storm is not regarded as independent within the definition of the Code since he served as Chairman of AEGON’s Executive Board prior to his retirement in April 2002. Mr. Storm joined the Supervisory Board in July 2002.

In April 2007, shareholders appointed Ms. Peijs and Mr. Burgmans to the Supervisory Board. In addition, Mr. Van Wijk was reappointed to another four-year term of office after his previous mandate expired in 2007.

In 2008, the mandates of both Ms. Rembe and Mr. Olcay will expire. Neither is eligible for reappointment. Members of the Supervisory Board wish to thank both Ms. Rembe and Mr. Olcay for their long and distinguished service to AEGON. Also in 2008, the four-year term of Irving W. Bailey II and René Dahan will expire. During the 2008 AGM, the Board will propose shareholders reappoint Mr. Bailey for another four-year term. Mr. Dahan has informed the Board that, for personal reasons, he will not be available for reappointment. Following the advice of the Nominating Committee, the Supervisory Board has decided to nominate Cecelia Kempler, Rob Routs, Dirk Verbeek and Ben van der Veer for appointment. Their biographies will be provided together with the agenda for the 2008 AGM. These appointments bring the number of Supervisory Board members to twelve.

EXECUTIVE BOARD

In compliance with the Dutch Corporate Governance Code, members of the Executive Board are appointed by shareholders for a term of four years, with the possibility of reappointment for subsequent, additional four-year terms. A schedule for all members of the Executive Board is included in the Group ’s Executive Board Rules and posted on AEGON’s corporate website.

In 2007, Mr. Wynaendts’ mandate expired. He was elected to another term of four years by shareholders at the AGM in April 2007.

In 2006, it was decided to establish a separate Management Board to strengthen and coordinate the management of AEGON’s business activities around the world. The Management Board came into effect on January 1, 2007.

Under this structure, the Executive Board continues as the Group’s statutory executive body and legal representative of AEGON N.V., entrusted with the overall management and strategic direction of the company. The Management Board, meanwhile, oversees a broad range of other issues that affect AEGON’s international business and growth objectives.

Throughout 2007, AEGON’s Management Board comprised:

  • Members of the Executive Board (Messrs. Shepard, Streppel and Wynaendts);
  • The CEOs of AEGON USA, AEGON The Netherlands and AEGON UK (Messrs Baird, Van der Werf and Thoresen respectively).

The Chairman of the Executive Board also acts as Chairman of the Management Board.

In January 2008, Mr. Van der Werf resigned as CEO of AEGON The Netherlands. Members of the Supervisory Board would like to express their appreciation for the valuable contribution Mr. Van der Werf has made to AEGON during his 26 years of service with the Group.

ANNUAL ACCOUNTS AND DIVIDEND

This Annual Report includes the annual accounts for 2007, prepared by the Executive Board, discussed by both the Audit Committee and the Supervisory Board and submitted to shareholders for approval. The Supervisory Board recommends that shareholders adopt these annual accounts and approve the proposal to pay a total dividend for the 2007 financial year of EUR 0.62 per common share. This total dividend comprises a final dividend payment of EUR 0.32 per common share and an interim dividend payment of EUR 0.30 per common share which was made in September 2007.

ACKNOWLEDGEMENT

The Supervisory Board would like to congratulate the Executive Board and all members of the worldwide AEGON community for their ongoing commitment to growing AEGON’s business profitably. Members of the Supervisory Board would also like to express their appreciation for the dedication and professionalism shown by AEGON employees in responding to an ever-changing market, business and regulatory environment.

The Hague, March 5, 2008


Dudley G. Eustace,

Chairman of the Supervisory Board



Retirement of DonALD j. Shepard

In November 2007, it was announced that Mr. Shepard would be stepping down as Chairman of AEGON’s Executive Board after six years at the helm of the company. Mr. Shepard’s retirement takes effect at AEGON’s 2008 General Meeting of Shareholders. In 2008, Mr. Shepard will be 62, his agreed retirement age.

Mr. Shepard led AEGON through challenging market conditions, particularly when he first took over as Chairman in 2002. During his time as Executive Board Chairman, AEGON has strengthened its financial position, expanded into new growth markets and is now well placed for future growth. The Supervisory Board would like to express its gratitude to Don Shepard for his many contributions to the growth of AEGON’s businesses around the world during a career that has spanned almost four decades.

After a thorough selection process, the Supervisory Board identified Alexander R. Wynaendts as Mr. Shepard’s successor. Mr. Wynaendts’ strong financial background and broad international perspective make him the right person to lead AEGON into its next stage of growth. In addition, Mr. Wynaendts has been a vital and integral part of AEGON’s senior management over the past several years. In particular, he has been instrumental in driving the recent expansion of the Group’s international businesses. The Supervisory Board would like to wish Mr. Wynaendts every success in the years to come.