Baltimorean next chief of Dutch giant

Aegon taps Shepard, now head of its American operations

Insurer's decision lauded

`To Don's credit, he has built the U.S. company'

November 09, 2001|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Donald J. Shepard, the head of Aegon NV's operations in the United States, will take over the reins of the giant Dutch insurer after the retirement next year of its chairman, the company announced yesterday.

In April, the Baltimore-based Shepard will replace the popular Kees J. Storm, who has been at the helm for nine years and will retire July 1, shortly after turning 60.

Shepard's replacement hasn't been named, a spokeswoman said.

Aegon also announced that its third-quarter profits rose 14 percent, and that it expects to meet earnings projections this year.

Shepard, the 55-year-old president, chief executive officer and chairman of Aegon USA, will be the first American to head the company. He's also said to be the first U.S. citizen to head any major Dutch company.

He started his career in Iowa, and, after Aegon consolidated its U.S. operations in 1989, moved to Baltimore to head up Aegon USA. Three years earlier, Aegon had acquired Monumental Corp. in Baltimore. He has served on Aegon's board since 1992.

Analysts said Shepard is a logical choice, considering that the North American operations account for the majority of Aegon's earnings.

Last year, Aegon's American operations, which include the United States, Mexico and Canada, made up almost 65 percent of profits. In 1994, the same region accounted for 33 percent.

"He brings a U.S. focus that we haven't seen at this level of management before," said Louise Pitt, senior financial institutions credit analyst with Credit Suisse First Boston in London. "This is a statement that confirms that the U.S. operations are core businesses for Aegon."

U.S. profits have been helped by major acquisitions in recent years.

In 1997, Aegon acquired Providian in Louisville, Ky., for more than $3.5 billion. Two years later, Aegon purchased Transamerica Corp. in San Francisco for $10.8 billion. This year, it paid about $1.3 billion for J.C. Penney's Direct Marketing Services operations in Texas.

"To Don's credit, he has built the U.S. company," said Jason Zucker, an analyst with Banc of America Securities in New York.

Storm and Shepard have also worked together to build the company to what it is today, he added.

"It should be a very smooth transition," Zucker said. "Everybody throughout Aegon knows Don Shepard. Everybody outside Aegon knows Don Shepard."

`He has done a good job'

Andrew Mitchell, an analyst with Fitch Inc. in London, agreed, saying, "Certainly, it does represent continuity. He has done a good job with Aegon US."

Zucker added that Storm will be missed. He's very financially disciplined, yet a fun-loving, free-spirited manager, the analyst said.

Storm, for instance, likes to keep a dozen small wagers going on at a time, betting a bottle of wine on earnings growth or less serious matters, Zucker said. The company's motto has been "Respect People, Make Money, Have Fun."

Aegon is the second-largest Dutch insurer and the fourth-largest life insurer in the United States. Based in The Hague, the Netherlands, it employs 24,000 people worldwide, with 18,700 of those in Canada and the United States. About 900 of the employees work in Baltimore.

Last year, the company earned 2.06 billion euros ($1.9 billion), more than six times what it earned in 1990. Revenues last year reached 30.7 billion euros ($28.4 billion), more than a five-fold increase from a decade earlier.

Aegon holds strong positions in its core businesses of life insurance, pensions and other savings and investment products, and has been good at containing costs, Mitchell said. He said he doesn't expect Shepard to stray from what has been a successful formula.

Revenue, profit up

The company has a record of solid earnings growth and the third-quarter profits were good and in line with expectations, Zucker said. Profits reached $531 million, or 38 cents per share, up from $472 million, or 36 cents per share, reported for last year's third quarter.

Revenue reached $6.83 billion in the quarter, slightly higher than quarterly revenue of $6.77 billion a year earlier.

The company said it expected earnings to rise this year by 12 percent to 17 percent, barring any further deterioration of the financial markets.

Aegon said it set aside $34 million before taxes to pay claims associated with the Sept. 11 terrorist attack.

Aegon's stock closed at $27.65 a share yesterday, down 36 cents.

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