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Aegon UK back in hunt as profits leap

Aegon UK, one of Scotland's key financial employers, has reported a sharp recovery in earnings and says its reinvented pension offering is taking the market by storm.

POSITIVE: Chief executive Adrian Grace said Aegon is now 'leader in our chosen markets'. Picture: Julie Howden
POSITIVE: Chief executive Adrian Grace said Aegon is now 'leader in our chosen markets'. Picture: Julie Howden

Adrian Grace, chief executive, who last year said Aegon "started 100 metres behind in a 400-metre race" to be ready for auto-enrolment into pensions, and the ending of commissions for advisers, said the company had now overtaken rivals to be "leader in our chosen markets".

His bullish forecast came as the former Scottish Equitable, with 1900 staff in Edinburgh, posted pre-tax earnings of £85 million for 2012, compared with just £5m the previous year when the insurer was still suffering the fall-out from a £2.8m enforcement fine from the Financial Services Authority.

Aegon's inadequate systems led to a £171m bill for compensating customers, pushing its pensions business to a £75m loss in 2011.

Clare Bousfield, chief financial officer, said 2012 earnings included a benefit of £40m from Aegon's cost-cutting programme, which axed around 600 jobs in the capital, while agreeing that the depressed 2011 "underlying" earnings figure of £5m included the one-off pension liabilities.

She said the Netherlands-based group took a conservative view of what was "exceptional".

Mr Grace said: "I'm more excited about 2013 than any other year in business I can remember, as I believe Aegon is uniquely positioned to secure a large share of the at-retirement and workplace savings markets."

He said Aegon had now launched innovative platform-based solutions for both markets, Aegon Retirement Choices (ARC) and One Retirement, created two new managing director roles to intensify its focus, incorporated all regulatory changes and posted a strong set of results.

He added: "This has given us a fantastic foundation to build from and we are already starting to capitalise on having such a compelling proposition.

"ARC is a prime example of this and is taking the market by storm.

"Our ability to offer a seamless transition from workplace savings to at-retirement solutions has never been offered anywhere in the world - one platform expert recently described the seamless transition as 'the coolest and best toy in the market'."

Pensions earnings, however, slipped from £16m in the first half of 2012 to £5m in the second, and were likely to remain depressed during 2013, Aegon, said, due to "persistency" issues – industry code for advisers switching clients to new providers in the race for commissions, before they were outlawed at the year end.

Aegon itself is said by rivals to have been among the big guns still buying new business with commissions right up to the year end.

Mr Grace said: "I prefer to talk about the new world and about the proposition we have got for the future, which we have been selling alongside for the last six months."

In the corporate pensions market, the Government is under pressure to put new controls on advisers, who under "consultancy charging" have to negotiate fees with companies but are allowed to spread the payments, and also to charge them to employees.

Mr Grace said: "What we want out of this is a stable industry where employers and employees can get the right advice."

He said a ban on consultancy charging would "destroy the corporate advisory market".

Another blackspot for Aegon has been its two owned financial advisory firms, Positive Solutions and Origen, which have racked up losses of over £25m in recent years.

They broke even last year and Mr Grace said he had "no plans" to dispose of them.

He added: "We have signed up to a broad range of distribution deals with numerous firms who we believe will have a bright future in the new regulated world. This is a great endorsement of our strategy."

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