Aegon growth vow after turnaround

Business Correspondent/Personal Finance Editor

Friday 10 August 2012

AEGON UK, the Edinburgh-based insurer reprieved from a possible sale or wind-down by its Dutch parent two years ago, has confirmed its return to financial health and promised future growth.

TURNAROUND: Adrian Grace has overseen a 37% reduction in costs since his appointment. Picture: Julie Howden

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SIMON BAIN

Aegon axed 600 of its 2500 jobs in Edinburgh in a major cost-cutting programme last year, as it battled to catch up with rivals in repositioning itself for the big changes ahead in workplace pensions and financial advice. It also had to pay out more than £170 million in redress to pension customers let down by past administration shortcomings, against an original estimate of £100m, alongside a £2.8m fine from the Financial Services Authority for the 30 different failings.

But yesterday Adrian Grace, who was installed as chief executive some 15 months ago, said costs were 37% lower than a year ago – well above the 25% target set from The Hague – and the group was in growth mode.Aegon was reporting an increase in underlying earnings of 10% to €443 million (£349m) in its second quarter. It did not break down the UK performance but said there had been a "strong improvement in earnings" to €25m.It said recovery had been driven by cost reductions and the disappearance of extraordinary charges. Since last November, Aegon has launched a twin assault on its two target markets, launching the Retirement Choices platform for "at retirement" customers and recently adding the Workplace Savings proposition to the same platform. The group said: "Pension reform and the retail distribution review will transform pension products and services and how they are distributed – Aegon's platform offers a compelling solution to advisers, employers, and their employees."Mr Grace told The Herald: "It was a business that needed a turnaround. We said we would take out costs and I think costs are 37% lower than at the same time last year." The repayments to customers and improvements in administration were "something we had to do to clean the business up", he said. "We had no platforms whatsoever in this business 18 months ago, and we now have platforms in both of our core operating markets. It is all about growth now and how we capitalise on the regulatory changes."Mr Grace's whirlwind new broom in Edinburgh, following the exit of his predecessor Otto Thoresen to become director-general at the Association of British Insurers, has prompted recent talk in the capital that he is already the target of headhunters. Mr Grace commented: "I have not finished the job here. We will start to see the fruits of our labours over the next 18 months to two years. I would like to see the job through. It is going to be an exciting time and an intellectual challenge."Asked whether Aegon would be reviewing the charges on its historic pension policies, following pressure on the industry from the Government, politicians and consumer groups, Mr Grace said that there would be a review and action would be taken "if it is the right thing to do and if we can find the right way to do it".

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Aegon growth vow after turnaround

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